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Commissioner of Income-tax, Bombay City Ii Vs. Trustees of Abdulcadar Ebrahim Trust - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 69 of 1964
Judge
Reported in[1975]100ITR85(Bom)
ActsIncome-tax Act, 1922 - Sections 4(3)
AppellantCommissioner of Income-tax, Bombay City Ii
RespondentTrustees of Abdulcadar Ebrahim Trust
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateR.J. Kolah, Adv.
Excerpt:
.....were trustees of trust whose management rested on a religious leader - whether income form trust properties entitled to exemption under section 4 (3) (1) - income-tax officer rejected claims as clause 14 of trust conferred extensive power over income of trust on religious leader which had overriding effect on all assessee - held, income from trust entitled to exemption under section 4 (3) (1) as religious leader cannot spend income for purposes other than for which trust was created. - section 31(4) (since repealed) :[tarun chatterjee & h.l.dattu, jj] jurisdiction of high court - respondent, a government company, chartered appellants vessel to carry rock phosphate from togo to west coast india - dispute arose between parties - under agreement, respondent had chosen mumbai as..........years the claim was made on behalf of the assessee (the trustees) that the income of the trust properties was entitled to the exemption under section 4 (3) (i) of the income-tax act, 1922. the income-tax officer, while accepting that there was a validly constituted trust and that the objects of the trust were religious and/or charitable, rejected the claim of the assessee for exemption on the ground that the provisions of clause 14 of the trust deed conferred upon mullaji saheb complete power over the income of the trust and enjoyment thereof for his own use and benefit and in any other manner he liked and, according to the income-tax officer, this clause had overriding effect on all the assessee that in fact mullaji saheb had not utilised that power at any time and it was.....
Judgment:

Tulzapurkar, J.

1. The question that has been referred to this court for its opinion by the Tribunal at the instance of the revenue is as under :

'Whether, on the facts and circumstances of this case, the income of the assessee-trust is exempt under section 4 (3) (i) of the Act ?'

2. The assessee happens to be the trustees of Abdulcadar Ebrahim Trust, Bombay, and the question referred to us arises out of the assessment made on the said trustees for assessment years 1952-53 to 1960-61, the corresponding previous years being S. Ys. 2007 to 2015. Ten persons belonging to Surat Dawoodi Bohra Mahomedan Community created a wakf on 25th January, 1937. By the deed of wakf bearing that date certain properties were settled in trust in favour of Dawat-ul-Hadiyah (Dawoodi Bohra Community) and the Dai-ul-Mutlak (Mullaji Saheb) being the spiritual head of the community was appointed the sole ex-officio trustee. The wakf properties were mainly immovable properties mentioned in the schedule to the document. The management rested absolutely in Mullaji Saheb as the holder of the office of Dai-ul-Mutlak and his successors in office. In the assessment proceedings for the aforesaid assessment years the claim was made on behalf of the assessee (the trustees) that the income of the trust properties was entitled to the exemption under section 4 (3) (i) of the Income-tax Act, 1922. The Income-tax Officer, while accepting that there was a validly constituted trust and that the objects of the trust were religious and/or charitable, rejected the claim of the assessee for exemption on the ground that the provisions of clause 14 of the trust deed conferred upon Mullaji Saheb complete power over the income of the trust and enjoyment thereof for his own use and benefit and in any other manner he liked and, according to the Income-tax Officer, this clause had overriding effect on all the assessee that in fact Mullaji Saheb had not utilised that power at any time and it was claimed that even that power was required to be considered with reference to the revered position which Mullaji Saheb occupied in the community which made it incumbent upon the Mullaji Saheb to use the income of the trust property for charitable purposes mentioned in the document. The Income-tax Officer took the view that the fact that the Mullaji Saheb had not exercised the power conferred upon him under clause 14 did not affect the question and that the provisions of clause 14 had the overriding effect over the other provisions of the document. He, therefore, rejected the claim of the assessee for exemption under section 4 (3) (i) of the Act. The Appellate Assistant Commissioner also rejected the claim of the assessee on the self-same ground. When the matter was carried in further appeal to the Appellate Tribunal, the Tribunal on a consideration of the provisions of the document as a whole and in view of the judgment of this court in Advocate-General of Bombay v. Yusuf Ali Ebrahim, which had made the position of the Mullaji Saheb in relation to the trust properties quite clear, came to the contrary conclusion. In its view, clause 14 of the document did not provide for and could not in any way confer powers which were not specifically mentioned in the earlier parts of the deed, and that the said clause did not confer any right on the Mullaji Saheb to use the property for his own personal purposes and having regard to the operative portion of the deed, it was clear that the properties were held by the Mullaji Saheb under a legal obligation to spend the income thereof only for charitable purposes mentioned in those parts of the deed. The Tribunal, therefore, allowed the claim of the assessee. The relevant provision under which exemption was claimed by the assessee is to be found in section 4 (3) (i), which runs as follows :

