Case: Ahmed G.H. Ariff &amp; Ors Vs. Commissioner Of Wealth Tax, Calcutta

2. By a deed dated November 19, 1928 as modified by a deed of rectification dated July 5, 1930 one Golam Hossain Casim 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 settlor 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 settlor died on January 1, 1937. He left behind his widow Aisha Bibi and three sons who are the appellants before this court. The wakf created was of the nature of Wakf-alal-aulad for the benefit of the settlers wife, children and their descendants. The extent of the benefit conferred on them would appear from clause 5 of the deed of wakf asAfter payment of all necessary outgoing such as establishment charges, collection 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 instalments.(b) In payment to each of my sons during the respective terms of their lives one-sixth of the said net income by monthly instalments.(c) In payment to my wife Aisha Bibi during the term of her life onetenth of the said net income by monthly instalments.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 educational 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 ofultimate benefit in the case of complete intestacy of the descendants of the settlor was reserved for poor musalmans of Sunni community deserving help.3. 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, 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 immoveable property belonging to the wakf estate was valued at 20 times the annual municipal valuation and 1/6 th of the value of the imoveable 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. It was held that the right of the sons of the wakif to receive a share of the rents and profits of the wakf property was property or an interest in property and 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 Section 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 assessees life interest may be capitalised on the basis of the valuation table set out in Parks Principles and Practice of Valuations taking the rent security at 6 per cent.4. On applications for referring the question of law, the following common question was referred to the High Court under S. 27 of theon 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 toHigh 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 annutiy which under the Mohammedan Law could not be commuted into a lumpsum. It was held that the right 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.

Court's reasoning:
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.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 orHigh 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 and is that the word "annuity be given its popular and dictionary meaning and not the which it has assumed as a legal owing to judicial interpretation a contention has only to be stated be rejected because it is well settled that where the legislature uses a term which has received judicial precaution, the courts must assume that the term has been used in the sense in which it has been judicially interpreted.9. The only direct case on the point under consideration is a decision of the Bombay High Court in Commissioner of Wealth Tax, Bombay City v. Purshottam N. Amersey, (1969) 71 ITR 180 (Bom)  . There the deed of settlement provided that the trustees shall apply the net income from the fund for the support maintenance and advancement in line and otherwise for the benefit of the settler and his wife etc. It was held that the definition of "assets" in Section 2 (e) and that of "net wealth" in Section 2 (m) were comprehensive provisions and all assets were included in the net wealth by the very definition. Therefore, when Section 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 Section 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 Section 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 Section 2 (e) and would be liable to be included in the net wealth of the assessee.A faint attempt was made to invoke the exception contained in Section 2 (e) by suggesting that the right to receive a share of the income was a more right to an annuity where the terms and conditions relating thereto precluded the commutation of any portion into a lump sum grant.The High Courtin 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 and is that the word "annuity be given its popular and dictionary meaning and not the which it has assumed as a legal owing to judicial interpretation a contention has only to be stated be rejected because it is well settled that where the legislature uses a term which has received judicial precaution, the courts must assume that the term has been used in the sense in which it has been judicially interpreted.