1. In this reference made at the instance of the revenue, the revenue, the following question has been referred to us :
'Whether, on the facts and circumstances of the case, the trusts are wholly religious and entitled to exemption under section 11(1)(a) of the Income-tax Act, 1961 ?'
2. We may point out that, though the question has been framed in connection with the trusts being wholly religious, there all controversy between the parties is whether these trusts are entitled to exemption under the provisions of section 11(1)(a). It is not in dispute before us that, if under a particular trust the income from the trust properties has to be utilised partly for charitable purposes and the balance for religious purposes or vice versa, the entire income will be entitled to exemption under section 11 of the Act. The relevant assessment years are 1965-66 to 1967-68, and the assessee is a trustee of two trusts created by two sisters by two different documents, both executed on the same day, namely, January 12, 1937. Both the trust deeds were in identical terms. The two sisters belonged to Dawoodi Bohra community and the trusts were executed in respect of certain properties which were situated at Surat and Bombay and by these two trust deeds the properties were vested for the benefit of Dawoodi Bohra community to be managed and applied by the chief of the Dawoodi Bohra community, namely, the Mullaji Saheb and by his successors-in office. The Mullaji Saheb as the head of the community is known as Dai-ul-Mutlak. Under the trust deed, in the preamble it is mentioned that the executant of the trust deed who belonged to Dawoodi Bohra community and was a follower of the Dawoodi Bohra religion believed in the theory that Mullaji Saheb for the time being is the vicegerent of the Imam in seclusion and, therefore, she declared that the properties described in the document were made a wakf in accordance with the religious belief other community. The dedication is to Dawat Hadiayah, a sort of a representative body for the Dawoodi Bohras. It is further mentioned in the deed that the Mullaji Saheb for the time being is the head, both spiritual and temporal of Dawat Hadiayah. The office of the Mullaji Saheb is also known as Dai-ul-Mutlak and the executant mentioned that, in order to effectuate the religious beliefs, she had created the wakf. We will come to the different clauses of the deed in the course of this judgment but the man question was, whether under the clauses of the trust deed it was open to the Mullaji Saheb for the time being as the head of the Dawoodi Bohra community to utilise the income or the corpus of the properties settled on trust under these two trust deeds for purposes other than religious or for purposes other than charitable. In respect of the income for the assessment years under consideration the income tax Office held that the trust was not entitled to exemption. He based his reasons mostly on the clauses giving absolute discretion to the Dai-ul-Mutlak. The trustees carried the matter in appeal and the Appellate Assistant Commissioner confirmed the order of the Income tax Officer and negatived the claim of the assessee. Thereafter, the matter was taken in further appeal to the Income tax Tribunal and the Tribunal observed that from a bare perusal of the trust deeds it was very clear that the trusts were wholly religious trusts. The properties which were the subject-matter of wakfs, according to the Tribunal, vested in the Mullaji Saheb (as Dai-ul-Mutlak for the time being in office) for the benefit of the Dawoodi Bohra community. According to the Tribunal the preamble made it abundantly clear that it was a religious belief of the Dawoodi Bohra community that the Mullaji Saheb was next to the Imam in seclusion The dedication of the properties was, according to the Tribunal, made purely for religious purposes in respect of the Dawoodi Bohra community and the fact that Dai-ul-Mutlak for the time being in office has been given absolute power to utilise the income would not mean that the trust was not for religious purposes. The idea in vesting the properties in the Mullaji Saheb, in the view of the Tribunal, was only to see that he being the religious head of the Dawoodi Bohra community, would utilise the income and the corpus for the upliftment of that community and the Tribunal held that the other clauses of the trust deed also pointed to the same conclusion. The Tribunal observed that the trusts were wholly religious. The question whether the entire income was exempt or not was all together a different question. Section 11(1)(a) states that income derived from property, etc., must be 'applied to such purposes in India', and if any income is applied to religious purposes outside Indian, that may not be exempt but the primary exemption for wholly religious trusts would not be taken away. According to the Tribunal, the trust was wholly religious and, therefore, entitled to exemption under section 11(1)(a). Since, however, the lower authorities did not examine as to which part of the income would be exempt in view of the observations made by the Tribunal, the matters were remanded back to the Income tax officer and thereafter, at the instance of the revenue the question hereinabove set out has been referred to us for our opinion.
