IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 135 of 1988 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO ------------------------------------------------------ COMMISSIONER OF INCOME TAX Versus HAZARAT PIR SHAH-E-ALAM ROZA ESTATE TRUST -------------------------------------------------------------- Appearance: MR B.B. NAIK, Standing counsel for the Revenue MR S.N. SOPARKAR, Sr. Advocate with Mr.M.K.Kaji and Mrs. Swati Soparkar, Advocates for the Assessee -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 11/04/2002 ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI for the Court) 1. This reference arises from the order of the Income Tax Appellate Tribunal, Ahmedabad `A' passed in a group of 20 appeals related to the Assessment Years 1964-65 to 1969-70, 1972-73 and 1973-74, in which the controversy before us revolved around the issue as to whether the income from the lands in question was the income of the Hazarat Pir Shah-E-Alam Roza Estate Trust (hereinafter referred to as `the Roza Trust') assessable in the hands of the said Trust and exempt under section 11 of the Income Tax Act, 1961 (hereinafter referred to as `the said Act'), or whether it was assessable in the hands of the Sajjadanashin of the Trust Saiyed Musamiya as income from his private property. 2. The Tribunal has concluded that the lands in question were wakf properties belonging to the Roza Trust, and that the exemption under section 11 of the said Act was available to the assessee - Roza Trust, provided the conditions mentioned therein are fulfilled. It was held that the actual expenditure on the Sajjadanashin and his family not exceeding Rs.30,000=00 would not be included in the income of the Roza Trust, but such amount spent by the assessee Sajjadanashin on his maintenance as Madad-E-Maash was taxable in his hands as income. The Tribunal restored the matter to the Income Tax Officer to assess the income of Rasulabad, Vasna, Isanpur and Sarsa lands as the income of the Roza Trust and grant the benefit under section 11 subject on fulfillment of the conditions mentioned therein, bearing in mind that the income actually spent by Sajjadanashin on his maintenance not exceeding Rs.30,000=00 was not to be included in the income of the Roza Trust. 3. The Tribunal has in the above background referred the following questions in Income Tax Reference No. 135 of 1988 for the opinion of this Court under section 256(1) of the said Act : "Questions at the instance of the Revenue (In Revenue Appeal Nos.402 to 409/Ahd/1985) : [1] Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has been right in law in holding that the assessee Roza is a wakf and the complex of buildings and lands at Rasulabad were wakf properties belonging to it by dedication and user ? [2] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in holding that the lands at Vasna, Isanpur and Sarsa were wakf properties belonging to the Roza by virtue of Sanad of Aurangzeb? [3] Whether, the Appellate Tribunal has been right in law and on facts in holding that the income of Roza was eligible to exemption under section 11 of the Income Tax Act, 1961 if assessee Roza satisfied the conditions mentioned in the said section? [4] Whether, the Appellate Tribunal has been right in law and on facts in holding that the actual expenditure on the maintenance of the Sajjadanashin and his family not exceeding Rs.30,000=00 a year would not be included in the income of Roza? Questions at the instance of the Revenue in Revenue Appeal Nos. 410 to 413/Ahd/1985 : [1] Whether, the Appellate Tribunal has not erred in law and on facts in holding that the properties at Rasulabad, Vasna, Isanpur and Sarsa belonged to Shah-E-Alam Roza at Ahmedabad and not to the assessee individual and hence the income thereof was not liable to be assessed in the hands of the assessee? [2] Whether, the Appellate tribunal has not erred in law and on facts in holding that the Bombay High Court decision wherein the assessee had taken the stand that the properties belonged to him individually and not to the trust, did not operate as res judicata and the assessee was not prevented from taking the stand that the properties belonged to Roza Trust? [3] Whether, the Appellate Tribunal has not erred in law and on facts in holding that income spent by the assessee Razvi on his maintenance and Madad-E-Maash was only taxable in his hands? Questions at the instance of the Revenue in Revenue Appeal Nos.384 to 387/Ahd/1985 : [1] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that all the properties, lands and buildings at Rasulabad are wakf properties by user? [2] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the income spent by the assessee Razvi on his maintenance and Madad-E-Maash was taxable income in the hands of the assessee? [3] Whether, the Tribunal was justified in law in holding that the maintenance and Madad-E-Maash expenditure incurred by the Trust on assessee and his family members was not expenditure for Khankah but was taxable income of the Sajjadanashin? Questions at the instance of the assessee - Roza Trust in Revenue Appeal Nos. 388 to 398/ Ahd/1985: [1] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the maintenance and Madad-E-Maash expenditure incurred by the trust on Sajjadanashin and his family members was not expenditure for Khankah? [2] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that actual expenditure incurred (not exceeding Rs.30,000=00 a year) in maintenance of Sajjadanashin and his family was not the income of the trust? [3] Whether, the Tribunal was justified in law in holding that the British Sanad granted to the assessee were not the documents of title?" 