TaxTMI 
TaxTMI 
TaxTMI 
1964 (9) TMI 77
X X X X Extracts X X X X
X X X X Extracts X X X X
....s exempt from tax under section 4(3)(i) which was the only question debated before the Tribunal. In order to answer this question it is necessary to state a few facts. Hazrat Pirmohamed Shah Saheb was a renowned Muslim saint who lived in Gujarat in the early half of the eighteenth century. He preached what is called by the Tribunal "a sectarian doctrine" and gathered around him a large following during his lifetime. From out of his followers who were considerable in number, he initiated 100 as his disciples and those initiated came to be known as Murids. He, however, did not permit Murids to initiate others as Murids with the result that after his death there could be no further Murids by initiation. But the descendants of Murids became Murids and the class of Murids was, therefore, constituted of the descendants of the original Murids initiated by the saint. The Murids came mostly, if not entirely, from Sunni Bohra community, Sunni being one of the two main sects of the Muslim community, namely, Sunni and Shia. On the death of Hazrat Pirmohamed Shah Saheb which occurred some time in 1742 A.D. his disciples, i.e., Murids and other devotees, subscribed moneys and collecte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....properties of the roza were considerable in number and they were situate in different places like Ahmedabad, Kadi and Viramgam. Barring the roza, the mosque and the rooms meant for the occupation of the Murids entitled to reside therein, the rest of the properties were let out and produced income by way of rent which forms the subject-matter of assessment in the present reference. The earliest records available are the records of the first survey operations carried out between 1870 and 1880 and the show that at that time the roza and the mosque were recognized as wakf and were entered as such in the revenue records. The properties which were purchased for the roza from time to time were also described as sold to the wakf of the roza in the documents conveying the properties. Now there is no positive evidence on record to show definitely how the properties of the roza were managed prior to 1888 but the minutes of the meetings of the Murids held on 15th October, 1888, indicate that until then the management of the roza properties was being looked after by the general body of Murids through certain appointed agents. At this meeting resolutions were passed by the general body of Murid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een, that the wakf was not a wakf for the benefit of the public but that wakf was merely for the benefit of the Murids and was, therefore, not liable to be registered as a public trust. The application was, however, withdrawn on 2nd November, 1953. The Assistant Charity Commissioner thereupon started a suo motu inquiry under the Act, but before this inquiry was concluded, the roza committee made another application for registration of the wakf to the Charity Commissioner on 28th April, 1955. In this application the roza committee conceded that the wakf was for the benefit of the public and was, therefore, liable to be registered as a public trust. The opposition of the roza committee being thus withdrawn, the Assistant Charity Commissioner made an order dated 29th April, 1955, registering the wakf as a public trust. No appeal or revision application was preferred against this order of the Assistant Commissioner until the beginning of January, 1958, when the roza committee, having regard to what happened in the income-tax proceedings initiated against it, to which we shall presently refer, made an application to the Charity Commissioner to revise this order. The Charity Commissioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the Tribunal held that since the properties were wakf properties, the roza committee held the properties under a legal obligation "even though they may not have held it under a trust". The Tribunal then examined the question whether the purposes of the wakf were public or private in the sense that the benefit of the wakf was available to the Muslim community as such or was confined only to the Murids. On this question the Tribunal would have had to examine the facts for the purpose of determining who were the beneficiaries under the wakf, whether the Muslim community as a whole or only the Murids, but counsel who appeared on behalf of the assessee conceded before the Tribunal that the benefit of the wakf was confined exclusively to the Murids. He contended that though the benefit of the wakf was strictly confined to the Murids, the class of Murids constituted an appreciable section of the Sunni Bohra community and the wakf was, therefore, a wakf for the benefit of a section of the community so as to fall within the exempting provision contained in section 4(3)(i). The Tribunal, however, relying on the test laid down by the House of Lords in Oppenheim v. Tobacco Securit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... part of the income of a private religious trust which does not enure for the benefit of the public." The section, it will be noticed, consisted of two parts: the first, exempting income derived from properties held under trust or other legal obligation wholly for charitable purposes on the basis of the statutory definition that "charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of public utility and the second, exempting