Ahmed G.H. Ariff & Ors Vs.
Commissioner of Wealth Tax, Calcutta [1969] INSC 192 (20 August 1969)
20/08/1969 GROVER, A.N.
GROVER, A.N.
SHAH, J.C. (CJ) RAMASWAMI, V.
CITATION: 1971 AIR 1691 1970 SCR (2) 19
CITATOR INFO :
C 1991 SC2023 (5)
ACT:
Wealth Tax Act (27 of 1957), ss. 2(e), (m)
and 7(1)-Right to receive share from wakf-alal-aulad-Whether asset assessable
to wealth tax-"If sold in open market" meaning of.
HEADNOTE:
A hanafi Muslim created a wakf-alal-aulad and
appointed himself as the sole Mutwalli and provided that after his death his
widow and sons would act as Mutawallis jointly.
The wakf was for the benefit of the settler's
wife, children and their descendants, and they were each to be paid a specified
share of the net monthly income of the property.
The ultimate benefit in the case of complete
intestacy of the descendants of the settler was reserved for poor musalmans of
sunni community deserving help On the question whether the right of the
assessee who were the beneficiaries under the deed of wakf, to receive a
specified share of the net income from the estate, was an asset assessable to
wealth tax, this Court,
HELD: (i) The right in question was
assessable to wealth tax.
(i) "Property" is a term of widest
import and subject to any limitation which the context may require, it
signifies every possible interest which a person can clearly hold or enjoy. [25
C--D] The definition of "assets" in s. 2(e) and that of "net
wealth" in s. 2(m) of the Wealth Act were comprehensive provisions and all
assets were included in the net wealth by the very definition. Therefore, when
s. 3 imposed the charge of wealth tax on the net wealth it necessarily included
in it every description of property of the assessee movable and immovable,
barring the exceptions stated in s. 2(e) and other provisions of the Act. There
is no reason or justification to give any restricted: meaning to the word
"assets" as defined by s. 2(e) of the Act when the language employed
shows that it was intended to include property of every description. [25 H; 26
A--B] On a proper construction of the relevant clauses in the wakf deed, it
must be held that the aliquot share of the income provided for the
beneficiaries was not meant merely for their maintenance and support. But even
on the assumption that it was so intended or to preserve the validity of the
deeds it should be so construed the right to the share of the income would
certainly be asset within the meaning of s. 2(e) and would be liable to be
included in the net wealth of the assessee. [26 B---C] Vidya Varuthi v.
Balusami Ayyar, 48 I.A. 302, 312, Abdul Karim Adenwalla v. Rahimabai, 48 Bom.
L.R. 67, Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra
Thirtha Swamiar of Sri Shirur Mutt. [1954] S.C.R. 1005, 1019 and Commissioner
of Inland Revenue v. Crossman, [1937] A.C. 26, referred to..
20 Commissioner of Wealth Tax, Bombay City v.
Purshottam N.Amersey & Anr. 71 I.T.R. 180, approved.
(ii) When the statute uses the words "if
sold in the open market" it does not contemplate actual sale or the actual
state of the market, but only enjoins that it should be assumed that there is'
an open market and the property can be sold in such a market and on that basis
the value has to be found out. It is a hypothetical ease which is contemplated
and the Tax Officer must assume that there is an open market in which the asset
can be sold. [26 E--F] (iii) The contention, that the right to receive a share
of the income was a mere right to an annuity where the terms and conditions relating
thereto precluded the commutation of any portion into a lump sum grant must be
rejected. The word "annuity" could not be given its popular and
dictionary meaning, but should be given the signification which it has assumed
as a legal term owing to judicial interpretation.
Where the legislature uses a legal term which
has received judicial interpretation courts must assume that the terms has been
used in the sense in which it has been judicially interpreted. [26 G--H; 27
A--B]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 2129 to 2132 of 1968.
Appeals from the judgment and order dated
December 4,' 1964 of the Calcutta High Court in Tax Matters Nos. 69, 62 and 64
of 1963.
A.K. Sen, S.K. Hazare and P.K. Mukherjee, for
the appellants (in all the appeals).
B. Sen, S. A. L. Narayana Rao and R.N.
Sachthey, for the respondent (in 'all the appeals).
The Judgment of the Court was delivered by
Groper, J. These appeals by certificate from a judgment of the Calcutta High
Court involve a common but important question, namely, whether the right of an
assessee to receive a specified share of the net income from an estate in
respect of which Wekf-alal-aulad has been created is an asset assessable to
Wealth Tax.
