- (1.) These appeals are brought, by certificate, from the Judgement of the High court of Gujarat, dated September 25, 1964, in Income-tax Reference No. 22 of 1963.
(2.) Hazrat Pirmohamed Shah Saheb was a renowned Muslim saint who lived in Gujarat in the early half of the eighteenth Century. At the time of his death he left a large number of followers. During his lifetime he initiated some of his followers as his disciples and those so initiated came to be known as Murids. At the time of the demise of the saint, the number of Murids was about 400. The descendants of the Murids also became Murids. Thus the class of Murids consists of the descendants of the Murids initiated by the saint in his lifetime. After the death of the saint in 1742, his disciples and devotees subscribed moneys and collected donations for the purpose of building a Roza or Dargah (mausoleum) to commemorate his memory. Besides the Roza, a mosque was also built for the purpose of offering Fatiahs and prayers. In accordance with Islamic doctrine, all Muslims, whether Murids or non-Murids, had unrestricted access to the Roza and the mosque. Now the maintenance of the Roza and the mosque required moneys and so also did the observance of .festive occasions such as Urs, death anniversaries, etc., at these institutions. Several gifts of properties were, therefore, made by Murids for these purposes and certain properties were also purchased by persons in management out of offerings made at these institutions. All these properties were treated as properties of the Roza and the income from these properties after payment of municipal taxes, insurance premium and other out goings in respect of the properties was utilised for maintenance of the Roza and the mosque and observance of festive occasions such as Urs, death anniversaries, etc. It appears from the statement of receipts and expenditure for the years 1942-43 to 1956-57 produced before the Appellate tribunal, which is Annex. " L " to the statement of case, that during those years a part of the surplus income of the properties after meeting this expenditure on the maintenance of the Roza and the mosque and the observance of festive occasions such as Urs, death anniversaries, etc., was also utilised for running madrassas, library and payment of expenses on items, such as langar and bhandar for giving food to pilgrims attending the Roza and the mosque on festive occasions. The surplus income was at no time utilised for the personal benefit of the Murids. The Murids, however, had two kinds of rights in the properties of the Roza. Some of the Murids who had contributed to the cost of construction of certain rooms were entitled to reside in those rooms when they camfi to the Roza. Then there were certain date trees in the premises of the Roza and the Murids were entitled to the dates from those trees. The earliest records available are the records of the first survey operations carried out between 1870 and 1880 and they show that at that time the Roza and the mosque were recognised 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 in the revenue records. There was no evidence to show how the properties of the Roza were managed prior to 1888 but the minutes of the meeting of the Murids held on October 15, 1888, indicate that until then the management of the 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 Murids laying down certain rules in connection with the management and administration of the Roza properties. In these resolutions, the properties were described as belonging to the Roza and a committee was appointed to manage and administer that Roza properties. The committee was enjoined to look after the properties of the Roza, maintain the Roza and the mosque and defray the expenses incurred on Urs and other functions in the Roza. The committee (hereinafter called the " Roza Committee ") thereafter carried on the management and administration of the Roza properties. In 1923, the Mussalman Wakf Act was passed which gave rise to considerable litigation between the Roza Committee on the one hand and the Anjuman-a-islam representing the Muslim community in general. With a view to prevent interference in the management of the Roza Committee by the Muslims in general, the Roza Committee top up the stand that the Musalman Wakf Act did not apply to their case. While the litigation was pending, the Bombay Public Trusts Act, 1950, came into force on 21.01.1952. Since the Act required applications to be made for registration of all public trusts, the Roza Committee made an application to the Charity Commissioner on 30.05.1952, for registration of the wakf. The application. was made under protest since the contention of the Roza Committee was that the wakf was not a wakf for the benefit of the public but was a wakf 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 2.11.1953. 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 28.04.1955. 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 Assistant Charity Commissioner thereupon made an order dated 29.04.1955, registering the wakf as a public trust. In the meantime, on 28.03.1953, the Income-tax Officer issued notices to the Roza Committee under section 44(1)(a) for the assessment years 1944-45 to 1948-49, the corresponding accounting years being Samvat years 1999 to 2003. The notice were issued on the ground that by reason of the failure of the appellant to make a return of its income under section 22 of the Income-tax Act, 1922 (hereinafter called the "Act"), the income of the appellant for those assessment years had escaped assessment. The appellant contended that the income derived from the Roza properties was exempt from tax under section 4(3)(i) of the Act. The claim for exemption was rejected by the Income-tax Officer whose order was affirmed by the Assistant Commissioner in appeal. The appellant took the matter in further appeal to the Appellate tribunal. The tribunal held, in the first place, that the Roza properties were wakf properties and were held under a legal obligation for a private religious purpose and not for a public religious purpose. The tribunal also examined the question whether the properties were held by the Roza Committee for a charitable purpose and took the view that the class of Murids could not be regarded as a section of the community and, therefore, the Roza properties were not held under a legal obligation for a wholly charitable purpose. The Tribunal accordingly rejected the claim of the appellant for exemption from taxation under section 4(3)(i) of the Act. As directed by the High court, the Appellate tribunal stated a case on the following questions of law : "1. Whether, on the facts and in the circumstances of the case, the properties of the Hazrat Pir Mohamed Shah Saheb Roza Committee are held under trust or other legal obligation for public, religious or charitable objects (2) Whether the income from the wakf properties for the relevant assessment years is entitled to exemption under section 4(3)(i) and/or 4(3)(ii) of the Indian Income-tax Act - The High court answered both the questions against the appellant, holding that, upon the evidence given, the purpose of the wakf included the maintenance of madrassas and the library which was not proved to be a wholly religious purpose. The High court also held that the class of Murids did not constitute a section of the community so as to satisfy the test of public benefit involved in a charitable purpose, but was merely a fluctuating body of private individuals and, therefore, rejected the claim for exemption on the basis that the wakf was a wakf wholly for a charitable purpose. In support of this view the High court relied upon the decision of the House of Lords in Oppenheim V/s. Tobacco Securities Trust Co. Ltd. S.4(3)(i) of the Act, as it stood at the material time, was to the following effect: "4.(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them : (i) Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto . . ..
(3.) In this Ss. ' charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility, but nothing contained in clause (i), clause (ia) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income of a private religious trust which does not enure for the benefit of the public.";