income derived from property held under trust or legal obligation wholly for a religious purpose with this qualification that that part of the income of a private religious trust which does not enure for the benefit of the public would not be entitled to exemption. The claim for exemption before us was formulated under both the heads and it will, therefore, be necessary for us to consider the section in both its parts. We will first examine the question whether the income sought to be assessed could be said to be derived by the assessee from properties held under trust or other legal obligation wholly for charitable purposes, keeping in view the statutory definition of "charitabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lic-whether it is for the benefit of the community or of an appreciably important class of the community. The inhabitants of a parish or town, or any particular class of such inhabitants, may, for instance, be the objects of such a gift, but private individuals, or a fluctuating body of private individuals, cannot. " The proposition is true of all charitable gifts and is not confined to the fourth class in Lord Macnaghten's well-known statement in Pemsel's case (supra), where the learned law Lord defined "charitable purposes" by saying:" 'Charity' in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads". The element of public benefit must exist whatever be the class in Lord Macnaghten's statement to which the charitable purpose may belong. The only exception is to be found in the case of trusts for the relief of poverty where the element of public benefit is dispensed with as a result of the historical development of the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose since no element of public benefit was involved. Similarly, it was held by the Bombay High Court in Arur v. Commissioner of Income-tax [1945] 13 ITR 465 that "education" in order to be charitable, must relate to the public and on that view the Bombay High Court found a trust for the education of the members of a family or the descendants of a certain named individual to be non-charitable. The element of public benefit must, therefore, be present before a purpose falling within any of the four classes set out in the last paragraph of section 4(3)(i) can be regarded as charitable. The purpose, in order to be charitable, must be directed to the benefit of the community or a section of the community and not to the benefit of particular private individuals or a fluctuating body of private individuals. The question which, therefore, requires to be considered is, has the wakf in the present case the public character which the income-tax law requires of the charities it recognizes and favours? We may make it clear at this stage when we use the word "wakf" we do not wish to anticipate the point whether there was in the present case a wakf or a trust, for that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y and the purposes of the wakf were, therefore, invested with a public character. That raises the question: What is a section of the community? Now this expression has always eluded definition and, having regard to the impossibility of laying down a precise definition of what is meant by a "section of the community", Lord Greene M.R. in In re Compton: Powell v. Compton [1945] 1 All ER 198; [1945] Ch. 123, 129, 131, while discussing this question disclaimed any intention to make an attempt to define it. Nevertheless, he did proceed to explain what in his opinion would constitute a "section of the community". In order to appreciate the test laid down by him for ascertaining when a class of persons can be said to constitute a section of the community as distinguished from an aggregate of individuals not constituting such section, it is necessary to notice the facts of the case which came before him. The testatrix there created a trust for the education of the lawful descendants of three named persons to fit such descendants to be servants of God serving the nation, not as students for research of any kind. The descendants of two of such persons were to "have t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ersonal element enters into and is an essential part of the qualification, which is defined by reference to something, i.e., a personal relationship to individuals or an individual which is in its essence non-public." After discussing the case of In re Drummond [1914] 2 Ch. 90, which was cited before him, he summed up his conclusion in the following words at page 202: "I come to the conclusion, therefore, that on principle a gift under which the beneficiaries are defined by reference to a purely personal relationship to a named propositus cannot on principle be a valid charitable gift. And this, I think, must be the case whether the relationship be near or distant, whether it is limited to one generation or is extended to two or three or in perpetuity. The inherent vice of the personal element is present however long the chain and the claimant cannot avoid basing his claim on it." This test was approved by the House of Lords in Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297. In that case the trust was for providing for the education of children of employees or former employees of a British limited company or any of its subsidiaries or allied compani....