Murtaza Reza Choudhury vs Commissioner of Agricultural Income Tax

Chakravartti, J.—This is a Reference u/s 63(7) of the Bengal Agricultural income tax Act by which the Agricultural income tax Appellate Tribunal of West Bengal has asked for the opinion of this Court on the following question of law:

Whether, on the facts and in the circumstances of the case and upon a true construction of the wakf deed, the income of the properties held by the Assessees under the said wakf deed as wdkf-al-al-aulad is wholly exempt from tax u/s 4(6) of the Bengal Agricultural income tax Act, 1944.

The facts and circumstances of the case are perfectly simple and the true construction of the wakf deed presents no particular problem. In fact, the real and the only point for determination is the true meaning of Section 4(6) of the Bengal Agricultural income tax Act in so far as it deals with wakf-al-al-aulads.

The income in question is that of an wakf estate in the management of two persons, namely, Murtaza Reza Choudhury and Humayun Eeza Choudhury, who are brothers and are the Assessees in the present case. They hold the estate as joint mutwallis under a deed of wakf, dated December 28, 1922, and each of them has been made responsible for a half share of the tax assessed on the entire agricultural income of the wakf estate for the assessment year 1944-45. The Assessees do not contend that the income so assessed, is not agricultural income. Nor does the department contend that the wakf is not a valid one or that it is not an wakf-al-al-aulad. Under the terms of the wakf deed, rent, revenue and other similar charges are first to be paid out of the income of the wakf estate and of the balance left, 15 per cent, is to be appropriated by the mutwallis as commission which is to serve both for their remuneration and. for the allowance granted to them for the maintenance of the necessary establishment. Of the balance next left, a 2 as. share is to be applied to certain pious and benevolent purposes mentioned in the deed and an 11 as. share is to be paid to two of the three settlors and after them, to their descendants and a further 2 as. share is to be paid to the fatherless female descendants of all the three settlors. The remaining 1 anna is to be invested by way of creating a reserve fund as a provision against emergencies. Except that a 2 as. share of the income is to be applied to religious or charitable purposes, the terms and conditions of the deed do not bear upon the question as presented before the authorities below or before us. Even as regards that 2 at. share, it was not proved that anything had been actually spent for religious or charitable purposes.

No question was raised by the department as to whether the whole of the agricultural income of the wakf estate was applied to the other purposes enjoined by the deed of wakf and it is, therefore, to be assumed that it was so applied. In those circumstances, the Assessees contend that no part of the income was taxable. According to them, u/s 4(6) of the Bengal Agricultural income tax Act, the entire agricultural income of an wakf-al-al-aulad is exempt from taxation, irrespective of the purposes of the wakf, provided only that the income is applied to such purposes, and that the exemption is not limited to such part of the income as may be applied to religious or charitable purposes. The Commissioner contends that the exemption contemplated by the section in the case of wakf-al-al-aulad is not total but only partial. According to him, as in the case of property held under other kinds of trust or legal obligation for religious or charitable purposes, so in the case of wakf-al-al-aulad estates, the whole income is not exempt but only such part of it as may be applied to purposes, religious or charitable, as understood in the general law.

The Appellate Tribunal rejected the claim of the Assessees and upheld the contention of the department. It did so by referring to what it considered to be the policy of the income tax laws regarding trusts and charities, to the meaning of religious or charitable purposes which, it is said, did not include benefiting oneself or one''s descendants and to certain decisions under the wholly different language of Section 4(3)(i) of the Indian income tax Act. The Tribunal seems to have assumed that in order to earn exemption u/s 4(6), the income must be applied to religious or charitable purposes and then to have proceeded to hold that such purposes did not include the secular purposes of a wakf-al-al-aulad. The one thing it did not do was to make an attempt to construe the words of the section, as they were.

It is needless to point out that the approach of the Tribunal to the question before it was entirely mistaken. There is no question of policy or intendment in a taxing statute. Only such income can be taxed as has been brought under a liability to taxation by clear words and if there is a provision for exemption, it should be so construed as to make it effective, provided of course the language used is capable of such construction. In particular, the Tribunal''s reference to decisions under the Indian income tax Act was entirely pointless. Section 4(3)(i) of that Act only deals in a general way with property held under trust or legal obligation for religious or charitable purposes, wholly or in part, and besides that it does not make a separate and specific mention of wakf-al-al-aulads it also excludes from the exemption such income of private trusts as may not enure to the benefit of the public. Such limitations are absent from the corresponding section in the Bengal Act where, again, wakf-al-al-aulads have been separately mentioned, in addition to properties held under trust or other legal obligation in part only for religious or charitable purposes. The section of the Indian Act, therefore, furnishes no useful analogy to the section under the Bengal Act.

Such considerations, however, in my opinion, do not assist the Assessees in the present case. But before proceeding further, I should refer to the terms of the relevant section. Section 4(6) of the Bengal Agricultural income tax Act, so far as is material, reads as follows:

Subject to the provisions of this Act, the total agricultural income of any previous year of any person comprises all agricultural income....but does not include-

(a)....