By a deed dated November 19, 1928 as modified
by a deed of rectification dated July 5, 1930 one Golam Hossain Kasim Ariff, a
muslim governed by the Hanafi School of the Mohammadan Law created a wakf in
respect of his properties in Noormul Lohia Lane and Armenian Street in
Calcutta. The settler appointed himself as the sole Mutwalli for the term of
his life and provided that after his death his widow Aisha Bibi and his sons
would act as Mutwallis jointly.
The settler died on January 1, 1937. He left
behind his widow Aisha Bibi and three tons who are the appellants before this
Court. The wakf created was of the nature of Wakf-alal-aulad for the benefit of
the settler's wife, 21 children and their descendants. The extent of the
benefit conferred on them would appear from clause 5 of the deed of wakf as
modified:
"5. After payment of all necessary out
goings such as establishment charges, collections charges, revenue taxes, costs
of repairs, law charges and other expenses for the upkeep and management of the
said Wakf property, the Mutwalli or Mutwallis shall apply the net income of the
said Wakf property as follows, viz.:
(a) In payment to me during the term of my
life of one-fifth of the said net income by monthly installments.
(b) In payment to each of my sons during the
respective terms of their lives one-sixth of the said net income by monthly installments.
(c) In payment to my wife Aisha Bibi during
the term of her life one tenth of the said net income by monthly installments.
The moneys payable as aforesaid to such of my
sons as are minors shall until they attain the age of majority be respectively
invested (after defraying the expenses of their maintenance and education) in
proper securities or in landed property in Calcutta and such securities or
property shall be made over to the said sons on their respectively attaining
the age of majority." The ultimate benefit in the case of complete
intestacy of the descendants of the settlor was reserved for poor musalmans of
Sunni community deserving help.
The appellants who are the beneficiaries
under the deed of wakf were paying income tax on the amount which was being
received by them in terms of that deed from the Mutwalli. In the year 1957 the
Wealth Tax Act 27 of 1957, hereinafter called the Act, came into force. During
the assessment years 1957-58 and 1958-59 the appellants were not only assessed
to income tax in respect of the income received by them from the wakf estate
but were also assessed to Wealth tax by the Wealth Tax Officer on the basis
that they had a share in the wakf estate. The total value of the immovable
property belonging to the wakf estate was valued at 20 times the annual
municipal valuation and 16th of the value of the immoveable property along with
other properties was taken to be the net wealth of each assessee.
Appeals were taken to the Appellate Assistant
Commissioner of Wealth Tax but these were dismissed. There were further appeals
to the Income tax Appellate Tribunal where no dispute was raised as indeed it
could not be raised with regard to the validity of the deed of wakf.
22 It was held that the right of the sons of
the wakf to receive a share of the rents and profits of the wakf property was
property or an interest in property and as it was not limited in enjoyment to a
period of six years it fell within the definition of the term "assets"
as defined by s. 2(e) of the Act. The contention of the appellants that the
right of the beneficiaries under the deed of wakf was a mere right to an
annuity as mentioned in s. 2(e)(iv) and was, therefore, not an asset assessable
to wealth tax was rejected. The third argument which had been raised before the
Tribunal that the allowances under assessment were payable to the beneficiaries
by way of maintenance were not transferable under s. 6(dd) of the Transfer of
Property Act and therefore they had no market value, for inclusion in the net
wealth was also refuted. It was pointed out that the right to maintenance was
not one of the assets mentioned in s. 5 which alone entitled an assessee to
claim exemption in respect of certain assets. The Tribunal did not find it
possible to hold on the facts of the case that the amounts in dispute were
receivable by the beneficiaries as maintenance under the terms of the wakf. As
regards the quantum of valuation a direction was made that the value of the
assessee's life interest may be capitalised on the basis of the valuation table
set out in Park's Principles and Practice of Valuations taking the rent
security at 6%.
On applications for referring the question of
law, the following common question was referred to the High Court under s. 27
of the Act:
"Whether on the facts and circumstances
stated the right of the assessee to receive a specified share of the net income
from the Wakf Estate is an asset the capitalised value of which is assessable
to Wealth-tax?" The High Court negatived the contentions of the appellants
that the right to receive a definite share of the net income from wakf property
did not fall within the meaning of the word "assets" as defined by s.
2(e) of the Act or that it was a mere right to an annuity which under the
Mohammedan Law could not be commuted into a lumpsum. It was held that the fight
of each assessee was to receive an aliquot share of the net income of the
properties which were made the subject matter of the wakf and there was a clear
distinction between an aliquot share of income and an annuity. The High Court
was of the view that even if the asset of the nature under consideration was
non-transferable and could not be sold in the open market it could not be said
that such an asset had no value. For the purpose of the Act the Wealth Tax
Officer must proceed to value it as if it was an asset which was saleable in
the market and that would depend on actuarial valuation. The question was
consequently answered in the affirmative and in favour of the revenue.