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regard to the conditions of Indian life, would constitute a section of the community. Now it is true that in determining whether a particular object of a gift is an object of general public utility or, in other words, an object tending to public benefit, the courts must apply, to use the words of Sir Raymond West in Fatmabibi v. Advocate-General of Bombay [1881] ILR 6 Bom. 42, approved by the Privy Council in the Tribune case (supra), "the standard of customary law and common opinion amongst the community to which the parties interested belong". As observed by Lord Wright in All India Spinners' Association's case (supra), English decisions may sometimes afford help or guidance but they "cannot relieve the Indian courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life". But we do not see anything peculiar to English law or peculiar to conditions of English life in the test which has been formulated in the English decisions to which we have referred. The test is a broad general test for determining when can a class of beneficiaries be said to have a public character o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to form a section of the community. Mr. Kaji contended that the common quality which united the beneficiaries into the class of Murids was the fact that each one of them was a Murid and the attribute of being a Murid was, in his submission, an attribute of an impersonal nature which constituted the class of Murids into a section of the community. He agreed that after the death of the saint, there could be no Murids by initiation and one could be Murid only by being born in the family of a Murid. But that by itself, he argued, could not be a reason for holding that the attribute of being a Murid was essentially of a personal nature. He gave the example of castes in the Hindu community, where in order to belong to a caste, one has to be born in the caste and pointed out that merely because the entry in the class can be obtained only by birth, it does not mean that the class does not constitute a section of the community. He also tried to illustrate the point he was making by taking the case of a religion like the Jewish religion where conversion not being possible entry can be secured only by birth and stressed his argument in the form of an interrogation by asking the question: Can....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n quality which united the Murids into a class was the following of the sectarian doctrine preached by the saint. Mr. Kaji then contended that the common quality was to be found in the fact that they were disciples of the saint but if this be the common quality, the argument of Mr. Kaji runs into serious difficulties. The relationship of a saint and his disciples is clearly a personal relationship being in the nature of an intimate spiritual relationship. It is difficult to see how this relationship can be described as of an impersonal nature. The nexus which connects disciples is the personal bond or relationship which each disciple has with the saint and if this be the common characteristic defining and demarcating the class of Murids, it is clear having regard to the test which we have set out above; that the class of Murids cannot be regarded as a section of the community. Moreover, in order to base a claim to be a Murid, a claimant must be able to show that he is a descendant of an original Murid initiated by the saint. This relationship too would be a personal relationship with the original Murid who was a Murid by reason of the fact that he was initiated as a disciple by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation), the wakf could not be regarded as a private religious trust within the meaning of that expression as used in the last paragraph of the section and the income from the roza properties held by way of wakf was, therefore, not taken out of the exemption enacted in the main part of the section. The alternative argument was that even if the wakf could be regarded as a private religious trust, its income enured for the benefit of the public and was, therefore, still exempt under the main part of the section. This was broadly the contention urged by Mr. Kaji on behalf of the assessee and we shall now proceed to examine the validity of this contention. Turning to the main argument, the first question that must be considered is whether the wakf was wholly for religious purposes, for, unless the assessee could show that the wakf was wholly for religious purposes, the assessee could not claim the benefit of the exemption enacted in the main part of the section. It is only if the assessee could show that the wakf was wholly for religious purposes and, therefore, within the exemption as found in the main part of the section, that the next question could arise for consideration, namely....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Murids and that it did not enure for the benefit of the public. It is, therefore, clear that the Tribunal found that the roza properties were held by the assessee for private religious purposes of the Murids. This finding, contended Mr. Kaji, was a finding of fact and being a finding of fact, it was binding upon us and in view of this finding, it was submitted, it was not open to us to hold that the wakf was not wholly for religious purposes. The learned Advocate-General, however, urged that the question whether the wakf was wholly for religious purposes was a question of law and the finding of the Tribunal on this question was therefore not immune from scrutiny by the court. Now the determination of the question whether the wakf was wholly for religious purposes would involve findings on two constituent questions. One would be as to what were the purposes of the wakf and the other would be whether those purposes could be regarded as religious purposes. The second question would of course be a question of fact since its determination would not involve the application of any legal principles, but the first question would in most cases be a question of law or at any rate a mixed que....