(b) any agricultural income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes or in the case of Muslim trusts commonly known as wakf-al-al-aulads, the income applied thereto.

Mr. Mitra who appeared on behalf of the Assessees contended that some kind of exemption for the income of wakf-al-al-aulads was clearly contained in the section and if it was capable of being construed as providing for a total exemption, such construction should be adopted. He admitted that another construction also might be possible, but his contention was that if the words in the section could bear the meaning which he would read in them, equally with some other meaning, the former ought to be preferred, inasmuch as it would carry a greater benefit to the Assessees. He suggested that in the case of "property so held in "part only for such purposes" the words "applied thereto" in the last line of the Sub-section should be read with the words "such "purposes", that is to say, religious or charitable purposes; but in the case of Muslim trusts, they should be read with the words "Muslim trusts commonly known as wakf-al-al-aulads", that is to say, such trusts as a whole or the whole income of such trusts. Mr. Mitra contended further that the effect of the use of the word "or" in the last but one line of the Sub-section was to exclude a joinder of the words "applied thereto" with the words "such "purposes" in the case of both "property so held in part only, etc." and "Muslim trusts commonly known as wakf-al-al-aulads" and to distribute the application of those words between the two so as to allocate them in the case of "property so held in part, etc." to "such purposes" and in the case of Muslim trusts, to "Muslim "trusts commonly known aa wakf-al-al-aulads". So read distributively in. the case of the two different parts of the subsection, the words "applied thereto" would mean in the case of Muslim trusts, applied to the trusts as such, and would thus provide for an exemption of the entire income.

I may pause here to dispose of an argument advanced by Mr. Sen who appeared on behalf of the Commissioner. He contended that the use of the word "applied" towards the end of the section, as distinguished from the word "derived''- in the beginning was a clear indication that the exemption was intended to be partial. He added that if the contention of the Assessees was accepted, then in a case where no part of the income might be applied to the purposes of the wakf, the whole of it would be liable to taxation. In my opinion, that argument completely misses the point of the contention of the Assessees. It is not disputed by them that the exemption must be total or partial, according as the agricultural income of the wakf estate may be applied to the purposes of the wakf, fully or in part. The dependence of the exemption on application and its qualified or partial character from that point of view are both admitted by the Assessees. What they still contend is that if the income of the wakf estate be applied wholly or in part to the purposes of the wakf, it is not permissible to make a further subdivision of the income so applied into income applied to religious or charitable purposes and income not so applied and to limit the exemption to the former only. That contention is in no way excluded by the occurrence of the word "applied" in the last line of the section. In fact, the distinction which is relevant under the question raised is not the distinction between income derived from property held under trust or legal obligation for religious or charitable purposes and such income applied to such purposes. But the distinction is between such part of the applied income as may be applied to religious or charitable purposes and such other part as may not be so applied. The answer to the question raised by that distinction is to be found not in the true meaning of the word "applied" but in the true meaning of the word "thereto".

Reverting now to the contention of Mr. Mitra, I am unable to hold that the expression "applied thereto" can be read distributively in two different senses in the manner suggested by him. In the first place, it is inappropriate to speak of income as applied to trusts. One speaks of income being applied to the purposes of a trust and indeed the present section itself uses that form of expression in its earlier part where it is speaking of application of the income to such, i.e., religious or charitable purposes. There is no reason why the legislature should be supposed to have adopted a different, and certainly a less appropriate and less elegant form of expression in the last part of the Sub-section. In the second place, if the words "income applied thereto" are to be read as applying to "Muslim trusts commonly known as wakf-al-al- "dulads" it would seem that the income contemplated is some income other than the income of the trusts themselves. Such certainly is not the intention of the Sub-section and, in my view, the words "applied thereto" cannot be read as having reference to "Muslim trusts commonly known as wakf-al-al-aulads".

On the other hand, it seems to me perfectly legitimate and proper, and also grammatical, to read the word "thereto" as referring to not the words "such purposes" as contended on behalf of the Commissioner, but to the words "religious or charitable "purposes", occurring earlier in the section. The whole subsection, if written out fully, would then read as follows:

Any agricultural income derived from property under trust or other legal obligation wholly for religious or charitable purposes and in the case of property held under trust or other legal obligation in part only for religious or charitable purposes or in the case of Muslim trusts commonly known as wakf-al-al-aulads, the income applied to religious or charitable purposes.

In other words, the word "thereto" refers back to the words "religious or charitable purposes" and imports the limitation contained in those words into the case of both "property so held "in part, etc." and "Muslim trusts commonly known as wakf-al-al-aulads". It is great assemblage of many words, intervening between the expression "religious or charitable purposes" and the word "thereto", which has obscured the connection between the two. If those words are simplified or eliminated, the clear connection becomes at once discernible. In my opinion, the true construction of the Sub-section is the one which I have suggested.

