(Judgment of the Court was delivered by the Honble the Chief Justice).
This reference has been made by the Income-tax Tribunal, Calcutta Bench, at the instance of the Commissioner of Income-tax, Madras. The Commissioner contends that the Tribunal failed to appreciate the case put forward by the Income-tax authorities in the appeal by the trustee of the waqf of Mirza Mohammed Ali Namazi in respect of the assessment to income-tax for the year 1940-41. It is evident from a perusal of the order of the Tribunal passed in the appeal that the criticism is well-founded.
By a deed dated the 17th January 1930 Mirza Mohammed Ali Namazi made a settlement of immovable property for the following purposes :-
1. For the benefit of his poor relations;
2. For celebrating Moharrum and other religious festivals of the Shiahs;
3. For the conduct of marriages and burials of poor Mussalmans;
4. For the benefit of poor Syeds; and
5. For such other religious, pious or charitable purposes as are allowed by Mussalman law as applicable to Shiahs.
He directed that ten per cent. of the income should be utilised for celebrating the Moharrum and other religious festivals, thirty per cent. for distribution among his poor relations and twenty per cent. for the conduct of marriages and burials of poor Muhammadans and for the benefit of deserving Syeds. Then the following provision was made :
'Provided always that the Muthavallis shall be at liberty from time to time to vary the distribution of the income among the objects of the waqf on unanimous resolution of all the three Muthavallis passed at meetings specially held for the purpose.'
Therefore, the trustees in their absolute discretion could, according to the deed, devote the whole of the income to the settlors poor relations. But a settlement for the settlors poor relations is not a settlement for a charitable purpose within the meaning of Section 4 (3) (i) of the Income-tax Act, as a full Bench of this Court pointed out in the case of Commissioner of Income-tax v. Jamal Mohammad. It was there held that a provision of this nature was not a provision for general public utility. It was a provision merely of a private nature, and the section only applies to public charities.
In the course of his speech in Bowman v. Secular Society Ltd., Lord Parker of Waddington said :-
'A trust to be valid must be for the benefit of individuals, which this is certainly not, or must be in that class of gives for the benefit of the public which the Court in this county recognize as charitable in the legal as opposed to the popular sense of that term. Moreover, if a trustee is given a discretion to apply trust property for purposes some of which are and some are not charitable, the trust is void for uncertainty.'
It is common ground that the principle of law applies in India.
The case for the Commissioner of Income-tax is that as the first of the objects for which the settlement was made, namely, the benefit of the poor relations of the settlor, cannot be deemed to be a settlement for a charitable purpose with in the meaning of Section 4 (3) (i), and as the trustees are given the power to apply the whole of the income of the trust for this one purpose, the deed does not fulfill the requirements of the section. This argument is clearly right. The first object is not a charitable object within the meaning of the section and as the whole of the income can be devoted to it, the settlement, so far as the Income-tax Act is concerned, cannot be recognised. If there had not been this discretion given to the trustees and the settlor had merely directed that a specified part of the income of the property should be devoted to a purpose which was charitable within the meaning of the section, such part of the income would be exempt from tax; but that is not the case here.
The answer we give to the question referred is that the assessee was not entitled to exemption from the assessment of any portion of the income of the waqf property.
The Commissioner is entitled to his costs, Rs. 250.
Reference answered accordingly.