Separate assessment of waqf beneficiaries applies where shares are definite and determinable, not collective taxation as an association

Waqf beneficiaries with definite and determinable shares were not to be assessed as an association of persons. Where each beneficiary's share in the relevant accounting year was equal and separately computable, the first proviso to section 41(1) did not apply because the shares were neither indeterminate nor unknown. Tax therefore had to be computed separately on each beneficiary's share of income at the rate applicable to that beneficiary's total income, and the mutawalli was liable on that basis.

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Issues: Whether the waqf beneficiaries were to be assessed as an association of persons or whether tax was to be computed separately on the share of each beneficiary under section 41(1).

Analysis: The beneficiaries under the waqf deed were found to be definite and determinable for the relevant accounting year, and their shares were equal and capable of separate computation. On that footing, the first proviso to section 41(1) had no application, because the case did not involve indeterminate or unknown shares. The assessment therefore had to proceed on the basis that each beneficiary's share of profit was separately ascertainable and taxable at the rate applicable to that beneficiary's total income, rather than by treating the beneficiaries collectively as an association of persons.

Conclusion: The beneficiaries were not assessable as an association of persons. Tax was payable on the separate shares of the beneficiaries, and the assessee mutawalli was liable accordingly.

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