MUHAMMAD JAFER NAIM, J.-This is a reference tinder section 27 of the Wealth Tax Act, 1963 by the Income-tax Appellate Tribunal in the matter of Wealth Tax Assessment of Mr. F. B. Patel of Quetta for the years 1975 and 1976. The circumstances leading to this reference are that the Wealth Tax Officer made an order of Assessm ent under section 16(3) of the Wealth Tax Act, 1963 wherein 1/3 of the Trust Property of Patel Charitable Trust was included as assessee's share on the basis that the trust was not irrevocable and as such Mr. Patel was not entitled to exemption from payment of Tax. An appeal was filed before the Appellate Assistant Commissioner which was allowed and it was held that since the assessee was not a beneficiary, be was entitled to, exemption the Wealth Tax Officer was directed to exclude the amount of Rs. 35,000 from the net wealth of the assessee.
The Wealth Tax Officer filed an appeal to the Income-tax Appellate Tribunal Karachi whereby he challenged the order of Appellate Assistant Commissioner. The Appellate 'tribunal set aside the order of the Appellate Assistant Commissioner and restored one made by the Wealth Tax Officer.
The assessee Mr. F. B. Patel made an application to the Income-tax Appellate Tribunal that a question of law arose out of the; order of the Tribunal which was as under :-- "Whether on the facts and in the circumstances of the case and on a proper construction of the trust deed executed on 21st March, 1940 the Tribunal was right in holding that the provisions of section 21 of the Wealth Tax Act, 1963 did not apply to. Patel Charity Trust and the assessee was a part owner of the trust money."
The applicant requested that the question be referred to the High Court under section 27 of the Wealth Tax Act. The Income-tax Appellate Tribunal has therefore referred this case to this Court and have formulated the question as under :-rd ".Whether on the facts and circumstances of the case the Tribunal was correct in coming to the conclusion that not being irrevocable 'the Patel Charity Trust could not be treated as an institution to which provisions of section 21 of the Wealth Tax Act apply or that it can be exempt under section 4(3) of the Income-tax Act."
2. We have heard- Mr. S. A. M. Qadri counsel for the assessee and Mr. Nasrullan Awan representing the Income-tax Department.
3. It will be seen from the record of the proceedings as shown in the Paper-Book that the assessm ent had been made by Income-tax Officer, Circle-1, Quetta under sections 16(3) and 17 of the Wealth Tax Act. The officer has given his designation as Income-tax Officer although he has passed the order of assessm ent as Wealth Tax Officer under the Wealth Tax Act. According to the definition given in section 2 of the Wealth Tax Act, Wealth Tax Officer means the Income-tax Officer authorised to perform functions of the Wealth Tax Officer under section 8 of the Act. The Assistant Appellate Commissioner also dealt with the case as an Appellate Tribunal under Wealth Tax Act..
He was also designated as Appellate Assistant Commissioner of Wealth under the Wealth Tax Act and empowered to exercise the function of the 'Assistant Commissioner of Wealth Tax. The Income-tax Appellate Tribunal exercising the function of the Appellate Tribunal heard the second appeal as Appellate Tribunal under the Wealth Tax Act. Again, the Income-tax Appellate Tribunal has referred the case to this Court under section 27 of the Wealth Tax Act. This reference had been made on 5-6-1979, before the repeal of the Income-tax Act, 1922, by the Income-tax Ordinance of 1979. The Ordinance came into force on 1st July, 1979, therefore for the purposes of decision of this reference the provisions of the Income-tax Act, 1922 will be referred to. The Wealth Tax Act of 1963 is an enactment independent of the Income-tax Act of 1922. The Wealth Tax Act has its own method of assessm ent, as separate hierarchy, separate provisions of appealrevision and reference and method of notice and recovery of tax and, penalties etc. Though officers of the Income-tax Department have been assigned the functions to be performed under the Wealth Tax Act of 1963, yet they are Wealth Tax functionaries and not there under Income-tax Act. All this has. Been stated above to show the object of the reference made by the Income---tax Appellate Tribunal and in order to correctly find out the terms of reference. The question formulated by the Income-tax Appellate Tribunal is as under :--- "Whether on the facts and in the circumstances of the case and on a proper construction of trust deed executed on 21st March, 1940 the Tribunal was right in holding that the provisions of section 21 of the Wealth Tax Act, 1963 did not apply to Patel Charity Trust and the assessee was a part owner of the trust money."
