1. ' SALEEM AKHTAR,J.--The deceased Moulvi Muhammad Amin expired on 31-12-1954. The respondent declared the net value of the estate at a debit of Rs,11,38,818. After hearing the respondent the Deputy Controller of Estate Duty issued a notice under section 58-A of the Estate Duly Act proposing the net value of the estate at Rs,1,08,50,889. The deceased had created Waqf-alalAwlad and Waqf-al-Masrif in respect of his movable and immovable properties situated in India and Pakistan two years before his death. It was registered on 127-1951 and was amended twice on 4-9- 1952 and 5-10-1952 with regard to the beneficiaries and some further properties which were dedicated to the Government. In the Waqf deed the deceased donor was also a Mutawalli of the Waqf and had reserved no benefit to himself except a remuneration of Rs,2,000 per mensum. The Waqf provided the 50% of the income was to be given to the daughters of the deceased, 20% to charity, 25% to five nephews and 5% was allocated for the maintenance of the property dedicated to the Government. Subsequently five nephews relinquished their interest and as such it was added to the property dedicated to charity. The respondent claimed exemption from Estate duty in respect of the Waqf property but the Deputy Controller held that Waqf was not for charitable purpose and it, does not relate exclusively to spiritual teaching or worship. The exemption granted under section 5 of the Estate Duty Act was therefore not available. The Deputy Controller rejecting the claim of exemption included the entire property to the net value of the estate of the deceased.
2. The respondent filed appeal against this order and the Tribunal by its order dated 10-4-1978 held that the entire property was dedicated and cannot be included in the property passing on the demise of the Waqif. Applying the proviso to section 10 of the Act it was held that the value of the benefit reserved to himself by the Waqif could not be treated as property passing. The Deputy Controller was directed to exclude the dedicated property from the property passing in the case and include therein only the value of benefits reserved by the Waqif to himself. The department then filed application under section 59-A of the Estate Duty Act, 1950 raising the following question:- "Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in excluding the value of the waqf property i.e, Rs,1,03,91,400 from the net valuation of the estate of the said deceased Moulvi Muhammad Amin, as determined by the Deputy Controller in his Assessm ent Order and only allowing the value of the benefits reserved by the waqif for himself?
3. ' Mr. Nasrullah Awan the learned counsel for the Department has adopted the same line of reasonings which was agitated by the Deputy Controller. He has contended that considering the nature of trust, no exemption can by granted under section 5 of the Estate Duty Act as it is not for the purpose which relates exclusively to religious teaching or worship. On the other hand Mr. Ather Saeed the learned counsel for the respondent has solely relied upon the proviso to section 10 of the Act. Both these provisions are reproduced as follows:- "5. Application of the Act to property dedicated by way of waqf, etc.- -Subject to the provisions of Section 10, nothing in this Act shall apply to property dedicated by way of waqf or by way of endowment for a purpose which relates exclusively to religious teaching or worship.
10. Gifts whenever made where donor not entirely excluded. --Property taken under any gift, whenever made, shall be deemed to pass on the donor's death bona fide possession and enjoyment of it was not immediately assumed by the donee and henceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise: ' Provided that the property shall not be deemed to pass by reason only that it was not, as for the date of gill, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least five years before the death: ' Provided further, and subject to the foregoing proviso, that in the case of property dedicated by way of waqf, where the person- making the dedication has reserved any benefit to himself the property which shall be deemed so to pass is the value of the benefit and not the value of the property as a whole.
4. Section 5. Of the Act is subject to the provisions of section 10 and provides that the Estate Duty Act shall not apply to such properties which have been dedicated by way.Of Waqf or by endowmenet whose sole purpose and object is religious teaching of worship. This section spells out the applicability of the Act and makes its provisions inapplicable to such trust properties which are exclusively dedicated for the purpose of religious teaching or worship. When the properties are subject to such a trust, the provisions of Estate Duty Act will not apply. However, this section refers to section 10 which is an overriding section and provides that the estate duty shall be payable on that part of the property which is retained by the donor for himself. In case of such Waqif, it is the benefit of the property which is retained by the Waqif to himself which shall pass on his death, but the property which is dedicated to the trust will not pass and will therefore, be not liable to estate duty. In fact the second proviso to section 10 makes this exception and brings such waqif property out of the pale of the Estate Duty Act.
5. ' Mr. Athar Saeed has referred to Master Ali Muhammad v. The Federation of Pakistan PLD 1957 Lah.
6. S5 where section 10 has clearly been explained in the following manner:- "If the second proviso to section 10 be not a substantive provision what is the provision under which property passes in case of a waqf like the one in dispute? The learned District Judge had referred to section 12 in addition to the proviso to section 10 though it does not appear whether he regarded it as a provision governing the present case. Before me too, section 12 is one of the sections relied upon. I have no doubt, however, that this is not a case of a settlement which means "an interest limited to or in trust for any person by way of succession". I have no doubt also that the second proviso to section 10 is only an exception to the first paragraph of that section, which contains the substantive provision as to passing of property at death in such cases. The marginal note to section 10 speaks of gifts but it is obvious from the mention of waqf in the second proviso that waqf is only regarded as a gift to charity or technically to the Almighty. On account of the first paragraph of section 10, the whole of the gifted property passes at death if the donor has not been wholly excluded from enjoyment of gifted property. When a person makes a Waqf alannafs wal-aulad he is not being entirely excluded from enjoyment of the dedicated property and by virtue of the first paragraph of section, the whole of the Waqf property would in case of Waqfs alannafs wal-aulad, have passed at death but for the second proviso. The object of this proviso was obviously to provide that in such cases not the whole of the waqf property but only its income shall be deeemd to pass. Of course, even this will pass only when the Waqif dies and not when the next Mutawalli dies. The proviso limits the application of the first paragraph of section 10 so as to exclude, in case of reservation of benefit by the Waqif, the corpus of the waqf property from the operation of the Estate Duty Act and to include only the income of the property and that too at death of Waqif. So in cases which would otherwise be covered by the first paragraph of section 10 only the benefit and not the dedicated property itself is deemed to pass at death."
7. ' Mr. Nasrullah Awan has relied upon the judgment of the High Court of West Pakistan Lahore in Civil Reference No,90/53. In this case the learned Judges did not differ from the aforestated observation of the Lahore High Court but in fact they have followed it. The entire judgment is based on the fact that considering the nature of trust and benefits from the property which were retained by the Waqif exemption even under section 9 proviso 2 (presently section 10 proviso 2) could not be granted. In the present case the Waqif has kept and reserved benefits to himself as a remuneration amounting to Rs,2,000 p.m. The entire property has been dedicated to the trust. Therefore the observation quoted above will fully apply to the present case.
8. It is pertinent to note that the respondent was not claiming exemption under section 5. In fact he was invoking proviso 2 to section 10 to seek relief. Accordingly after the death of Waqif only that part of the estate will pass which has been reserved as benefits for the Waqif.
9. ' We therefore, answer the question in the affirmative.