1983 (8) TMI 21 - HC - Income Tax

Summary

Issues:
1. Interpretation of the provisions of the Income Tax Act, 1961 regarding the assessment of income from a wakf in the hands of the mutawalli.
2. Determination of whether the shares of the beneficiaries of the wakf were known and definite, impacting the assessment of income.
3. Application of the Hanafi School of Mohammadan Law in the distribution of income among the beneficiaries of the wakf.
4. Consideration of past assessment orders and the principle of res judicata in tax cases.

Analysis:

The case involved a reference under s. 256(1) of the Income Tax Act, 1961, regarding the assessment of income from a wakf known as Astana Hazrat Pir Dumarin Baba of Bhagalpur. The primary question was whether the shares of the beneficiaries were determinate, impacting the assessment in the hands of the mutawalli as an association of persons. The Income Tax Officer (ITO) had assessed the income as an association of persons due to the lack of clarity on the shares of the beneficiaries as per the wakf deed.

The Appellate Assistant Commissioner (AAC) upheld the assessment, noting the increasing number of beneficiaries and the absence of definite shares among them. The appellant contended that under the Hanafi School of Mohammadan Law, beneficiaries should share income equally, even if not specified in the wakf deed. The Tribunal reviewed the wakf deed provisions and observed that while the number of beneficiaries could be ascertained, the deed did not specify the shares or equal distribution among them.

The Tribunal found that the wakf deed did not provide for equal distribution among beneficiaries or mention the Hanafi School of Mohammadan Law. Despite the ascertainable number of beneficiaries, the maintenance amounts paid were not equal, weakening the appellant's argument. The Tribunal held that the shares of the beneficiaries were not determinate, leading to the income being assessable in the hands of the mutawalli as an association of persons.

The High Court concurred with the Tribunal's decision, emphasizing the absence of equal distribution provisions in the wakf deed and the lack of mention of the Hanafi School of Mohammadan Law. The Court rejected the appellant's reliance on past assessment orders, stating that the principle of res judicata does not apply to tax cases assessed annually. The Court affirmed that the shares of the beneficiaries were not determinate, upholding the assessment of income in the hands of the mutawalli as an association of persons.

In conclusion, the High Court affirmed that the shares of the beneficiaries were not determinate, leading to the income of the wakf being assessable in the hands of the mutawalli as an association of persons. The decision favored the Revenue and rejected the appellant's arguments, with no order as to costs in the case.