Wakf income and indeterminate beneficiary shares attracted trustee taxation at the maximum rate under section 41(1).

Section 41(1) of the Income-tax Act, 1922 applied to income receivable by a muthawalli under a valid wakf deed, and the income was to be taxed in the same manner as the human beneficiaries would be taxed. Because the deed conferred only a right to maintenance and religious or charitable spending according to need and discretion, with no ascertainable individual shares, the first proviso applied and the beneficiaries' shares were indeterminate. The contention that the income was received on behalf of the Almighty was rejected, since the muthawalli was treated as a trustee for tax purposes and the income was received for the benefit of the beneficiaries.

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Issues: Whether the first proviso to section 41(1) of the Income-tax Act, 1922 applied to the wakf income so as to attract assessment at the maximum rate; and whether the muthawalli could escape section 41(1) on the ground that the wakf property vested in the Almighty.

Analysis: Section 41(1) applies to income receivable by a trustee, including a trustee under a valid wakf deed, and taxes the income in the same manner as the beneficiary would be taxed. The first proviso applies where the income is not specifically receivable on behalf of one person or where the individual shares of the persons on whose behalf it is receivable are indeterminate or unknown. On the terms of the wakf deed, no definite shares were conferred on the beneficiaries; the muthawalli was required to maintain the family and meet religious and charitable expenses according to need and discretion, so the beneficiaries had only a right to maintenance and not ascertainable shares in income. The argument that the income was received on behalf of the Almighty was rejected because, for the purposes of section 41(1), the muthawalli is treated as a trustee and the income is received for the benefit of the human beneficiaries contemplated by the wakf.

Conclusion: The first proviso to section 41(1) applied, the beneficiaries' shares were indeterminate, and the assessee was liable to be taxed at the maximum rate; the objection based on receipt on behalf of the Almighty was rejected.

Ratio Decidendi: Where a wakf deed gives beneficiaries only a right to maintenance without ascertainable shares in income, the first proviso to section 41(1) of the Income-tax Act, 1922 is attracted and the muthawalli is assessable at the maximum rate as a trustee for tax purposes.

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