23 The definition of the word
"assets" as given in s. 2 (e) of the Act to the extent it is material
is in the following terms:
(e) "assets" includes property of
every description, movable or immovable but does not include-- (iv) a right to
any annuity in any case where the terms and conditions relating thereto
preclude the commutation of any portion thereof into a lump sum grant;
(v) any interest in property where the
interest is available to an assessee for a period not exceeding six years
;" "Net wealth" is defined by section 2(m). Section 3 is the
charging valuation date of every individual etc. Section 4 gives the financial
year a tax in respect of the net wealth on the corresponding valuation date of
every individual etc.
Section 4 gives the assets which have to be
included in computing the net wealth. Section 5 gives those assets which are
exempt from and are not to be included in the net wealth of the assessee.
Section 7 (1) provides that value of any asset other than cash shall be
estimated to be the price which, in the opinion of the Wealth Tax Officer,, it
would fetch, if sold in the open market, on the valuation date.
It is to be essentially decided whether the
right to receive an aliquot share of the net income of the properties which
were made the subject matter of the wakf would be covered by the definition of
"assets" within the meaning of s. 2(e) of the Act. There can be no
difficulty if such a right can be regarded to be property giving that word the
widest meaning as is contemplated by the language employed in the aforesaid
clause. The principal argument of Mr. A.K. Sen for the appellants is that the
right to receive a share of the income under a deed creating wakf-alal-aulad
can, by no stretch of reasoning, be regarded to fall within the meaning of the
word "property" even in its wide and extended sense. He has referred
to the incidents of such a right with particular reference to the Mohammedan
Law relating to wakf. That law owes its origin to a rule laid down by the
Prophet of Islam; and means "the tying up of property in the ownership of
God the Almighty and the devotion of the profits for the benefit of human
beings." Once it is declared that a particular property is wakf, the right
of the wakf is extinguished and the ownership is transferred to the Mutawalli
(vide Vidya Varuthi v. Balusami Ayyar(1). Wakfs could be divided into two
classes:
(i) public and (ii) private. A private wakf
is one for the benefit of the (1) 481.A. 302 atp. 312.
24 settlor's family and his descendants. It
is called Wakf- alal-aulad. -Before the enactment of the Mussalman Wakf Validating
Act 1913, a wakf, exclusively for the benefit of the settlor's family, children
and descendants in perpetuity, was invalid. It was, however, valid if the
property was given in substance to charitable uses. Section 3 of the aforesaid
Act declared it lawful for a person professing the Mussalman faith to create a
wakf which in all other respects was in accordance with the provisions of the
Mussalman law, for the following among other purposes :-- "(a) for the
maintenance and support wholly or partially of his family, children or
descendants, and (b) where the person creating a wakf is a Hanafi Mussalman,
also for his own maintenance and support during his lifetime or for the payment
of his debts out of the rents and profits of the property dedicated;
Provided that the ultimate benefit in such
cases expressly or impliedly reserved for the poor or for any other purpose
recognised by the Mussalman law as a religious, pious or charitable purpose of
a permanent character." As mentioned before, the moment a wakf is created,
all rights of property pass out of the Wakif and vest in the Almighty.
Therefore, the Mutawalli has no right in the property belonging to the wakf. He
is not a trustee in the technical sense, his position being merely that of a
superintendent or a manager. A Mutawalli has no power, without the permission
of the court, to mortgage, sell or exchange wakf property or any part thereof
unless he is expressly empowered by the deed of wakf to do so: (ss. 202 and
207, Mulla's Principles of Mahomedan Law, 16th Edn.) In Abdul Karim Adenwalla
v. Rahimabai(1), a distinction was made between a settlor belonging to the
Hanafi sect reserving for his own maintenance and support during his lifetime
the income of the trust property and has reserving for his absolute use income of
the whole of the property during his lifetime. It was 'pointed out that a
Hanafi Mussalman was not permitted to follow the latter course and it was only
when he reserved the income for his maintenance and support that the provisions
of the Mussalman Wakf Validating Act, 1913 would not be offended, There would
be a difference in law between these two provisions; if a settlor reserved to
himself income for his own maintenance and support that would not be
transferable as property under the Transfer of Property Act nor would it be
attachable under the provisions of the Civil Procedure Code. If he, however,
reserved for himself a life interest, s. 6 of the Transfer of Property Act (1)
48 Bom. L.R. 67.
25 and s. 60 of the Code with regard to the
non-transferability and non-liability to an attachment would nor be attracted.
