Satish Chandra, J. - (1.) THE question of law referred by the Tribunal for our opinion relates to the assessment year 1968-69, the relevant valuation date for which was March 31, 1968.
(2.) KHAN Bahadur Syed Ahmad Hussain Rizvi executed a deed of waqf-alal-aulad and for charitable purposes on January 31, 1940. It was a registered document to which, two supplementary instruments were executed on November 30, 1947, and February 1, 1950. Till 1950, the waqif was the sole mutawalli. Thereafter, his wife became the mutawalli. The settlor died in 1955 and his wife in 1966. One Syed Hamid Hussain Aslam Rizvi was elected mutawalli thereafter. In the wealth-tax proceedings, the WTO sought to include the entire value of the waqf properties in the assessment of the waqf. This was objected to by the assessee. Ultimately, the matter went to the Tribunal. On an interpretation of the waqf deed, the Tribunal held that it provided for distribution of 80% of the income to the heirs of the waqif, the rest 20% was to be dealt with in accordance with para. 5(b) of the trust deed as follows : (i) Maintenance and support of the waqif's relations and of orphans and widows of the waqif's family, who are not the heirs of the waqif. (ii) Muslim widows, orphans, destitutes, helpless persons and travellers in general, and (iii) Granting of scholarships for religious and worldly education and granting of aid to Muslim institutions. Out of these three charitable purposes, 10% of the income was to be spent on object b(i). The rest 10% on objects b(ii) and (iii). The Tribunal held that 80% share of the income which was to go to the beneficiaries in defined shares in accordance with the Mohammedan law was liable to assessment under Section 21(1) and not under Section 21(4) of the Act. It also held that 10% of the income which was spent on object b(i) was not exempt while the remaining 10% which was to be spent on items b(ii) and (iii) was exempt because these objects were clearly charitable in nature. On this view, the appeal filed by the assessee was partly allowed.
(3.) AT the instance of the Commissioner, the Tribunal has referred the following questions of law for our opinion : "(i) Whether, on the facts and in the circumstances of the case and on an interpretation of Clauses 5(b) and (c) and 7(c) of the waqf deed, 80% of the income of the waqf properties was assessable under Section 21(1) of the W.T. Act ? (ii) Whether, on the facts and in the circumstances of the case, 10% of the income of the waqf meant for spending in accordance with Clause 5(c) on the sacrifice of two goats each year and on making arrangement for a sabil on some public way was exempt from tax ?" There is no doubt or controversy with regard to the interpretation of the waqf deed. Learned counsel for the revenue urged that it was clear from Clause 7(c) of the trust deed that the beneficiaries had a right of residence in some of the properties in accordance with the discretion of the trustees who were empowered to allocate portions of the building amongst them. Thus, the income of the trust was liable to fluctuations. The submission is misconceived. A perusal of the waqf deed shows that it specifies three properties as residential houses. These houses could not yield income because they were reserved for residential purposes. It was immaterial as to which one or more of the beneficiaries resided in it. It was said that some of the families had migrated to Pakistan. But that would not make any difference. The trust deed specifically provided that 80% of the income will be divided between the beneficiaries of the waqf in accordance with the Mohammedan law. It was thus clear that distribution of 80% of the income was determinate and not fluctuating. The Tribunal was justified in taking that view. It was hence correct in holding that Section 21(1), and not Section 21(4), was applicable. This view has been upheld in CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555, 598 (SC).;