C.S.P. Singh, J. - (1.) THE Income-tax Appellate Tribunal, ' D ' Bench, Allahabad, has referred the following two questions for the opinion of this court : " 1. 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 matter of the waqf, in his capacity as beneficiary ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Officer having made an assessment under Section 41(1) of the Indian Income-tax Act, 1922, on the waqf of which the assessee was the mutawalli, was not competent to assess the assessee as a beneficiary under the provisions of Section 41(2) of the Act on the ground, inter alia, that the provisions of Sections 41(1) and 41(2) are alternate ? "
(2.) THE assessment year in question is the year 1961-62. THE dispute centres round the income derived by the assessee as a beneficiary from a waqf. This waqf was created by the assessee's grandfather, Haji Lal Mohammad, by a deed dated March 14, 1942. Under this deed, the assessee and his brother, Haji Abdul Shakoor, were the beneficiaries and the properties forming the subject-matter of the waqf was the biri business, styled as " Haji Lal Mohammad Biri Works ". Originally, Haji Lal Mohammad and his wife were the mutawallis; but later they, by deed dated February 13, 1947, surrendered their rights, and Haji Abdul Hamid became the sole mutawalli, and continued as such during the relevant period. As both Haji Abdul Shakoor and Haji Abdul Hamid had half share each in the income from the business covered by the waqf, they were assessed as beneficiaries of the waqf business. In the assessment year in question, the income derived by the waqf was computed; but, no tax was assessed thereon. THE income from the waqf was included half and half in the individual assessment of the two brothers, Haji Abdul Hamid and Haji Abdul Shakoor. THE assessee objected to the inclusion of this income on two grounds. Firstly, that as the income had been assessed in the hands of the waqf, it could not be included in the assessment of the assessee. THE other ground was that as the income was earned income, he was entitled to " earned income relief ". Both these contentions have been rejected by the assessing authorities. It is convenient to dispose of the second question first. Although the second question gives the impression that the income had been assessed in the hands of the waqf in the sense that not only was the income computed, but also brought to tax, it is common ground that no tax was imposed on this income. All that was done was that the business income of the waqf was computed by the ITO. The answer to this depends on the phraseology of Section 41 of the Act. The relevant Section 41(1) runs : "41. (1) In the case of income, profits or gains chargeable under this Act.........any trustee............(including the trustee or trustees under any waqf deed which is valid under the Mussalman Waqf Validating Act, 1913), are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such............trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly :...... (2) Nothing contained in Sub-section (1) shall prevent either the direct assessment of the person on whose behalf income, profits or gains therein referred to are receivable or the recovery from such person of the tax payable in respect of such income, profits or gains." The words of Section 41 of the Act speak for themselves. Under this provision, the ITO can either assess the trustee in the same manner and to the same amount as the beneficiaries or make a direct assessment on the beneficiaries. In the present case, no tax was imposed on the waqf. All that has been done is that the income from the business has been computed. In such a situation, the ITO could have recourse to Section 41(2) of the Act, which he did. The decision of the Andhra Pradesh High Court in the case of Barium Chemicals Ltd. v. ITO [1975] 100 ITR 637 is directly in point. To the same effect is the decision in the case of C. R. Nagappa v. CIT [1969] 73 ITR 626, decided by the Supreme Court. The decision of the Bombay High Court in the case of Chaturbhuj Raghavji Trust v. CIT [1963] 50 ITR 693 does not help the assessee's contention, for, in that case, the income had been assessed in the hands of the beneficiary and also taxed. It was, in these circumstances, that the Bombay High Court held that it was not permissible for the department to tax the same income in the hands of the trustees.
(3.) COMING now to the first question. As the dispute relates to " earned income relief " on the share of income received by the assessee from the business it is necessary in this connection to refer to Section 15A and Section 2(6AA) of the Indian I.T. Act, 1922. Section 15A tuns thus : " The tax shall not be payable by an assessee in respect of such portion, if any, of the earned income included in his total income as is directed by the annual Central Act fixing rate or rates of tax for any year to be deducted in making an assessment for that year......... " Section 2(6AA) defines " earned income " as : " Any income of an assessee who is an individual, Hindu undivided family, unregistered firm or other association of persons not being a com pany......... (b) which is chargeable under the head ' Profits and gains of business, profession or vocation ' where the business, profession or vocation is carried on by the assessee or, in the case of a firm, where the assessee is a partner actively engaged in the conduct of business, profession or vocation......... and includes any such income which, though it is the income of another person, is included in the assessee's income under the provisions of this Act, but does not......... " ;