Earned income relief unavailable for wakf beneficiaries where income arose from the deed, not direct business profits.

Earned income relief under section 2(6AA)(b) or section 2(6AA)(c) of the Indian Income-tax Act, 1922 was unavailable where beneficiaries received income under a wakf deed rather than as direct business profits earned by them. The Supreme Court noted that the receipt originated in the wakf instrument and was assessable under section 41(2), not as profits and gains of business carried on by the assessees in their own right. Clause (b) failed because the income did not arise directly from the assessees' business activity, and clause (c) failed because there was no immediate nexus between personal exertion and the receipt. The claim for earned income relief was therefore rejected.

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Issues: Whether the assessees were entitled to earned income relief under section 2(6AA)(b) or section 2(6AA)(c) of the Indian Income-tax Act, 1922 in respect of income received as beneficiaries under the wakf, where the assessment proceeded under section 41(2) of the Act.

Analysis: The income in question was received by the assessees not as direct profits from business carried on by them in their own right, but as beneficiaries under the wakf deed. On the facts, the source of the receipt was the deed of wakf and not business income assessable under the head "Profits and gains of business". For clause (b), the relief was unavailable because the receipt did not arise directly from the carrying on of business by the assessee. For clause (c), the requisite immediate connection between personal exertions and the receipt was lacking, since the income reached the assessees only after distribution under the wakf. The assessment having proceeded under section 41(2) rather than section 41(1), no earned income relief was available on the footing claimed.

Conclusion: The claim for earned income relief was rightly rejected.

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