'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) subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, 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. On the admitted facts it was not disputed before us by Mr. Joshi, appearing for the revenue, that by the deed of wakf dated January 25, 1937, a valid trust was constituted and that the objects of the trust were religious and/or charitable and the only contention urged before us by Mr. Joshi was that having regard to certain provisions contained in this deed the income of the trust property could not by said have been held by the Mullaji Saheb under a legal obligation to spend the same for charitable purposes and in support of this contention he invited our attention to clause 6 and clause 14 of the document. Under clause 6 it has been provided that it shall be competent to the Mullaji to make use of the rents and income, if any, arising out of the said properties for any purpose of the Dawat either religious, pious, charitable or otherwise in addition to or in substitution of that or those thereafter described, the Mullaji Saheb being the sole judge in his absolute discretion of what is or what is not a purpose of the Dawat. He contended that though under clause 6 the income of the property has directed to be used for any purpose of the Dawat either religious, pious or charitable, this clause used the expression 'or otherwise' and the use of this expression suggests that the Mullaji Saheb has been empowered to spend the income of the trust property for purposes other than religious, pious or charitable and he, therefore, urged that it could not be said that the entire income of the trust property is held under an obligation to be spent for charitable purposes. It is not possible to accept this contention of Mr. Joshi for the simple reason that, in our view, the expression 'or otherwise' occuring in clause 6 will have to be read ejusdem generis with the words which precede in Halsbury's Laws of England, 2nd edition, Volume 10, page 295, para. 366, which, in our view, would be clearly applicable in this case. The relevant passage runs as follows :

'Where the particular things named have some common characteristic which constitutes them a genus, and the general words can be properly regarded as in the nature of a sweeping clause designed to guard against accidental omissions, then the rule of ejusdem generis will apply, and the general words will restricted to things of the same nature as those which have been already mentioned.'

4. In clause 6 of the document the nature of the purposes of the Dawat for which the rents and income of the trust property are required to be spent has been particularised and it has been clearly stated that any such purpose of the Dawat must be either religious, pious or charitable and it is after these words that the expression 'or otherwise' will have to be read ejusdem generis with the words which precede that expression. Looked at from this angle, it seems to us clear that the expression 'or otherwise' occurring in clause 6 cannot have the effect of enlarging the nature of purposes of which the income of the trust property could be spent by the Mullaji Saheb and even acting under the expression 'or otherwise' the Mullaji Saheb is under an obligation to use the income of the trust property for the purpose of the Dawat either religious, pious or charitable or similar nature.

5. Mr. Joshi then relied upon clause 14 of the document, which runs as follows :

'And we the said wakifs do and each of us doth hereby convenant with the said Mullaji Saheb his successors-in-office and assigns that notwithstanding any act deed or matter whatsoever by us or by any person or persons lawfully or equitably claiming from under or in trust for us made done omitted or executed or knowingly or willingly suffered to the contrary we now have in ourselves good right and absolute power to grant convey assign and assure the premises unto and to the use of the said Mullaji Saheb in manner aforesaid and that it shall be lawful for the said Mullaji Saheb and his successors-in-office and his or their assigns from time to time and at all times hereafter peaceably and quietly to hold possess and enjoy the said premises hereby granted with their appurtenances and receive the rents and profits thereof for their own use and benefit without any lawful eviction interruption claim and demand whatsoever from or by us or from or by any other person or persons lawfully or equitably claiming by from under or in trust for us AND THAT free and clear and freely and clearly and absolutely acquitted exonerated released and for ever discharged or otherwise by us sufficiently saved defended kept harmless and indemnified of from and against all estates charges and incumbrances whatsoever either already or to be hereafter had made executed occasioned or suffered by us or by any person lawfully or equitably claiming by from under or in trust for us and further that we and all persons having or lawfully or equitably claiming any estate right title or interest at law or in equity in the said premises hereby granted and confirmed or any part thereof from under or in trust for us shall and will from time to time and at all times hereafter at the request an cost of the Mullaji Saheb or his successors-in-office do and execute or cause to be done and executed all such further and other lawful or reasonable acts deeds matters things and assurances in law whatsoever for further and more perfectly and absolutely granting and assuring the said premises hereby granted unto and to the use of the said Mullaji Saheb or his successors in office in the manner aforesaid as shall or may be reasonably required.'

