Tax exemption for wakf income denied where deed reserved income for settlor and descendants, with only future charitable application.

A reference was not invalid merely because the Division Bench differed in opinion and directed the matter to a larger Bench; the objection based on Section 98 CPC was rejected because both Judges intended a Full Bench decision. In construing "religious or charitable purposes" under the Income-tax Act, the court applied the ordinary legal sense of those words in the statute's legal setting, not the personal law of each assessee. A wakf deed reserving income for the settlor and his children, with only a future charitable application, was not property held wholly for religious or charitable purposes, so the income remained taxable.

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Issues: (i) Whether the reference under the Income-tax Act was invalid because the Division Bench had differed in opinion and the matter was sent to a larger Bench. (ii) Whether the wakf property was held wholly for religious or charitable purposes so as to exempt the income from tax.

Issue (i): Whether the reference under the Income-tax Act was invalid because the Division Bench had differed in opinion and the matter was sent to a larger Bench.

Analysis: The difference of opinion between the Judges did not exhaust the Court's power where both Judges intended that the matter should be placed before a larger Bench. The order directing hearing by a Full Bench showed that the reference was meant to obtain a final decision on the disputed question, and the objection founded on Section 98 of the Code of Civil Procedure, 1908, was rejected.

Conclusion: The preliminary objection was overruled.

Issue (ii): Whether the wakf property was held wholly for religious or charitable purposes so as to exempt the income from tax.

Analysis: For construing the expressions "religious or charitable purposes" in the Income-tax Act, the proper approach was to apply the ordinary legal sense of the words as understood in the legal system underlying the statute, rather than to investigate the personal law of each assessee. On that construction, a deed reserving the income for the maintenance of the settlor and his children, with only a future application to religious or charitable objects, was not property held wholly for such purposes. Independently, even on Mahomedan law, the deed did not make the income wholly devoted to religious or charitable purposes; the validating legislation did not compel a different result on the facts of the case.

Conclusion: The wakf was not wholly for religious or charitable purposes and the income was assessable to tax.

Final Conclusion: The reference was answered against the assessee and the income from the wakf property was held taxable.

Ratio Decidendi: Expressions in a taxing statute are to be construed in their legal sense as applicable to the statute, and a wakf reserving income for the settlor and his descendants is not a trust wholly for religious or charitable purposes merely because it contains a contingent or ultimate charitable element.

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