TMI Blog1944 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to income-tax in the hands of the duly constituted trustee. In connection with the assessment of income from the said business for the year 1940-41 and 1941-42, the Income-tax officer, upon a scrutiny of the material provisions of the waqfdeed, considered that the case fell within the first proviso to Section 41 (1), since, according to him, the individual shares of the beneficiaries, on whose behalf they were receivable by the mutawalli, are not clearly demarcated in the deed. He was further of the opinion that the beneficiaries should be treated as an association of persons and tax computed on that basis should be levied on the trustee under the provisions of Section 41. The Appellate Assistant Commissioner upheld this line of action. The trustee challenged the decision of the Income-tax authorities before the Tribunal. The Tribunal upheld the trustee's contention that on a proper construction of the deed it cannot be contended that the beneficiaries or their individual shares are indeterminate and unknown and that it is not permissible under the Act to treat the beneficiaries in such a case as an association of persons. The reasons that led the Tribunal to these conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically the trust income of an individual beneficiary, it should be assessed as income of that individual and so far as it is not the income of an individual beneficiary or so far as the individual shares are indeterminate, the income should be assessable on the trustees jointly at standard rate of income- tax. With regard to income under a wakf deed it was explained when this provision was under discussion in the Legislature that to the extent that the said income is allocated specifically to an individual, the tax payable will be based upon the total income of that individual, to the extent that the income is definitely applied in public, religious or charitable purposes, it is exempt and to the extent that the income is not specifically the income of any individual or public charity or religious body, tax will be chargeable at the maximum rate of income-tax. On scrutiny of the language under Section 41, the Tribunal was of the view that in the first case the tax should be computed in the same way as it would have been computed had the assessment been made directly on the beneficiaryin other words the assessment is to take into account the rate at which the beneficiaries are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anches in various places is valued at two lakhs of rupees. The relevant provisions of this deed are set out in the appellate order of the Assistant Commissioner of Income-tax dated the 23rd February and may be reproduced as follows:- Whereas I am solely and exclusively in possession of the above property, and personally and directly in charge of the organisation, conduct, discretion, superintendence, and management of the business associated therewith; and in the sale and exclusive employment of the income, gains and profits of the said property and business; and Whereas I wish and propose permanently and perpetually to dedicate the entire property with the business incomes, and revenues...................by way of waqf, for the following objects namely:- For the maintenance of and support of my family, children and descendants; and for my own maintenance and support during my time and for the payments of my debts out of the rents and profits thereof; and for helping the deserving Musalman boys in the District of Ranchi in prosecuting higher studies; and ultimately on the extinction of my family for the benefit of the poor; and whereas I consider and believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his sons and daughters could not be accepted and the word family was wide enough to include his grandchildren also. He further observed that the beneficiaries in this case were indeterminate as there were numerous grandchildren of the 12 sons and daughters of the assessee and that the term family was wide enough to include a daughter-in-law, the son of a half brother, the son and grandson of a maternal uncle and the son of a half-sister. The view of the Assistant Income-tax Commissioner was not fully accepted by the Income-tax Appellate Tribunal on appeal. The members of the Tribunal held in agreement with the Assistant Commissioner that the term family included the grandchildren of the respondent but they proceeded to observe as follows:- The exact number of children and descendants can be known and is definitely determinable under the Muhammadan law at any given time. The largeness of their numbers is no ground either for failing to ascertain the beneficiaries or for treating them as indeterminate and unknown. The number may be variable from time to time but since the assessing officer is concerned with the constitution of the family as it was in the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 24 persons, to whom reference has already been made, were the only persons who were entitled to share the profits. In the application which the Commissioner of Income-tax made to the Tribunal for referring this case under Section 66(1) this finding does not seem to have been questioned as will appear from the fourth and fifth paragraphs of the application. In the fourth paragraph the Commissioner was required to state the error of law which had been committed by the Tribunal in arriving at the findings of fact and all that he stated under it was as follows:- It is not necessary in this case to examine the question whether Section 41 is a purely machinery etc. It was not suggested that the term family had been misconstrued by the Tribunal and it was wide enough to include certain other relations who were interested. Under paragraph 5 the Commissioner was required to state any other fact that may in the circumstances be considered necessary , but under this paragraph all that is stated is Nothing to add. It seems to me therefore that the finding of the Tribunal that there were only 24 persons who were entitled to share the profits in the accounting yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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