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Commissioner of Wealth-tax, Vidarbha and Marathwada, Nagpur Vs. Hasnate Burhaniyah Fidaiyah Wakf - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth-tax Reference No. 72 of 1977
Judge
Reported in(1983)35CTR(Bom)190; [1984]147ITR509(Bom); [1983]14TAXMAN545(Bom)
Acts Wealth Tax Act, 1957 - Sections 21(1) and 21(4)
AppellantCommissioner of Wealth-tax, Vidarbha and Marathwada, Nagpur
RespondentHasnate Burhaniyah Fidaiyah Wakf
Excerpt:
.....sought to be taxed in the hands of the..........years as stated in paragraph v, cl. (e), sub-cl. (i). it has not been disputed that the present years of assessments fell beyond that period of five years. the beneficiaries under the trust deed were, therefore, the five sons of the wakif or the settlor and the entire income remaining after meeting the costs, charges and expenses specified in cls. (b), (c) and (d) of paragraph v of the trust deed was to be distributed in equal shares among the five sons. the present case thus fell within the ratio of the decision of the supreme court in trustees of nisam's family trust case : [1977]108itr555(sc) . the only provision under which the assessment could be made would, therefore, be s. 21(1) of the w.t. act, and, in our view, the tribunal was justified in taking the view that the.....
Judgment:

Chandurkar, J.

1. The assessee in this reference which is made at the instance of the Revenue is M/s. Hasnate Burhaniyah Fidaiyah Wakf. The assessment years in question in this reference are 1966-67 to 1974-75. There are other references in respect of the same assessee, that is, Reference No. 68 of 1976, for the assessment years 1958-59 to 1961-62; W.T. Reference No. 5 of 1974, for the assessment years 1962-63 and 1963-64; W.T. Reference No. 9 of 1981, for the assessment year 1957-58; and W.T. Reference No. 69 of 1977 also for the assessment is whether the assessment to wealth-tax was liable to be made under s. 21(1) of the W.T. Act, 1957, or under s. 21(4) of the said Act. In this judgment we are dealing only with the questions which are referred in W.T. Reference No. 72 of 1977 and for the purpose of convenience we are answering other reference separately by separate orders, though the facts are identical and the document of wakf involved and which falls for consideration is the same in all these references.

2. The wakf deed in question was made on August 9, 1940, by one Haji Mulla Fidaali, son of Sultan Ali and as usual the wakf is know as 'Wakfalal-aulad'. We are not concerned with the other dispositions made by the wakf deed, but suffice it to mention that the wakf is in respect of certain immovable properties. What is relevant for our purposes is only cl. VI which deals with distribution of the income of the wakf property. The relevant part of that clause is sub-cl. (a), which reads as follows :

'That after the termination of the period of 5 years as stated in paragraph V, clause (e), sub-clause (i) hereinabove and after meeting the costs, charges and expenses specified in clauses (b), (c) and (d) of the said paragraph v, the manager or the managers shall distribute the entire income in equal shares amongst the five sons of 'the wakif' as aforesaid.'

3. For the assessment year 1957-58, which is the assessment year for the purposes of assessment to wealth-tax, the WTO determined the net wealth of the assessee at Rs. 5,88,540 and this health was assessee in the hands of manager-cum-mutawalli of the trust. The AAC confirmed this assessment. The Appellate Tribunal, however, took the view that there was no warrant for making an assessment on the trustees collectively, treating them as a body of individuals, and, therefore, the assessments could not be sustained.

4. For the years 1958-59 to 1961-62, the Tribunal held that the assessed- waif was chargeable to wealth-tax in respect of the entire wakf property in the status of an individual through its five managers for all the four years. For the assessment years 1962-63 and 1963-64, the Tribunal took the view that the AAC had erred in not upholding the assessments as made by the WTO and in giving the direction that they should be made on the individual managers of the trust the trust in respect of their shares in the total wealth of the trust.