3. In order to find out whether these trusts are for wholly religious purposes within the meaning of section 11(1)(a) or for wholly charitable purposes or partly religious or partly charitable entitled to exemption under section 11(1)(a), it is necessary to refer to the deed of trust in detail. Since both the trust deeds are in identical terms, we will refer to only one of them, namely, the deed of wakf or declaration of wakf executed by Bai Aminabu, one of the two settlors. She stated that she was a follower of the Dawoodi Bohra religion and as such believed that His Holiness Sardar Sayemne Taher Saifuddin Saheb, the Mullaji Saheb of the Dawoodi Bohra community for the time being is the vicegerent on earth of the Iman in seclusion and she further declared that she believed that the Mulla Saheb, as the vicegerent of the Inam in seclusion, is accountable for his words and deeds to the Inam in seclusion and to none else on earth. She Said :
'I declare this to be an essential part off my belief and if any provision hereinafter contained should be deemed contrary to this belief, such shall be null and void.'
4. She declared that she was making this wake of her free will and pleasure and that she was making a wakf in accordance with the religious beliefs of her community and was giving the right, title and interest in the meoity in the properties described in the schedules to the document to the Dawat Hadiayah, of which the head, both spiritual and temporal on earth is the Mullaji Saheb and his successors-in-office as Dai-ul-Mutlak and in order to effectuate the same, she was assigning and conveying the said property to the Mullaji Saheb and to the successors-in-office absolutely. The preamble then proceeds :
'The conditions of the said wakf, subject to and without derogating in any manner from the absolute powers of the Mullaji Saheb and his successors-in-office hereinbefore declared shall be as following.'
5. Under clause 1 it is provided that the management use, and enjoyment of the property shall rest absolutely in the Mullaji Saheb as the holder of the office of Dai-ul-Matlak and his successors-in-office, who shall have absolute power to deal to with the same at their absolute discretion. Clauses 2 and 3 are not material for the purposes of this judgment. Under clause 4 power to sell the trust properties is given to the Dai-ul-Mutlak for time being and it has been pointed out that the properties shall always remain the property of the Dawat-Hadiayah and shall not be sold or mortgaged except under the authority of the Mullaji Saheb as Dai-ul-Mutlak for the time being and then only of such sale or mortgage is, in the opinion of the Dai-ul-Mutlak, absolutely necessary for the purposes of the Dawat. Then come the words which are relied upon by the revenue : 'whether that purposes is or is not religious social or charitable according to the law of land; and in the later event the said Mullji Saheb a shall have full power to sell or mortgage the said documents of or any part thereof and to execute the necessary deeds and documents of whatever description for the purposes required, always provided, however, that the said property shall never to be sold or mortgage for paying off any debt of the Dawat or of the Dai-ul-Mutlak.' Clause 5 throws no light on the question before us. Under clause 6, the settlor said :
'It is my request that the net income in of my share in the Bombay property as described in the schedule 'A' hereunder may be utilised for purpose of Faize-Hashami, an institution for feeding the Hajees of the Dawoodi Bohra community at mecca during Haj season, and for any other object as His Holines deems fit and proper at his sole and absolute discretion.'
6. Under clause 7 the settlor requested that the net income from some of the properties settled upon trust may be utilised for the maintenance of Saifi-Daras of Surat and similarly the be income of the other properties described in the trust deed be utilised for the maintenance of Madresah Tyebiyah at Surat at His Holiness's sole and absolute discretion, he being at liberty as well to make use of both the properties for any other purposes or purposes as he deems fit and proper that the purposes already set out. Clause 8 in which the revenue very strongly relied in is these terms :
'That it shall be competent to the Dai-ul-Mutlak to make use of the rents and income arising from the said properties in his absolute discretion for any purpose of the Dawat in addition to or substitution of that or those herein described, he being the sole and absolute judge of what is or what is not a purpose of the Dawat (whether this purpose is charitable or non-charitable according to law).'
