Agricultural income retains its character through a mutawalli, and mixed waqf receipts require rateable apportionment.

Agricultural income does not lose its character merely because it is received through a mutawalli-cum-beneficiary under waqf deeds; if the receipt remains traceable to the waqf's agricultural source, it is treated as agricultural income in the beneficiary's hands. Where waqf income is a composite of agricultural and non-agricultural receipts and forms a common fund, the surplus must be apportioned rateably in the same proportions as those components contributed to the fund. This preserves the exempt character of the agricultural portion while bringing only the non-agricultural portion into tax computation.

---

---

Issues: (i) Whether the residuary amounts received by a mutawalli-cum-beneficiary under waqf deeds retained the character of agricultural income when received by him as beneficiary. (ii) Whether, where the waqf income was composed of both agricultural and non-agricultural receipts and formed a composite fund, the agricultural element had to be apportioned in the same proportion as it bore to the non-agricultural element.

Issue (i): Whether the residuary amounts received by a mutawalli-cum-beneficiary under waqf deeds retained the character of agricultural income when received by him as beneficiary.

Analysis: The residuary income passed under the waqf instruments themselves and was received by the assessee not as a mere employee or stranger but as a beneficiary with an obligation attached to the office of mutawalli. The fact that the receipt was referable to services did not, by itself, alter the essential character of the income when it reached his hands. The income did not acquire a new source merely because it passed through the hands of the mutawalli before being retained by him beneficially.

Conclusion: Yes. So far as the sums represented agricultural income under the waqf deeds, they remained agricultural income in the assessee's hands.

Issue (ii): Whether, where the waqf income was composed of both agricultural and non-agricultural receipts and formed a composite fund, the agricultural element had to be apportioned in the same proportion as it bore to the non-agricultural element.

Analysis: The composite fund was subjected first to the prior trusts and expenses, and the residue could not fairly be treated as wholly taxable or wholly exempt without distorting the mixed character of the fund. The proper approach was rateable apportionment, so that the prior charges were borne by the agricultural and non-agricultural components in proportion to their respective contributions to the fund and the residue resumed that proportionate character.

Conclusion: Yes. The surplus had to be attributed rateably to agricultural and non-agricultural income in the same proportions as those elements stood in the composite fund.

Final Conclusion: The reference was answered in a manner that preserved exemption for the agricultural portion of the surplus income and subjected only the non-agricultural portion to tax, with costs awarded to the assessee.

Ratio Decidendi: Income that remains identifiable as agricultural income does not lose that character merely because it passes through a trustee or mutawalli, and where agricultural and non-agricultural receipts are commingled in one fund, the residuary income must be apportioned rateably according to the original proportions of the two sources.

---