As observed above the Wealth Tax Act is independent of the Income-tax Act, 1922 and therefore section 4(3) of the Income-tax Act would not have any relevency and also for the reason that the revocability of the trust or otherwise has no bearing upon the claim for exemption, we therefore alter. This question. The question formulated by the Tribunal is therefore amended as under "Whether on the facts and in circumstances of the case the assessee is entitled to an exemption under section 5(1) of the Wealth Tax Act, 1963." it has been urged by Mr. S. A. M. Qadri that the terms of the deed of trust show that it is in essence irrevocable trust and as such the findings of the Wealth Tax Officer were wrong and the assessee was entitled to exemption under section 4(3) of the Income-tax Act as well as section 5 of the Wealth Tax Act. We made a pointed question to the counsel of the Department to show as to whether and how far the irrevocability or otherwise of the trust would affect the claim for exemption from payment of tax but the counsel of the Department was unable to show us the law on this point. There is no distinction made under section 5 of the Wealth Tax Act in respect. Of a revocable trust or irrevocable trust. That distinction has been a creation of the mind of the Wealth Tax Officer. An exemption under section 5 of the Wealth Tax Act can be claimed whether the trust is or is not irrevocable. If the assessee is able to show that he fulfils the requirement of section f(1) then he is entitled to exemption. The identical provisions are also contained in section 4(3) of the Income-tax Act though with different phraseology. Section 5(1) of the Wealth Tax Act, 1963 is reproduced below for ready reference : "5. Exemption in respect of certain assets.-(1) Wealth Tax shall . Not be payable by an assessee in respect of the following assets, and shall not be included in the net wealth, of the assessee.
(i) any property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in Pakistan."
According to this provision Wealth Tax shall not be payable by an assesse if he holds the property under a trust for any public purpose of a charitable or religious nature in Pakistan. The trust property for which exemption had been claimed by the assessee has been described in the Second Schedule of the Deed of Trust dated 21st March 1946, copy of which is available in the record of the reference. The author of the trust is Mr. F. B. Patel a Parsi gentleman of Quetta and the trustees are Mr. F. B. Patel himself and Mrs. Jorbai, his wife. The trust property came to the author of the trust on the basis of deed of partnership on the death of Khan Bahadur Burjori Dorabji Patel.
Khan Bahadur Burjori Dorabji Patel bad left behind one son F. B. Patel (author of the trust), two daughters Teminabai and Goolbai, one was resident of Bombay and other of Surat (India) and also Retnabai his widow. While creating the trust the author has shown the object in the deed. Khan Bahadur Dorabji Patel belonged to Kundiana Village of Surat District of India and his maternal ancestors also belonged to that village. It is stated in the Trust Deed that Burjori Dorabji Patel had expressed a desire to create a trust for the benefit of his maternal relatives of India. The trust has been created primarily for the benefit of those poor and destitute-relatives, other Parsis and other persons. By this trust deed the author appointed himself and. His wife as trustees of the property. In Paragraph 3 of the deed the author had reserved for- himself the powers to revoke the powers of trustees and to give other powers but in no case he would have any interest in the trust property.
The manner in which the trust property was to be applied is provided in Paragraph 6 of the Deed which is : "6. That the said Trustees will apply the interest earned or accumulated or any other benefit and income arising out of the said property and in their possession after deducting and paying out therefrom all taxes, as easements, outgoing, charges for collections, to the benefit and use of the persons and objects in the following manner, that is to say .
(a) That the Trustees shall in their absolute and unfettered discretion and in the manner they shall consider suitable and appropriate distribute the whole or any part of the residue of income and interest among and to all or to such of the relatives, kinsmen, and kinswomen described in the First Schedule hereunder written, as are in the opinion of the trustees (which opinion shall be deemed final and conclusive) indigent poor and deserving of help towards their, his, or her maintenance, or benefit without being responsible or accountable for the application or misapplication thereof, but the persons described in the First Schedule hereunder written, shall under no circumstances be entitled to claim as of right, any benefit under these presents, and the Trustees shall -have the sole right to decide whether they will or will not spend any income or interest in the manner herein provided, and provided always that during his lifetime the author of this Trust as Managing Trustee always reserves the unfettered right of, applying the income of the said Trust Property for the benefit or use of any relatives or other persons, Parsis or otherwise, or for that of any charitable institution, such beneficiaries to be always exclusively determined in his exclusive discretion. In such a case notwithstanding anything contained heretofore the opinion of the other Trustee or Trustees, individually or collectively, shall not prevail against the choice of the Author during his lifetime. After the death of the Author, the Trustees shall distribute or apply the whole or any part of the income, interest, or other benefit arising out of, the Trust Property, only for the benefit or use of the poor relatives, and .