7. Under clause 9 it has been provided that it shall not be competent to anybody either within or without the community to call upon the Dai-ul-Mutlak to account for the management of the said properties and under clause 10 it has been provided that at no time the said property or the income accruing therefrom be spent for purpose prohibited by the sacred faith of the settlor the decision of the Mullaji Saheb as to what proposes are prohibited by her sacred faith being final. The rest of the causes and the schedules to the trust deed throw no light on the question which we have to consider.
It is clear that what the settlor wanted to create was wakf. As pointed out by Sir Dinshaw Mulla in his commentary on Principles of Mohammedan Law, seventeenth edition, wakf means the permanent dedication by a person professing the Mussalman faith of any property for any purpose recongnised by the Mussalman law as religious pious or charitable. This is the definition of wakf as given in the Mussalman Wakf Validating Act, No. VI of 1913 and according to the strict Mohammedan law, wakf or literally means detention and the legal meaning of wakf according to Abu Hanifa, is the detention of a specific thing in the ownership of the wakf or appropriator, and the devoting or appropriating of its profits or usufruct 'in charity for the poor or other good objects'. Therefore, from the beginning we must bear in mind that the settlor was creating a wakf in the sense as understood by the Mohammedan law and further that she was dedicating the properties to the Dawat Hadiayah, that is, the Dawoodi Bohra a community. She has also made it clear in clause 4 that the property which she was dedicating in trust by this was any occasion to alienate the Dawoodi Bohra community and if there was any occasion to alienate the property, then under clause 4 it could be either sold or mortgaged for the purposes of the Dawat. Of course, under clause 4 it was provided that whether Dawat purpose was or was not charitable, according to the law of the land if, in the opinion of the Dai-ul-Mutlak for the time being it was absolutely necessary, the property could be sold for the purpose of the Dawat. The controversial clause, in our opinion, is clause 8, because it clearly stated that, apart from the specific object mentioned in clauses 6 and 7, namely, Faize-Hashami-Saifi-Daras of Surat or Madresah Tyebiyah, it was competent to the Dai-ul-Mutlak for the time being to make use of then rents and income arising from the properties settled upon turns in his absolute discretion for any purpose of the Dawat in addition to or in substitution of the specific object mentioned in the deed of settlement and it is specifically stated that the Dai-ul-Mutlak is the sole and absolute judge of what is or what is not a purpose of the Dawat, whether that purpose is charitable or not charitable according to law. It is no doubt true that under this deed of trust pharisees and words are used which confer absolute discretion upon the Dai-ul-Mutlak and the Mullaji Saheb as the Dai-ul-Mutlak for the time being to utilise the income and the corpus for Dawat purposes and if the wordings of the different clauses, classes 6, 8 and 9, are read literally, prima facie, it would mean that it may be open to the Mullaji Saheb even to divert the income or corpus for some purpose which may not be strictly religious or charitable. However, one must not forget that the main idea is to create a wake and that too for the purpose of the Dawat, that is for the purposes of Dawoodi Bohra community.
8. We may point out that the question as to what is meant by Dawat purposes and what the are the power of the Dai-ul-Mutlak for the time being regarding properties which are to be used for fairly long time. As far back as 1922, in a well-known decision in this branch of the law in Advocate-General of Bombay v. Yusufalli, Marten J. of the Bombay High Court examined the entire material before him and considered what is meant by Dawat purposes. One of the question before him was whether the offering made at the tomb of Chandabhoy, a Saint of the Dawoodi Bohra community, could be said to be money dedicated for charitable purposes. The evidence before the learned judge showed that the money from the gulla or these offerings at the tomb of Chandabhoy was used for Dawat purposes and the learned judge, therefore examined the question as to whether Dawat purposes were charitable purposes or not. At page 1101, he observed :
'If then, as I held to be the case the usual application of the suit gulla funds in the past have all been charitable, what is the legal position as regards the surplus In the first place, has the Mullaji a discretion to apply the whole fund for any of what I will call the surplus object as well as the usual object Could he, for instance, apply the whole income of any one year exclusively on the surplus object I think not. I have felt some doubt on this point because of the admittedly wide powers of the Mullaji. On the other hand the constant past user of the suit gulla funds fortified as it is by similar consistent user of other gulla funds, and absence of instances in Indian of cessation or substantial alteration of usual gulla object goes far, I think, to show that these usual object must be satisfied firsts. In my judgment, therefore, it is only the surplus of the gulla funds which can be spent on surplus object.