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the execution of the purpose would be either (1) the particular private individuals or fluctuating body of private individuals, or (2) the community or a section of the community, as the case may be. If the beneficiaries satisfy the former description, the trust would be a private trust and if they satisfy the latter the trust would be a public trust. It is, therefore, not correct to say that merely because a concession was made on behalf of the assessee that the benefit of the wakf was confined strictly to Murids, the purposes of the wakf did not require to be independently investigated. All that the concession meant was that the purposes of the wakf were purposes for the benefit of the Murids and not for the benefit of the Muslim community as a whole or any section of that community. The concession did not project itself into the purposes of the wakf and when we look at the finding of the Tribunal, we find that the Tribunal also understood the concession in the same sense, for when they gave the finding, they said that the roza properties were held under trust for private religious purposes of the Murids. We cannot, therefore, hold that in view of the concession the purposes o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he argument proceeded, it was clear that the purposes of the wakf were wholly religious. Now, there is no doubt that the Tribunal did find that the purposes of the wakf were maintenance of the roza and the mosque and the observance of festive occasions such as Urs, death anniversaries, etc., at those institutions, but, as we have pointed out above, this finding was not a finding on a pure question of law and fact and it would, therefore, be open to us to examine its correctness. Mr. Kaji, however, raised an objection of a preliminary nature against our entertaining the contention of the revenue that the finding of the Tribunal as regards the purposes of the wakf was erroneous and liable to be set aside. He urged that there was in fact no dispute before the Tribunal on the question whether, if there was a wakf, the purposes of the wakf were wholly religious. He pointed out that the only dispute between the parties was whether the properties were held under trust or other legal obligation and, if they were so held, whether the purposes for which they were held were for the benefit of the public or for the benefit of only a fluctuating body of private individuals, namely, the Murids. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s as contended on behalf of the assessee. We must accordingly proceed to consider this contention of the revenue and see how far it is justified. Now it is clear from the record that the assessee incurred expenditure on maintenance of Madrassas and library and the figures which we have for the expenses from the year 1942-43 onwards show that the amounts expended on maintenance of Madrassas and library were almost as large as the amounts expended on (1) the dargah and the mosque; and (2) the observance of festive occasions such as Urs, death anniversaries, etc., at these institutions. There is nothing on the record before us to show that the Madrassas and the library were started as adjuncts of the roza and the mosque and were only for imparting religious instruction to Muslims. The order of the Charity Commissioner which is annexure "O" to the statement of the case on the contrary shows that schools were being run by the wakf in Ahmedabad and also outside Ahmedabad and that those schools were open to non-Muslims as well as Muslims. It is, therefore, clear that the maintenance of Madrassas and library was a purpose of wakf. Mr. Kaji, however, contended that the wakf came ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue that there is no evidence on record to show that the income of the wakf was applied for maintenance of Madrassas and library prior to the year 1942-43 but equally there is no evidence to show that it was not so applied. The fact that the wakf maintained Madrassas and library and income of the wakf was applied for that purpose at any rate from 1942-43 onwards must lead to the inference that the maintenance of Madrassas and library was a purpose of the wakf and that even if that was not the original purpose for which the properties were gifted by the Murids, it had become a purpose of the wakf. We are, therefore, of the view that the Tribunal was in error in taking the view that the purposes of the wakf were confined only to maintenance of the roza and the mosque and the celebration of festive occasions such as Urs, death anniversaries, etc. Along with these purposes, the maintenance of Madrassas and library was also a purpose of the wakf. We may point out that, even if the view be taken that the question as to what were the purposes of the wakf is a question of fact, we would still be entitled to interfere with the finding of the Tribunal on that question since the finding was cl....