In aid of his contention Mr. Mitra pointed out that wakf-al-al-aulads had been separately mentioned in Section 4(b) and submitted that the legislature must have done so with some particular purpose. The purpose, he suggested, was to provide for a total exemption of the income of such wakfs and he reinforced his argument by saying that if there was no such special intention, the legislature might well have left wakf-al-al-aulads to the general words of the preceding clause, namely, "property so held in part only for such purposes". Wakf-al-al-aulads also, it was suggested, are one kind of property held in part for such purposes and there could be no legitimate reason for mentioning them separately unless some special provision was contemplated. In my opinion, it is not difficult to see why wakf-al-al-aulads were specifically mentioned. Mr. Mitra Referred us to the statutory definition of wakf-al-al-aulads, as contained in Section 6(22) of the Bengal Wakf Act under which at least 75 per cent, of the income of such wakfs must be applied to the benefit of the settlor or the members of his family or his descendants. The rest may be applied to charitable or religious purposes. But it is important to notice that Section 4(6) does not speak of statutory wakf-al-al-aulads but of all Muslim trusts "commonly known as wakf-al-al-aulads". Wakfs commonly known as Wakf-al-al-aulads are private trusts for the benefit of the settlor himself and his descendants, as pointed out by Sir Dinshah Mulla and, commonly at least, such wakfs are not regarded or suspected as containing any provision for the expenditure of any part of the income for religious or charitable purposes. It is true that under the statutory law, since enacted, there must at least be some provision for the application of part of the income to religious or charitable purposes, however remote the occasion for such application may be. But since even such application may be postponed till after the extinction of the settlor''s sons and descendants, the provision for such an ultimate gift to religion or charity is more of an illusory than a real character. Besides, the religious or charitable purposes for which some ultimate provision must be made even in wakf-al-al-aulads, need only be such purposes as are recognised and approved by Mahomedan law and need not be religious or charitable purposes as recognised by the general law. It must, therefore, have been thought that unless wakf-al-al-aulads were separately mentioned, they were likely to be regarded as dispositions wholly for secular purposes and, therefore, it might be thought that they would not come under the words "property "so held in part only for such purposes" so that even if a part of the income was applied to religious or charitable purposes, it would be left out altogether. That, I conceive, was the reason why such wakfs were separately mentioned and the object was to ensure to the income of such wakfs such exemption as is provided for in the section, but not also to extend or enlarge the scope of the exemption. The separate mention of wakf-al-al-aulads does not, therefore, suggest that in the case of income from such wakfs, the exemption is larger. The contention of the Assessee amounts to saying that if a Muslim will only give the name of wakf-al-al-aulad to a family settlement made by him, with an ultimate provision for religion or charity which may never come into effect, the income from the property so settled will be wholly exempt from tax, even when applied only to secular, personal and private purposes. I can find nothing in Section 4(6) to indicate such an intention of the legislature.

For the reasons given above, I am of opinion that Section 4(6) of the Bengal Agricultural income tax Act, in so far as it deals with wakf-al-al-aulads, provides for the exemption from tax of only that part of the income of such wakfs as may be actually applied to religious or charitable purposes. The answer to the question referred must, therefore, be in the negative.

The Commissioner of Agricultural income tax, West Bengal, will have his costs of this reference.

BACHAWAT, J. Section 4(6) of the Bengal Agricultural income tax Act, 1944, may be subdivided into three parts:

The first part deals with property held under trust or other legal obligation wholly for religious or charitable purposes. The income of such property is wholly exempt from taxation.

The second part deals with property held under trust or other legal obligation in part only for religious or charitable purposes.

The third part deals with Muslim trusts commonly known as wakf-al-al-aulads.

The phrase "the income applied thereto" plainly qualifies both the second and the third parts.

When applied to the second part this phrase plainly means "income applied to religious or charitable purposes". In other words, with regard to property held in part only for religious or charitable purposes only that part of its income which is applied to religious or charitable purposes is exempt from taxation.

The same phrase, when applied to the third part, in my opinion, must have the same meaning which it has, when applied to the second part. I cannot think that the same phrase has one meaning and content when applied to the second part and wholly different meaning and content when read with the third part.

It is plain, therefore, that the word "thereto" relates to the antecedent "religious or charitable purposes" with which alone in the total context it makes sense.

The construction that the word "thereto" relates to the antecedent "wakf-al-al-aulad" gives it a meaning which does not make sense when the phrase "income applied thereto" is read with the second part of the Sub-section.

The legislature in both the second and the third parts of the Sub-section is dealing with property the income of which may in part be applied to religious or charitable purposes.

In my opinion, therefore, only that part of the income of the Muslim trust commonly known as wakf-al-al-aulads which is applied to religious or charitable purposes is exempt from taxation.

It is conceded that only a two annas part of the wakf-al-al-aulads in this case is applied to religious or charitable purposes. The whole of the income of this wakf is, therefore, not exempt from taxation and the answer to the question must, therefore, be in the negative.