4. Much historical interest has been evinced by the authorities and a detailed account is given in their orders with a historian's thrill to show as to how the Dargah of Hazarat Pir Shah-E-Alam came into existence when the Roza was constructed during 1531 - 41 A.D. by a noble man of the Court of Sultan Bahadur Shah over the tomb of the great muslim sage who died in 1475 A.D. and how Diwankhana came to be built in 1570 - 73 by Sultan Muzaffer Shah III. These facts found mention in the Bombay Gazette Volume IV at pages 286-87. The lands of six villages, including the four which were the subject matter of the assessment proceedings, are said to have been granted by the Mogal Emperor Aurangzeb for the up-keep of the Roza in the year 1670 A.D. under a Sanad and grants were confirmed by the Sanads issued during the British regime. 5. It appears from the record that a suo motu inquiry was started under section 19 of the Bombay Public Trusts Act, 1950 (hereinafter referred to as `the Trusts Act of 1950') by order dated 7th march 1956 (Inquiry No. 176 of 1956) passed by the Deputy Charity Commissioner who had chosen the assessors to aid and assist him. As a result of that inquiry, the Deputy Charity Commissioner, Ahmedabad Region, made an order on August 10, 1962 directing that the said Trust be registered as a Public trust in the Public Trust Registration Office, Section `B' for Ahmedabad. Appeals were filed against that order before the Charity Commissioner, Gujarat State, Ahmedabad (Appeal Nos. 60 to 71 of 1962) and the Charity Commissioner by a very elaborate reasoned order dated 20-1-1966 dismissed both the appeals, confirming the order of the Deputy Charity Commissioner that the said Roza trust was a public trust and that the lands of villages Vasna, Isanpur and Sarsa were the properties of the said trust and setting aside the finding of the Deputy Charity Commissioner about the Rasulabad lands by holding that those lands were also the property of the trust. It is stated that an application under section 72 of the said Trusts Act of 1950 was filed and has been pending, but there has not been any stay of the order of the Charity Commissioner, by which it was held that the Roza was a registered public trust and these lands of four villages were registered as the properties of the said wakf. 6. The Income Tax Officer assessed the income of villages Vasna, Isanpur and Sarsa as well as the income from Rasulabad land as the income in the hands of the assessee Sajjadanashin Saiyed Musamiya Haiderbux Razvi. Protective assessment was, however, made in respect of that income in the name of the assessee Roza Trust. In the appeals, the Assistant Appellate Commissioner upheld the finding of the Income Tax Officer that the income was assessable in the hands of Saiyed Musamiya Haiderbux Razvi but cancelled the protective assessment which was made in the name of the Roza Trust. 6.1 Against the order of the A.A.C., appeals were preferred by the Roza Trust before the Tribunal challenging the finding that the income in question was of Saiyed Musamiya Haiderbux Razvi and not of the Roza Trust, and that it was not exempted under section 11 of the said Act. According to the assessee Roza Trust, the Appellate Assistant Commissioner had committed an error in setting aside the protective assessment on the ground that the income was not the income of the Roza Trust instead on the ground that it was exempted under section 11 of the said Act. 6.2 In the appeals filed by Saiyed Musamiya Haiderbux Razvi, it was urged that the A.A.C. had erred in holding that the income of the trust was assessable in his hands and not in the name of Roza Trust and that it was not exempted under section 11 of the said Act. 6.3 The Department was aggrieved by the cancellation of protective assessment and in its appeals, challenged the order of the A.A.C. by urging that the protective assessment in the name of Roza Trust should not be cancelled. 7. The Tribunal took note of the fact that the Deputy Charity Commissioner had held that all the lands in question except the Rasulabad lands, were belonging to the public religious and charitable trust i.e. the Roza Trust. It noted that the Charity Commissioner had confirmed that order and had also held that the Rasulabad lands were belonging to the said trust. It took note of the book entitled "A History of Gujarat" by M.S. Commissariat (Professor of History and Former Principal, Gujarat College, Ahmedabad) to trace out the events that led to the establishment of the Roza Trust as a public charitable trust. It noted that Shah-E-Alam Estate was under the management of the Collector of Ahmedabad under the Court of Wards Act, from 1872 to 1877, 1896 to 1914 and 1948 to 1958. Considering the effect of the judgement dated 24th September 1957 of the Bombay High Court, in First Appeal No. 188 of 1952 which was filed against the decision of the 3rd Joint Civil Judge (S.D.) Ahmedabad in Civil Suit No. 72 of 1948, partly decreeing the suit filed by the senior widow of Saiyed Musamiya Imam Hyderbux against the other widow Mamubibi and her son Saiyed Musamiya Razvi and others, for a decree for administration of the estate of Saiyed Musamiya Hyderbux and for appointment of a receiver etc., the Tribunal came to a finding that the said judgement did not operate as res judicata, because, the Roza Trust was not represented in those proceedings and the question whether the properties were public trust properties was not before the Court. It was, therefore, held that Saiyed Musamiya Razvi was not prevented from taking