6. In particular, Mr. Joshi relied upon the words 'and that it shall be lawful for the said Mullaji Saheb and his successors in office and his or their assigns from time to time and at all times hereafter peaceably and quietly to hold possess and enjoy the said premises hereby granted with their appurtenances and receive the rents and profits thereof for their own use and benefit without any lawful eviction interruption claim and demand whatsoever from or by us or from or by any other person or persons lawfully or equitably claiming by from under or in trust for us' occurring in the aforesaid clause 14 and he contended that the words of clause 14 must be taken to have the effect of conferring absolute power and discretion upon Mullaji Saheb to use the trust property and its income for his own personal purposes and if that was effect then these words would override all other provisions of the trust deed. In our view, it is not possible to read the relevant words on which reliance has been placed by Mr. Joshi occurring in clause 14 in the manner sought to be canvassed by Mr. Joshi before us. In the first place, clause 14 is the usual clause containing four covenants which are usually to be found in all conveyances, namely, covenant for title, covenant for quiet enjoyment, covenant against incumbrances and covenant for further assurances and as such these covenants can never have the effect of controlling or overriding the operative parts of the deed. The operative parts of the deed make the following position very clear. Firstly, it has been declared that the properties shall always remain the properties of Dawat-ul-Hadiyah (Dawoodi Bohra Community) of which the Mullaji Saheb is the spiritual and religious head and in such a capacity as holder of that office the management of the trust properties was vested absolutely in Mullaji Saheb. Clause 6 clearly states that the rents and income of the properties will be used for religious, pious and charitable purposes connected with the Dawat and the very first condition of wakf under which the properties were entrusted to the care of Mullaji Saheb makes the position clear that 'the management use and enjoyment of the said properties shall vest absolutely in the Mullaji Saheb as holder of the office of Dai-ul-Mutlak and his successors-in-office'. It is in the context of the operative parts of the deed that clause 14 containing the usual covenants will have to be understood and since, in our view, clause 14 merely contains the usual covenants mentioned above, all those covenants cannot enlarge the scope of the operative parts of the deed. Further, even the words 'it shall be lawful for the said Mullaji Saheb and his successors-in-office...... to hold possess and enjoy the said premises...... and receive the rents and profits thereof for their own use and benefit' occuring in clause 14 of the deed will have to be read as meaning that the Mullaji Saheb or his successors-in-office shall receive the rents and profits of the properties for his own use and benefit as holder of the office of the Dai-ul-Mutlak. It is, therefore, clear to us that the provisions contained in clause 14 had not conferred any right on the Mullaji Saheb or his successors-in-office to use the property or the income thereof for his own or their personal purposes. But, having regard to the operative parts of the deed, it is clear that the use of the property and its income is required to be made by the Mullaji Saheb or his successors-in-office for charitable purposes which have been specified in the deed. On the construction of the document, therefore, we are of the view that the Tribunal's decision was correct.

7. It may be useful in the same context to refer to two judgments, one of this court in Advocate-General of Bombay v. Yusuf Ali Ebrahim and the other of the Privy Council in Hasanali v. Mansoorali. The legal position occupied by the Mullaji qua the properties in respect of which endowment trust has been created in favour of the Dawoodi Bohra Community has been clarified in these two judgments. In the former decision this court has categorically taken the view that the objects of this Dawat for which the income from the properties is required to be spent were charitable, inasmuch as the objects were allowances to learned, allowances to Amila, allowances to Dawoodi in trouble, assistance to Dawoodi Borahs to start business, assistance on marriage, the maintenance of schools, the repairs of mosques and other Dawat property and assistance to pilgrims and this court has further taken the view that the Mullaji Saheb holds the properties belonging to the Dawat as a trustee by virtue of his office as 'Dai' and on his death these properties could pass to his successors-in-office and not to his heirs. In the latter decision it has been stated very clearly that Dai is the religious ruler and trustee of the properties of the community and he has to act in a constitutional manner. In other words, as the religious ruler and trustee of the community he cannot use or spend the income thereof for the purposes other than the purposes for which the trust has been created.

8. Having regard to the above discussion, we answer the question in the affirmative.

9. Department will pay the costs of the reference to th assessee.

10. Notice of motion is dismissed. No order as to costs.


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