V.G. Oak, C.J. - (1.) THESE are two connected references under Section 66 of the Indian Income-tax Act, 1922 (hereafter referred to as "the Act"). THESE references raise a common question whether receipts in the hands of beneficiaries are to be treated as earned income or not. Haji Abdul Hameed and Haji Abdul Shakoor are the two assessees. The assessment years are 1957-58 to 1960-61.
(2.) ONE Haji Lal Mohammad executed a deed of wakf in the year 1942. The beneficiaries under the deed of wakf were his two grandsons, Shakoor and Hameed. The property conveyed to the wakf consisted of a business in bidis. In the year 1947, Hameed became the sole rnutawalli. Under the deed of wakf, Hameed and Shakoor were each entitled to one-half share in the income from the business owned by the wakf. For the assessment year 1957-58 the income from the business was fixed at Rs, 2,70,868. The shares, of Hameed and Shakoor from this income came to Rs. 1,35, 434 each. The question arose whether this income in the hands of the two beneficiaries was to be treated as their earned income. On this point, the Income-tax Officer found against the two assessees. It was held that these sums did not represent their earned income. This view was upheld in appeal by the Appellate Assistant Commissioner. When the two assessees went up in appeal before the Appellate Tribunal Allahabad, the Judicial Member was of the view that the assessees' appeals should be dismissed. The Accountant Member had some doubts on the points. But, ultimately he decided to agree with the Judicial Member. The result was that the appeals by the assessees were dismissed. At the instance of the two assessees, the Tribunal has referred the following question of law to this court: "Whether, on the facts and in the circumstances of the case, the assessee is entitled to any earned income relief on the share of income received by him from the business which is the subject of the wakf in his capacity as a beneficiary ?"
(3.) MR. P. N. Pachauri appearing for the two assessees suggested before us that the receipts in question do not constitute income at all in the hands of the two assessees. I think, it is not open to the two assessees to raise this contention before this court. The case proceeded on the footing that the various sums were assessable as income in the hands of the two assessees. The sole question for consideration by the court is whether certain receipts are earned income or not. Another question for consideration is whether the income falls under Section 10 or under Section 12 of the Act. Mr. Pachauri contended that it is not open to the department to raise this point before the court, as it was understood throughout that this was business income. I note that the Appellate Assistant Commissioner disposed of the appeal before him on the footing that the source of income in the hands of the beneficiary was the right under the deed of wakf. It was not business income in the assessee's hands. This question was again considered by the Accountant Member. It is true that he concluded that the matter fell under Section 10 of the Act. But he found it necessary to discuss the question whether the case fell under Section 10 or under Section 12. In the assessment order the word "business" was noted against the item of Rs. 1,35,434. But there was no clear indication whether this item fell under Section 10 or under Section 12. Considering the entire proceedings before the various authorities, it is not correct to say that the department conceded that the receipts were business income in the hands of the two assessees. It is now necessary to consider whether the receipts fell under Section 10 or under section !2 of the Act.;