1987 (3) TMI 86 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether a mutawalli can be treated as a trustee in a valid deed of waqf and can be assessed to tax under section 21 of the Wealth-tax Act, 1957.
2. Whether the shares of the mutawallis were indeterminate and, therefore, assessable under sub-section (4) of section 21 of the Wealth-tax Act, 1957.

Issue-wise Detailed Analysis:

Issue 1: Treatment of Mutawalli as Trustee
The court examined whether a mutawalli can be considered a trustee under section 21 of the Wealth-tax Act, 1957, and thus be assessed to tax. The term "waqf" was defined as the detention of property for charitable or religious purposes, with the property devoted to God and managed by a mutawalli. The court noted that under Mohammadan law, a mutawalli is not a trustee in the technical sense, as the property does not vest in him but remains dedicated to God.

However, the court emphasized that section 21 of the Wealth-tax Act includes "trustee under a valid deed of waqf" and should be interpreted broadly. The Supreme Court's ruling in CIT v. Managing Trustees, Nagore Durgha was cited, stating that the technical doctrine of vesting is not relevant, and the mutawalli functions legally for the benefit of others. The court concluded that a mutawalli could be treated as a trustee under section 21 and assessed to tax.

Issue 2: Determinacy of Mutawalli Shares
The second issue addressed whether the shares of the mutawallis were indeterminate, thereby justifying assessment under section 21(4) of the Wealth-tax Act. The court examined the waqf deed, which specified that after covering certain expenses, the remaining income was to be distributed equally among the mutawallis. The Tribunal had held that the shares were indeterminate due to the discretionary nature of the expenses.

The court disagreed, stating that the relevant valuation date determines whether the shares are indeterminate or unknown. On this date, the income and the shares of the mutawallis were known and ascertainable. The court held that the assessment under section 21(4) was not justified, as the shares were determinate on the valuation date.

Conclusion:
- Question 1: Affirmed that a mutawalli can be treated as a trustee in a valid deed of waqf and assessed to tax under section 21 of the Wealth-tax Act, 1957.
- Question 2: Determined that the shares of the mutawallis were not indeterminate, and thus, assessment under section 21(4) was not justified.

The court provided a detailed analysis of the legal principles and precedents, ultimately ruling in favor of the Department on the first issue and in favor of the assessee on the second issue, with no order as to costs due to divided success.