TMI Blog1938 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... properties referred to therein (hereinafter called the wakf properties ), to have and to hold them upon trusts for the several purposes declared therein. Under clauses (a), (b) and (c) of the said indenture, the Mutavalees were directed to collect the rents of the said properties and after defraying all charges in connection therewith, to set apart th of the balance for the purposes of a reserve fund and distribute the remaining amount during the lifetime of the Settlor amongst his wife and children, in such manner as the Settlor in his absolute discretion may direct. After his death, the income was to be disposed of as directed in clause (b) and other clauses of the said deed. Thereafter, on 29th October 1934, the Settlor executed another deed (copy annexed hereto marked Exhibit B) under which he rescinded clauses (b) and (c), in the original deed (Exhibit A) and directed that the income of the Wakf properties, after defraying the charges mentioned in clause (a) of the original deed, should be dividend amongst his wife and children, 1/8th going to his wife and the remaining to his children, from the date of the new deed, Exhibit B. 3. For the purposes of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly the five beneficiaries mentioned in the Deed of Wakf dated the 18th day of July 1931 and Supplemental Indenture dated the 29th day of October 1934 . 6. Opinion of the Commissioner.-As Section 66(2) of the Act requires that I should give my opinion while submitting this statement of the Case, I respectfully submit that the answer to questions (1) to (3) should be in the affirmative and to question (4) in the negative, following the decisions of your Lordships in the following cases:-(i) Messrs. Laxmidas Devidas and Vasanji Ruttonsey (Civil Reference No. 17 of 1936) reported in 39 Bom. L.R. 910. (2) Messrs. Kheraj Obheya and others (Civil Reference No. 15 of 1936). (3) (Messrs. Kantisen Mohanji Ganjawalla and Brothers (Civil Reference No. 1 of 1937). (4) Messrs. Dwarakanath Harischandra Pitale and Chandrakant Harischandra Pitale In re (Civil Reference No. 5 of 1934). The income under assessment is admittedly liable to tax under the head Property in Section 6 of the Act and hence, has to be computed as laid down in Section 9 thereof, which states that The tax shall be payable by an assesses under the head Property in respect of the bona fide annual value of propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pitale (Civil Reference No. 5 of 1937), your Lordships decided that as soon as the assessees elected to retain the property as a joint venture producing income, they became an association of individuals within the meaning of the Income-tax Act, and that they are properly assessed as the owners of the property under Section 9 . Applying the same reasoning, as soon as the assessees in the present case agreed to work as Mutavalees and associated themselves in order to get the properties transferred, assigned and conveyed to them and began to manage them, collect the rents thereof and disburse all charges in connection therewith, they became an association of individuals liable to tax under Section 9 as the legal owners of the properties concerned. That the association does not itself as such enjoy the income is irrelevant. Section 9 does not require that this should be so and it is open to any owner of property not to enjoy it but to give it for enjoyment to his wife or children or any one else. The associations of individuals in the above cases which this Honourable Court has decided did not enjoy the income but divided it amongst the individual members thereof. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to us that in any case the trustees are not liable to be assessed to tax because of section 4, sub-section (3)(i) of the Income Tax Act which exempts income derived from property held under trust or other legal obligation wholly for religious or charitable purposes. In my opinion, this property, although validly given as Wakf under the Wakf Validating Act, is not held for religious or charitable trusts. Prior to the date of that Act it had been held by the Privy Council that trusts of this nature for the benefit of the settlor's family and afterwards for charity were void, and in my opinion, the Wakf Act did not in any way alter the law as declared by the Privy Council. It only validated trusts which otherwise would have been held void. That view is in accordance with a decision of the Full Bench of the Lahore High Court in Umar Baksh v. Commissioner of Income tax, Punjab (1931 I.L.R. 12 Lah. 725). The main question which arises is whether under this Wakf the trustees or the beneficiaries ought to be assessed. Up to a recent date, the Commissioner of Income tax had assessed the beneficiaries on the income which they received under the Wakf deed, as appears from his order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precludes assessment on a trustee. Now, in this case the learned Advocate-General has argued that in assessing income derived from immovable property under the Indian Income Tax Act, it is the owner of the property who must be assessed under Section 9. He admits that the owner need not be the legal owner, and that when property is vested in a trustee in trust for a beneficiary simply, the beneficiary may be the owner. But this consideration cannot apply to trusts which create interests in succession, since a reversioner cannot be assessed upon income to which he is not entitled. Moreover in the trust which falls for consideration in this case, and in most trusts under Indian Law, the ultimate beneficiaries are not ascertainable, and there is no existing beneficial owner of the corpus of the property. So that if the argument of the learned Advocate General is accepted, it must follow that in most cases of trusts it is the trustee who will be assessable on income of immovable property. This seems to me inconsistent with the general scheme of the Act, which undoubtedly recognizes trusts (See Sections 38 to 40). A difficulty does, however, arise on the language of Section 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9 means owner of the property from which the income is derived, there was no question to discuss, since the Baronet was at the most a tenant for life. As far as I know, the construction which, I think, should be placed on Section 9 is the one which has been adopted in practice, and we have been referred to no authority in support of the Advocate General's argument that the income of the immoveable property must be assessed on the owner of such property, and not on the owner of the income. I think, therefore, that the original view of the learned Commissioner was right and that it is the beneficiaries who should be assessed, and not the Mutavalees of the property. The actual questions raised are: (1) Whether in the circumstances of the case Mutavalees (assessees) constitute an association of individuals within the meaning of Section 3 of the Indian Income tax Act, 1922? (2) Whether the Mutavalees (assessees) can be said to be the owners of the properties within the meaning of Section 9 of the Indian Income Tax Act, 1922, and were rightly assessed as such? (3) Whether the assessees were in any event rightly assessed as owners of the Wakf properties under Section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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