DIVAN, J. -
(1.)IN this reference made at the instance of the revenue, the revenue, the following question has been referred to us :
'Whether, on the facts and circumstances of the case, the trusts are wholly religious and entitled to exemption under section 11(1)(a) of the Income -tax Act, 1961 ?'
(2.)WE may point out that, though the question has been framed in connection with the trusts being wholly religious, there all controversy between the parties is whether these trusts are entitled to exemption under the provisions of section 11(1)(a). It is not in dispute before us that, if under a particular trust the income from the trust properties has to be utilised partly for charitable purposes and the balance for religious purposes or vice versa, the entire income will be entitled to exemption under section 11 of the Act. The relevant assessment years are 1965 -66 to 1967 -68, and the assessee is a trustee of two trusts created by two sisters by two different documents, both executed on the same day, namely, January 12, 1937. Both the trust deeds were in identical terms. The two sisters belonged to Dawoodi Bohra community and the trusts were executed in respect of certain properties which were situated at Surat and Bombay and by these two trust deeds the properties were vested for the benefit of Dawoodi Bohra community to be managed and applied by the chief of the Dawoodi Bohra community, namely, the Mullaji Saheb and by his successors -in office. The Mullaji Saheb as the head of the community is known as Dai -ul -Mutlak. Under the trust deed, in the preamble it is mentioned that the executant of the trust deed who belonged to Dawoodi Bohra community and was a follower of the Dawoodi Bohra religion believed in the theory that Mullaji Saheb for the time being is the vicegerent of the Imam in seclusion and, therefore, she declared that the properties described in the document were made a wakf in accordance with the religious belief other community. The dedication is to Dawat Hadiayah, a sort of a representative body for the Dawoodi Bohras. It is further mentioned in the deed that the Mullaji Saheb for the time being is the head, both spiritual and temporal of Dawat Hadiayah. The office of the Mullaji Saheb is also known as Dai -ul -Mutlak and the executant mentioned that, in order to effectuate the religious beliefs, she had created the wakf. We will come to the different clauses of the deed in the course of this judgment but the man question was, whether under the clauses of the trust deed it was open to the Mullaji Saheb for the time being as the head of the Dawoodi Bohra community to utilise the income or the corpus of the properties settled on trust under these two trust deeds for purposes other than religious or for purposes other than charitable. In respect of the income for the assessment years under consideration the income tax Office held that the trust was not entitled to exemption. He based his reasons mostly on the clauses giving absolute discretion to the Dai -ul -Mutlak. The trustees carried the matter in appeal and the Appellate Assistant Commissioner confirmed the order of the Income tax Officer and negatived the claim of the assessee. Thereafter, the matter was taken in further appeal to the Income tax Tribunal and the Tribunal observed that from a bare perusal of the trust deeds it was very clear that the trusts were wholly religious trusts. The properties which were the subject -matter of wakfs, according to the Tribunal, vested in the Mullaji Saheb (as Dai -ul -Mutlak for the time being in office) for the benefit of the Dawoodi Bohra community. According to the Tribunal the preamble made it abundantly clear that it was a religious belief of the Dawoodi Bohra community that the Mullaji Saheb was next to the Imam in seclusion The dedication of the properties was, according to the Tribunal, made purely for religious purposes in respect of the Dawoodi Bohra community and the fact that Dai -ul -Mutlak for the time being in office has been given absolute power to utilise the income would not mean that the trust was not for religious purposes. The idea in vesting the properties in the Mullaji Saheb, in the view of the Tribunal, was only to see that he being the religious head of the Dawoodi Bohra community, would utilise the income and the corpus for the upliftment of that community and the Tribunal held that the other clauses of the trust deed also pointed to the same conclusion. The Tribunal observed that the trusts were wholly religious. The question whether the entire income was exempt or not was all together a different question. Section 11(1)(a) states that income derived from property, etc., must be 'applied to such purposes in India', and if any income is applied to religious purposes outside Indian, that may not be exempt but the primary exemption for wholly religious trusts would not be taken away. According to the Tribunal, the trust was wholly religious and, therefore, entitled to exemption under section 11(1)(a). Since, however, the lower authorities did not examine as to which part of the income would be exempt in view of the observations made by the Tribunal, the matters were remanded back to the Income tax officer and thereafter, at the instance of the revenue the question hereinabove set out has been referred to us for our opinion.
In order to find out whether these trusts are for wholly religious purposes within the meaning of section 11(1)(a) or for wholly charitable purposes or partly religious or partly charitable entitled to exemption under section 11(1)(a), it is necessary to refer to the deed of trust in detail. Since both the trust deeds are in identical terms, we will refer to only one of them, namely, the deed of wakf or declaration of wakf executed by Bai Aminabu, one of the two settlors. She stated that she was a follower of the Dawoodi Bohra religion and as such believed that His Holiness Sardar Sayemne Taher Saifuddin Saheb, the Mullaji Saheb of the Dawoodi Bohra community for the time being is the vicegerent on earth of the Iman in seclusion and she further declared that she believed that the Mulla Saheb, as the vicegerent of the Inam in seclusion, is accountable for his words and deeds to the Inam in seclusion and to none else on earth. She Said :
'I declare this to be an essential part off my belief and if any provision hereinafter contained should be deemed contrary to this belief, such shall be null and void.'
(3.)SHE declared that she was making this wake of her free will and pleasure and that she was making a wakf in accordance with the religious beliefs of her community and was giving the right, title and interest in the meoity in the properties described in the schedules to the document to the Dawat Hadiayah, of which the head, both spiritual and temporal on earth is the Mullaji Saheb and his successors -in -office as Dai -ul -Mutlak and in order to effectuate the same, she was assigning and conveying the said property to the Mullaji Saheb and to the successors -in -office absolutely. The preamble then proceeds :
'The conditions of the said wakf, subject to and without derogating in any manner from the absolute powers of the Mullaji Saheb and his successors -in -office hereinbefore declared shall be as following.'