Agricultural income exemption does not extend to mutawalli remuneration retained as pay for services, even when taken from waqf income.

Agricultural income exemption applies only where the recipient takes the income in his own right and with a right to retain it. Where a mutawalli merely realises agricultural income on behalf of a waqf and keeps one-tenth as remuneration for services, that amount does not retain the character of exempt agricultural income and remains taxable. The allowance was treated as pay for the office of mutawalli, not as a beneficial entitlement under the waqf. On that basis, the retained amount was held liable to assessment and the reference was answered against the assessee.

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Issues: (i) Whether one-tenth of the income retained by the assessee as remuneration for services rendered as mutawalli was agricultural income exempt from assessment; (ii) whether the allowance was received by the assessee in the capacity of a mutawalli or as a beneficiary.

Issue (i): Whether one-tenth of the income retained by the assessee as remuneration for services rendered as mutawalli was agricultural income exempt from assessment.

Analysis: Agricultural income is exempt only when it is received by a person in his own right and with a right to retain it. Where a person merely realises agricultural income on behalf of another and keeps a part of it only as remuneration for services, the amount retained does not acquire the character of agricultural income. A fixed salary, and equally a percentage-based remuneration, paid out of agricultural income for services rendered, remains taxable in the hands of the recipient.

Conclusion: The one-tenth retained by the assessee as mutawalli remuneration was not exempt agricultural income and was liable to assessment.

Issue (ii): Whether the allowance was received by the assessee in the capacity of a mutawalli or as a beneficiary.

Analysis: The findings accepted by the Tribunal showed that the assessee was not a beneficiary. The allowance was fixed as pay for the office of mutawalli under the relevant waqf arrangement and the statutory scheme, and there was no basis for treating the assessee as receiving the amount for his own beneficial interest in the waqf property.

Conclusion: The allowance was received by the assessee as a mutawalli and not as a beneficiary.

Final Conclusion: The reference was answered against the assessee, and the remuneration retained from the waqf income was held taxable.

Ratio Decidendi: Agricultural income retains its exemption only when received by the assessee in his own right; money kept merely as remuneration for services rendered as mutawalli is taxable, even if measured as a fraction of the agricultural income.

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