5. Then we come to the reference for the years 1966-67 to 1974-75. For those assessment years the WTO took the view that the assessment to wealth-tax should be made in the hands of the wakif in the status of an individual and not in the hands of the beneficiaries. However, for the assessment year 1967-68, though the assessee's contention was that the assessments should be made in the hands of the beneficiaries separately under s. 21(1) of the Act, be followed his earlier view not only for the assessment year 1967-68, but also for the subsequent years. This assessment was upheld by the AAC and the assessee appealed to the Tribunal. The main question argued before the Tribunal was whether the shares of beneficiaries were known and determinate and whether s. 21(1) or s. 21(4) applied. The question whether the assets were at all chargeable to wealth-tax was also canvassed. The Tribunal took the view that there were five beneficiaries under the trust and their shares were also determinate and since the beneficiaries were known and their shares were also determinate, the case fell within s. 21(1) of the W.T. Act. Having taken the view that s. 21(1) was the relevant section which was attached, the Tribunal further held that there had to be five assessments and not one. We are not concerned with the other findings recorded by the Tribunal for the purposes of this reference. Aggrieved by the view taken by the Tribunal the it was s. 21(1) which was attracted and not s. 21(4) of the W.T. Act, at the instance of the Revenue, the following question has been referred in this reference under s. 27(1) of the W.T. Act :

'Whether, on the facts and in the circumstances of the case, the assessments under s. 21(4) of the Act are justified ?'

6. The tenor of the question which is referred indicates that what is put in the issue in the question is the correctness of the view of the WTO who had invoked the provisions of s. 21(4) of the W.T. Act. Now the question referred must arise out of the order of the Tribunal and since it is obvious that the contention of the Revenue before the Tribunal was that s. 21(1) did not apply to the facts of the present case, but that s. 21(4) applies, the proper question which should have been referred was whether the assessments under s. 21(1) are justified, because it is the correctness of the view of the Tribunal which is being questioned. It is, therefore, necessary to reframe the question as follows :

'Whether, on the facts and in the circumstances of the case, the assessments under s. 21(1) of the Act are justified ?'

7. It is now too late in the day to dispute that where the beneficiaries under a trust are determinate and can be identified and their shares are known, the proper provision under which an assessment has to be made under the W.T. Act is s. 21(1). This is now settled by the decision of the Supreme Court in CWT v. Trustees of H. E. H. Nizam's Family Trust : [1977]108ITR555(SC) . The Supreme Court has clearly laid down in that decision that where the beneficiaries are determinate and the shares are known there has to be as many assessments on the trustees as there are beneficiaries with determinate and known shares and that the assessment on the trustee would have to be made in the same status as that of the beneficiaries whose interest is sought to be taxed in the hands of the trustee. It was not possible for the learned counsel for the Revenue to dispute the finding recorded by the Tribunal, and indeed, in our opinion, he did not very fairly do so that on the terms of the trust deed, it was clear that there were five beneficiaries and their shares were also determinate. A bare reading of sub-cl. (a) of cl. VI of the wakf deed of 1940 would show that after deducting the amount specified in cls. (b), (c) and (d) of paragraph V of the trust deed, the manager or the managers were to distribute the entire income in equal shares amongst the five sons of the wakif. Clause VI (a) of the wakf deed was to come into operation after the termination of the period of five years as stated in paragraph V, cl. (e), sub-cl. (i). It has not been disputed that the present years of assessments fell beyond that period of five years. The beneficiaries under the trust deed were, therefore, the five sons of the wakif or the settlor and the entire income remaining after meeting the costs, charges and expenses specified in cls. (b), (c) and (d) of paragraph V of the trust deed was to be distributed in equal shares among the five sons. The present case thus fell within the ratio of the decision of the Supreme Court in Trustees of Nisam's Family Trust case : [1977]108ITR555(SC) . The only provision under which the assessment could be made would, therefore, be s. 21(1) of the W.T. Act, and, in our view, the Tribunal was justified in taking the view that the assessments had to be made under s. 21(1). In that view of the matter, the question reaffirmed as above has to be answered in the affirmative and in favour of the assessee. The assessee to get the costs of this reference.


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