TaxTMI 
TaxTMI 
1985 (5) TMI 37
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....facts and in the circumstances of the case, 49/64ths share of the income of the wakf allocated to qaumi account was exempt from tax under the provision of section 11 (1)(a) or (b) read with section 2(15) for the assessment years 1962-63, 1963-64 and 1964-65 ? " In the statement of case, it is pointed out that the facts relating to this case have been set out at great length in a Full Bench judgment of this court which is reported as Hakim Abdul Hamid v. CIT [1973] 90 ITR 203. The assessee is M/s. Hamdard Dawakhana (Wakf), Delhi, and as pointed out in the statement of case, this is an association of persons consisting of the mutawallis of the wakf. By a deed dated August 28, 1948, Hakim Haji Abdul Hameed, Hakim Hafiz Mohd. Said and Mst. Rabea Begum took certain properties which belonged to them out of their control and possession and delivered them to the God Almighty to create a wakf. The properties were movable properties belonging to the Hamdard Dawakhana (Wakf), but excluded the rights of ownership in some registered trade marks and also some buildings occupied and used in the business. The executants transferred their rights, etc., in accordance with the terms of the deed, b....
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....i account was exempt. He gave certain directions to the Income-tax Officer to determine the actual income of the wakf. The assessee as well as the Department filed appeals to the Incometax Appellate Tribunal. The case of the Department was that there was no absolute trust and also, it was argued that as the object of the trust was the carrying on of the business of the Hamdard Dawakhana, it was not a charitable purpose. For the contention that there was no absolute gift, reliance was placed on sections 60 to 63 of the new Act. The assessee, however, contended that there was no revocable transfer of assets and the wakf could not reassume power over the income or the assets. There was a difference between the Vice President and the judicial Member, so a reference was made to the President of the Appellate Tribunal under section 255(4) of the Act. The President agreed with the Vice President to hold that the entire qaumi income is exempt from tax and as far as the reserve fund is concerned, it has to be split in the ratio that the qaumi income bears to the khandani income and that portion of the income earmarked for the reserves proportionate to the qaumi income would be exempt.....
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....ed the contentions with some care, but we think we are dealing with an unusual case inasmuch as the trust has been in existence for a very long time. The trust has already been held to be charitable trust for a number of years under the Indian Income-tax Act, 1922. There is a Full Bench judgment of this court under the 1922 Act pointing out that the Income-tax Officer had granted exemption under section 4(3)(i) of the Indian Income-tax Act 1922, in respect of the income set apart for being spent for charities. There, it is pointed out that the khandani income was assessed in the personal hands of Hakim Abdul Hamid. The following words occur: " There is no dispute with regard to the exemption granted in respect of the income set apart for charities and there is no dispute also with regard to the assessment of the khandani income in the hands of Hakim Abdul Hamid." Thus, we are concerned with a case in which there was a settled position for a number of years. We are, therefore, not fully convinced that there is any alteration in the 1961 Act which changes the position as existed in the 1922 Act. The main point urged by Mr. Wazir Singh was based on the definition of " charita....
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....of any business at a profit, then the object of the trust is charitable, notwithstanding the source of the income. It is hardly possible for a charitable trust to work with no source of income. So, the makers of the trust in the present case, dedicated a portion of the income of the business for being used for charitable purpose. As long as the user of that money is charitable, then the exemption has to be granted. It is useful now to refer to the opening words of section 11 (1) of the Act: " Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created bef....
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....No. 1 and 2, jointly during our lifetime and on the death of one of us, the survivor alone, shall have full right to make at his or their discretion suitable alterations in the conditions relating to the duties of mutawalli and the administration of the wakf and the modes of division of " khandani " income and 'Qaumi' income or to make changes in the distribution of income among the various items and objects of charity or in the matter of allocation of rights and shares of his or their heirs or legal representatives in regard to the benefit from the income of the wakf." The main point is regarding the nature of the reserved right to make alterations in the wakf deed. We do not think that the wakf can at all be withdrawn in the light of the language used. The provision is for making alterations in the conditions relating to the duties of the mutawallis and the administration of the wakf. The khandani income has to be treated quite separately from the qaumi income. The khandani income is personal to the mutawallis, i.e., it is not to be used for charity, it is to be used for the family of the executants. It has to be distributed amongst the various members of the family. The reser....
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....nd successfully conduct a Tibbia College in conformity with our own standard. (3) To establish and run charitable hospitals and clinics where poor patients are given free treatment, according to the principles of indigenous system of medicine. We shall prefer that at least 2/3rds (two-thirds) of the money out of the 3/4ths (three-fourths) share of the 'Qaumi Income' devoted to collective needs, is spent on the above-mentioned objects and the remaining 1/3rd (one-third) shall be spent on establishing and running such industrial and technical institutions and laboratories as may tend to reduce poverty and unemployment in the country. 46. It shall not be necessary that the 3/4ths (three-fourths) of the `Qaumi Income' shall in all cases be spent on the collective needs referred to above and only 1/4th (one-fourth) of it on the individual needs of deserving people in the community and country. It shall be possible to make suitable alterations in this proportion in conformity with the needs and requirements of the time and the following items of expenditure and needs shall not be considered as excluded from the collective needs of the community and country. 46. (1) To establi....
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....iance with the relevant (or otherwise), para, text or provision of this wakf deed, interpretation and guidance shall be taken from these modifications and clarifications as final and complied with accordingly. 49. We, the Wakf-Mutawallis shall, jointly and severally, have full power and authority, without any let or hindrance to spend the wakf income according to our own discretion and to establish, run or close down any institution of a public nature according to our independent judgment and during the lifetime of any of us, mutawallis, the only duty of the Majlis-E-Ayan shall be to scrutinise and supervise the accounts relating to I Qaumi Income' and from time to time to give us the benefits of its advice. " It was submitted before us that clause 46 shows that it is possible to use the trust even for running profitable businesses such as commercial institutions, schools, laboratories, inns and also by publication of books. Thus, a non-charitable purpose was visualised by this trust. No doubt, the words actually used do suggest that conceivably the trust income could be used for non-charitable purposes. At the same time, we think that the object of the trust was not to us....