up the stand that the properties in question belong to the Roza Trust. The Tribunal took into consideration the inscription on the marble tablet placed at the entrance of the Roza Trust, the account of which was given in the book of Professor Commissariat and the sanad granted in 1670 by Aurangzeb assigning six villages for the maintenance of the tomb and its custodian and found that there was dedication of these lands of four villages for charitable and religious purpose. The Tribunal considered the said Sanad, a translation of which was submitted before it, and held that all the requirements of the public religious endowment were satisfied. It held that, as per the Sanad, one Saiyed Mohammad was appointed by the `Farman' of Aurangzeb as the Sajjadanashin and Mutawalli of the Roza and he was granted six villages comprising 80 Bighas and 17 Biswas of land exclusively for expenditure on the sacred mausoleum under the heads of expenditure : the tutors, people of the mosque, the seekers of knowledge, the carpet spreaders, the light kindlers, the travellers, and all other aspects of beneficience and charity and for Madad-E-Maash of the Sajjadanashin, his sons and descendants. The Tribunal held that, in the translation of the Sanad which was supplied to it, there was no omission and the names of villages were clearly mentioned. It was held that the primary and dominant purpose of the grant was public religious and charitable and the maintenance of the Sajjadanashin (Madad-E-Maash) was only incidental to the primary object of the wakf. It was also held that the evidence regarding establishment of the wakf was so predominant that inconsistent conduct of Saiyed Musamiya Razvi or his ancestors cannot displace the existence of the wakf. Considering the status of Sajjadanashin as the holder of a spiritual office in the Roza Trust, the Tribunal held that a reasonable expenditure on the maintenance of the Sajjadanashin and his family must be held to be expenditure incurred for a religious purpose, and therefore, the benefit of section 11(1)(a) would be available to the assessee Roza Trust for such expenditure. It was held that the actual expenditure not exceeding Rs.30,000=00 a year over the maintenance of the Sajjadanashin and his family was allowable and should not be included in the income of the Roza Trust. The Tribunal, however, held that the Sajjadanashin receives such income by reason of his office and any monetary receipt in the hands of a person by reason of his office was the income in his hands and was taxable. Summarising its conclusions, the Tribunal held in paragraph 45 of its order, that the decision of the Bombay High Court in First Appeal No. 188 of 1952 did not operate as res-judicata and the Sajjadanashin Saiyed Musamiya Razvi was not prevented from taking up a stand that the properties belong to the Roza; that the assessee Roza was a wakf and the complex of buildings and the lands at Rasulabad were wakf properties belonging to it by dedication and user; that the lands at Vasna, Isanpur and Sarsa are wakf properties belonging to the Roza trust by reason of the Sanad of Aurangzeb; that the income spent by the assessee Musamiya Razvi on his maintenance as `Madad-E-Maash' was taxable in his hands; and that the actual expenditure on the maintenance of the Sajjadanashin and his family not exceeding Rs.30,000=00 a year, would not be included in the income of the Roza Trust. With these findings, the Tribunal restored the matter to the Income Tax Officer to assess the income of Rasulabad, Vasna, Isanpur and Sarsa lands as income of the Roza Trust and grant the benefit under section 11 of the said Act, subject to fulfillment of the conditions mentioned therein, bearing in mind that the income actually spent by the Sajjadanashin on his maintenance and that of his family not exceeding Rs.30,000=00 per year was not to be included in the income of the Roza Trust. 8. The learned Standing Counsel appearing for the Revenue argued before us that the judgement of the Bombay High Court in First Appeal No. 188 of 1952 was a judgement rendered within the jurisdiction of the Court and was binding on all the authorities under the Bombay Public Trusts Act, because, the suit was of the year 1948, while the Bombay Public Trusts Act came into force from 1950. It was argued that the income tax authorities were not bound by any decision of the Charity Commissioner under the Bombay Public Trusts Act as to the existence of the public trust or about the fact whether any property belonged to the public trust. It was submitted that, in the process of assessment, it was incidental for the assessing officer to decide as to whom the property belonged, and therefore, notwithstanding the powers of the Charity Commissioner under the Bombay Public Trusts Act, the assessing officer can take a different view under the provisions of the Income Tax Act as regards the ownership of the properties which may have been registered as the properties of the Trust. The learned counsel strongly contended that the authorities under the Income Tax Act were functioning under the Central Law and therefore, they would not be bound by any decision taken by a functionary under the State law. Therefore, the tax authorities have independent powers under the said Act to decide the ownership of the immovable property for determining the question regarding the income received by the Public Trust and whether it was exempted under section 11 in light of the said provision read with section 143(2) and (3) of the said Act. It was further argued that the grant made by Aurangzeb was in favour of the