(b) If any balance or surplus of income or interest etc. Remains in. The hands of the Trustees after distribution and payments as mentioned above, they shall in their absolute discretion either apply it towards the. Maintenance, education, or benefit of deserving poor and needy Parsis, per preference always given, to those that reside in the villages `of Kundiana and Karanj of the Olpad Toluka of the Surat District or at one time were or whose parents or ancestors Were at one time residents of the investment in which the Trust properties are hereby directed to be invested and shall apply 'the income and interest of such investments and accumulations and accretions for the purpose of the Trusts created by those presents Provided Always that the Trustees may also, if they think fit, resort to the accumulations of any preceding year or years and apply the same for or towards the purposes of the Trust in the same manner as the ordinary income or interest for the year might have been applied."
In the first instance the trustees were bound to distribute whole or any part of the income to the relatives shown in the First Schedule of the Deed out of whom, (1) Hiraji Patel and Edulji Pestonji are shown to have been residents of Khudiana and Karanjia villages of Surat, District Surat (now in India) as regards No. 2 place of his residence is not shown but having regard to the introductory portion of the trust deed it appears that he also belonged to such District, The income of the Trust property was to be applied to the persons named in First .Schedule and their descendants howsoever. After supplying to the needs of the poor relatives shown in Schedule I the balance left was to be applied to the deserving and poor and needy Parsis, preference always to be given to those residing in Kundiana and Karanjia village of the old Pad Toluka District Surat.
In paragraph 9 of the deed it has been provided that in case the object of the Trust fails or cannot be fulfilled the Trust property would revert to author of the trust and after his death to be distributed among the descendants of the author. If the property reverts to the heirs of the author of the trust after the death of the author there is no obligations upon them to apply the trust property for any specific purpose. The author of the trust however was to apply the trust property to different charitable purposes of similar nature.
4. The contents of the deed of trust show that primary object of the creation of the trust was to help the poor and needy relatives of the father of the author of the trust and preference was to be given to those specified in the Ist Schedule of the trust and the other important feature is that in case of failure of the object of the trust the property was to revert to 'the author and on his demise to his heirs.
5. As will be seen - from section 5 of the Wealth Tax Act an assessee can claim exemption from payment of Wealth Tax if he can show that he had certain property in trust for any public purpose and public purpose should be of charitable or religious nature in Pakistan. To attract the provision of section 5(l), clause (1) of the Wealth Tax, it is incumbent upon the claimant to satisfy all the requirements of the provision. The trust deed G no doubt shows that he property described in the trust was held by the assessee under an obligation in the nature of trust. As has been stated above the primarily object of the trust was to help maternal ancestors of the father of the author of Trust as shown in Schedule 1.
It was a trust no doubt of charitable nature as he intended to help. Poor relatives but to attract the provision of section 5(1) of the Wealth Tax Act it is also to be shown that the trust was for public purpose. A trust is of a public trust if the intention of executor is to expend the income of the property for public purpose generally. If it was the intention to apply the income generally to the poor of the Parsi community, it could be said that it was for public purpose. It would be applied to the poor of the community only when the primary object failed and so .It was not for a public purpose. The income of the trust property is to be applied to the persons specified in Schedule I and thereafter to the needy persons of Parsi community or to some other purpose of charitable nature. It is not mentioned in the deed that in the first instance the trust was created for public purpose.
6. The other aspect of the case is that only that income or the property of the trust is exempt from payment of Wealth Tax the object of which is public purpose of religious or charitable nature in Pakistan. If a trust is created in Pakistan 'main object of which in the first instance is to help the poor and needy persons who are residing outside Pakistan, the Trust property will not be exempt from payment of Wealth Tax under section 5(1) of the Act. The assessee Mr. F. B. Patel has nowhere claimed that the property is held by him under Trust for a public purpose of religious or charitable nature in Pakistan. It could be utilized for other charitable purposes if the first object failed. . No such failure has been shown by the assessee. The assessee has not been able to show that the charitable public purpose was in Pakistan and so the property in question is not exempt from payment o Wealth Tax and the reference is therefore answered in these terms.
ZAKAULLAH LODH1, AGTG. C. J.---- I agree.