9. The defendants contended that the surplus objects were those of the Dawat generally. Assuming for the sake of argument that the contention is correct, are the general objects of the Dawat charitable I will agains cite the book, Ex. A. L. for it is the then Dai's own description of his obligations before the present controversy arose. It runs :
'He (the Dai) is the trustee of the public funds which it is his duty to dispose of economically and at his discretion as directed by the sacred rules, in relieving the distressed and the needy and paying the expenses incurred by them and his deputies and discharging their sacred duties and in keeping schools and institutions for religious and secular instructions.'
10. According to Mr. Justice Marten, these purpose were all charitable and, at the end of page 1120, he observed :
'Assuming, however, for the sake of argument that the items of Dawat expenditure put forward for the defendants are correct, the question still remains whether they are not all charitable. In my opinion they are charitable. The funds are held by a religious head for the benefit of the community as was whole. The particular application of this funds as shown in those items are to my mind consistent with the central objects of the fund. The selection of individual objects of relief does not necessarily negative a charity.
11. He pointed out that the purposes in the case before him, as also in the case before us, are not merely religious or pious purposes in general. They must also be for the benefit of the Dawoodi Bohra community. In that, particular case Mr. Justice Marten pointed out that being gift at a shrine they were already consecrated to God, and presumably must be used for religious or pious purposes. Similarly, in the case before us also, the property is settle upon wakf, that is, for purposes which ar considered to be religious pious or charitable according to the notions of members of the Dawoodi Bohra community and further the income in the corpus of theses properties settled upon trust must be used for Dawat purposes, that is, for the benefit of the Dawoodi Bohra community. Though the words of clauses 6, 7 and 8 are very wide in terms, in fact, that apparently wide discretion of the Mullaji Saheb is bound down by the two factors, namely that this is a wakf, a dedication by a Mussalmans of property for purposes which according to the notion of Mussalmans ar pious religious or charitable, and secondly, it must be used for Dawoodi Bohra community. With these two limitations operating on him even the apparently wide discretion conferred upon the Mullaji Saheb as Dai-ul-Mutlak for the time being is confined within the four corners of these two overriding factors and in view of these two overriding factors it must be half that the properties in question settled by the two deeds of January 12, 1937, were settled upon trust for charitable or religious object and were, therefore entitled to exemption under section 11(1)(a) of the Act of 1961. We must make it clear that the real controversy between the parties is regarding exemption under section 11(1)(a) and not whether the trusts are wholly religious or wholly charitable. Even if the trusts are partly religious and partly charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious there is no doubt that the exemption under section 11(1)(a) will be available to the assessee. In the instant case we find that, spite of the apparently wide language of the clauses of the deed of trust in fact reading the trust in fact reading the trust deed as a whole, it transpires, particularly in the light of the decision of the Bombay High Court in Advocate-General of Bombay v. Yusufalli, that the apparently wide discretion to the be exercised with in the four corners of the wakf and for Dawat purposes. What are Dawat purposes have been described by Marten J., at page 1102, in Advocate-General of Bombay v. Yusufalli and, in our opinion, it is only within the four corners of Dawat purposes as recognised by the Dawoodi Bohra community that the Mullaji Saheb can use the corpus or the income of this fund.
12. Under these circumstances, in our opinion, the Tribunal was right in coming to the conclusion that the assessee is entitled to exemption under section 11(1)(a) of the Act. We, therefore, answer the question referred to us as follows :
'On the facts and in the circumstance of the case the trusts are entitled to exemption under section 11(1)(a) of the Income-tax Act, 1961.'
13. We, accordingly, answer the question in favour of the assessee. The Commissioner will pay the costs of this reference of the assessee.