Sajjadanashin and his family, and his descendants and therefore, it was a personal inam and cannot be treated as creation of a wakf. He therefore submitted that there was no dedication of the said lands to any religious or charitable purpose. It was also argued that, from the conduct of the Sajjadanashin and his family members, it was clear that they had treated the properties as if they were their private properties, and that is why, the administration suit was filed by one of the widows of the then Sajjadanashin which culminated in the decision of the Bombay High Court in First Appeal No. 188 of 1952, confirming the decree passed in the Administration Suit wherein the other widow and the present Sajjadanashin were parties. It was argued that the Tribunal had committed an error in fixing the amount of Rs.30,000=00 as an expenditure wholly incurred for religious purpose entitled to exemption under section 11 of the Act. According to him, such expenditure on Sajjadanashin and his family (Madad-E-Maash) was a private expenditure and not incurred for any religious purpose. He then argued that the authorities under the Bombay Public Trusts Act had committed an error in holding that the judgement of the Bombay High Court did not preclude them from taking a decision under the said Act, and that there was no bar of res-judicata. He submitted that the authorities under the Bombay Public Trusts Act were clearly bound by the decision of the Bombay High Court and could not have held that there was a public trust or that the properties in question were dedicated for religious and charitable purposes. It was submitted that, in any event, an application under section 72 of the Bombay Public Trusts Act was pending before the Ahmedabad City Civil Court and therefore, the decision under the Bombay Public Trusts Act registering the Roza Trust and showing the properties in question as the trust properties was not final. Even if it is to be treated as final for the purposes of the Bombay Public Trusts Act since that is a State law, the income tax authorities acting under the central law, i.e. the Income Tax Act, were in no way bound to follow the decisions taken under the Trusts Act. The learned Standing Counsel finally argued that the record shows that, in the past, the said Roza was registered as a wakf under the Musalman Wakt Act, 1923, but later on, on 3/9/1934, it was deleted by the Collector from the list of wakfs. Therefore, it could not have been again decided under the Bombay Public Trusts Act that the said Roza was a public trust, and that its properties were public trust properties. Therefore, the properties in question are required to be held of the individual assessee i.e. the Sajjadanashin and the income was assessable in his hands and not in the hands of the Roza Trust. The learned Standing Counsel supported the reasoning of the Income Tax Officer, and contended that the findings of the Tribunal were not warranted by the material on record. 8.1 The learned Standing Counsel for the Revenue, in support of his arguments, cited the decision of this Court in Commissioner of Income Tax, Gujarat III v. Thobhandas Jivanlal Gajjar, reported in 109 ITR 296 to point out that a Division Bench of this Court has held that, it cannot be said as a broad proposition of law that the decisions of civil courts would operate as res judicata in the references so as to bind the Government, which was admittedly not a party to the proceedings before the civil courts, or would preclude the Income Tax Officer, in the course of assessment, to investigate in whose hands a particular income should be assessed. Reliance was also placed on the decision in Keshavlal Punjaram v. Commissioner of Income Tax & Wealth Tax, reported in 141 ITR 466, in which the ratio of the aforesaid decision in Thobhandas's case was followed, and it was held that the Tribunal had rightly taken the view that the decision rendered by the civil court in the circumstances pointed out cannot preclude the statutory exercise by the Income Tax Officer to form his own opinion. 9. The learned Senior Counsel, who appeared for the assessee, argued that, in view of the finding reached by the Charity Commissioner on 20-1-1966 in Appeal Nos. 60 and 71 of 1962 upholding the order of the Deputy Charity Commissioner dated 10-8-1962 registering the Roza Trust as a public trust and finding that the properties in question were the properties of the Roza Trust, it was not open to the Tax Authorities to take a different view of the matter. It was argued in the alternative that the finding reached by the Tribunal as to the ownership of the property was a finding of fact, which could not be challenged as perverse, because, it was based on the evidence on record. It was, therefore, not possible to take any view as to the ownership of the property other than the one taken by the Tribunal. It was submitted that, in any event, it was quite clear from the evidence on record that the findings reached by the Tribunal are correct. As regards the amount of expenditure upto Rs.30,000=00, which was required to be taxed in the hands of Saiyed Musamiya Razvi, the learned Senior Counsel submitted that the questions referred at the instance of Saiyed Musamiya Razvi in respect thereof were not pressed. He however submitted that this amount should be a permissible deduction, because, it was expended for the maintenance of the Sajjadanashin. It was then argued that the controversy in the administration suit which culminated in the decision of the Bombay High Court in First Appeal No. 188 of 1952 was entirely different, and the Roza Trust was not a