The crux of the matter, according to Mr. Sen,
is that the aliquot share of income under the deeds executed in the present
case was reserved for the maintenance and support of the wakf and other
beneficiaries during their lifetime. It is pointed out that if the provisions
contained in cl. (5 ) of the deed of wakf were not to be read in that manner,.
the deed would be rendered void a result which has to be avoided by the courts.
It is thus contended that the right, in question, is a right to future
maintenance measured by the aliquot part of the income and it is neither
partible nor alienable, and is one which is wholly personal to the beneficiary.
It lacks the basic attributes of property.
Now "property" is a term of the
widest import and subject to any limitation which the context may require, it
signifies every possible interest which a person can clearly hold or enjoy. The
meaning of the word "property" has come up for examination before
this Court in a number of cases.
Reference may be made to one of them in which
the question arose whether Mahantship or Shebaitship which combines elements of
office and property would fall within the ambit of the word
"property" as used in Article 19(1)(f) of the Constitution. It was
observed in the Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra
Thirtha Swamiar of Sri Shirur Mutt(1) that there was no reason why that word
should not be given a liberal and' wide connotation and should not be extended
to those well recognised types of interests which had the insignia or
characeristics of proprietary right. Although Mahantship was not heritable like
the ordinary property, it was still held that the Mahant was entitled to claim
protection of Art.
19(1) (f) of the Constitution. It is stated
in the Halsbury's Laws of England, Vol. 32 3rd Edn. page 534 that an annuity
(which is a certain sum of money payable yearly either as a personal obligation
of the grantor or out of property not consisting exclusively of land) can be an
item of property separate and distinct from the beneficial interests therein
and from 'the funds and other property producing it is property capable of
passing on a death and can be separately valued for the purpose of estate duty.
The only direct case on the point under
consideration is a decision of the Bombay High Court in Commissioner of Wealth
Fax, Bombay City v. Purshottam N. Amersey and Another(2). There the deed of
settlement provided that the trustees shall apply he net income from the fund
for the support, maintenance and advancement in life and otherwise for the
benefit of the settlor and is wife etc. It was held that the definition of
"assets" in s. 2(e) and that of "net wealth" in s. 2(m)
were comprehensive provi- (1) [1954] S.C.R. 1005, 1019. (2) 71 I.T.R. 180.
CI/70-3 26 sions and all assets were included
in the net wealth by the very definition. Therefore, when s. 3 imposed the
charge of wealth tax on the net wealth it necessarily included in it every
description of property of the assessee, movable and immovable, barring the
exceptions stated in s. 2 (e) and other provisions of the Act. We are in entire
concurrence with that view. There is no reason or justification to give any
restricted meaning to the word "asset" as defined by s.
2(e) of the Act when the language employed
shows that it was intended to include property of every description. On a
proper construction of the relevant clauses in the wakf deed we are not
satisfied that the aliquot share of the income provided for the beneficiaries
was meant merely for their maintenance and support. But even on the assumption
that it was so intended or to preserve the validity of the deeds it should be
so construed the right to the share of the income would certainly be an asset
within the meaning of s. 2(e) and would be liable to be included in the net
wealth of the assessee.
Mr. Sen has laid emphasis on the language of
s. 7 (1 ) of the Act and has contended that the right to a share in the income
is not capable of any valuation and the price which it would fetch if sold in
the open market, could not possibly be ascertained. Such an argument was fully
examined in the Bombay case(1) in which the High Court referred to the
provisions of the English statutes, which were in pari materia as also
decisions given by the English Courts including the one by the House of Lord,'
(Commissioner of Inland Revenue v. Crossman) (2). It has beet rightly observed
by the High Court that when the statute uses the words "if sold in the
open market" it does not contemplate actual sale or the actual state of
the market, but only enjoins that I should be assumed that there is an open
market and the property can be sold in such a market and on that basis, the
value has to be found out.
It is a hypothetical case which is
contemplated and the Tax Officer must assume that there is an open market it
which the asset can be sold.
A faint attempt was made to invoke the
exception contained in s. 2(e) by suggesting that the right to receive a share
of the income was a mere right to an annuity where the terms and conditions
relating thereto precluded the commutation of any portion into a lump sum
grant. The High Court in the judgment under appeal dwelt at length on the true
meaning and import of the expression "annuity" and negatived that
suggestion. The burden of the argument was and is that the word "annuity"
should be given its popular and dictionary meaning and not the signification
which it has assumed as a legal term owing to judicial inter pretation. Such a
contention has only to be stated to be rejected (1) 71 I.T.R.180. (2) (1937)
A.C.
27 because it is well settled that where the
legislature uses a legal term which has received judicial interpretation, the
courts must assume that the term has been used in the sense in which it has
been judicially interpreted.
For the reasons given above, the appeals fail
and are dismissed with costs. (One hearing fee.) Y.P. Appeals dismissed.
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