Go, AailitlAD KHAN, 1.--This tax reference has neon made by the income-tax Appeilate Tribunal Pakistan, Lahore, at the instance of the amine It pertains to the assessm ent year 1962-63 andwds arises out of the o@rder dated 30th April, 1970 of the Tribunal. It raises the foll56owing question of law t-- "Whether on the facts dwqand in the circumstances of the case the Appella&^#te Tribunal was justified in holding that the entire inco@me from the properties was assessable in ihe hand of the applicant ?"
2. The petitioner is ^@#4one of the sons of Khan Bahadur Sheikh Mulmminad NIKO, who had, vide deeds dated 20th April, 1931 and 16th March, 1943 created a Waqf-Alal-Aulad of his properties meY$%tioned therein in favour of his sons and their descendant', Later, on 22nd December, 1950, a declaration was made by K. B. Sh. Muhammad Naqi by which he divvy%$ided his property in three categories 'A', 'B' and 'C' and apportion$%Yed their income as under
(I) Sheikh Muhammad Naqi
(2) Sh. Fayysa-std-Din.
(3) Mi. Saeed-ud-Din.
(4) She Resheed-nd,Din.
Sh, Nisei Ahmed. Rs, 8,400 per year before distribution to sons.
26% of the balance net innome. 23% of the balance net income. 17% of the balance net income. 14% of the balance net income 80%
(f) Sb. Muhaintmtd Siddiq M. Anwari Beam .14/
(3) Ma. Geti Atit Begum .14p {{BLUR PAGE}} ' Properties shown in Schedule 'C" continued to remain that of K. B. Sheikh Muhammad Naqvi, ' Subsequently, by an award, which had ban made a rule of the Court, on 22nd July, 1957, the learned Senior Civil Judge, Lahore, appointed the mums at the sole Mutwalli of the properties as mentioned in that award for the benefit of his own branch of beneficiaries. He was being assessed, however, as an individual for the entire income received by him.
3, On 27th December, 1961, the assesses, by virtue of a deed of declaration, apportioned the net income of the properties in his charge between himself and his only son Dr. S. A. Rahman in the ratio of 60 and 40 respectively. Later, In his income-return for the charge year 1962-63 the assume declared a sum of Rs, 15,485 as his share of the income of the immovable properties being held by him as Mutwalli. The Income-tax Officer, however, lids his order dated 8th December, 1966, did not accept the contention of the amuses that the assignment of the 40% of the income to his son absolved him of tax liability to that extent. He, therefore, brought to tax the entire income as having accrued to him. An appeal by the assessee failed before the Appellate Assistant Commissioner and was dismissed on 29th June, 1968. A second appeal before the Tribunal also failed with the following observations "The learned counsel appearing for the appellant argues that the father divested himself of 40% of his income in favour of his son and this was according to the intention of the creator of the Waqf, who wanted the income of the properties to be utilised for the benefit of members of family of the Waqf. BM when confronted with the question as regards the authority for creating additional conditions in the Waqf deed he could not come up with any satisfactory reply% The very fact that a part of the income has been allocated to the son, itself proves beyond any shadow of doubt that the income initially belonged to the ammo appellant who merely paid a part of his income to his son but this payment was certainly after tax was attracted. The income-tax Officer, was therefore, perfectly justified in assessing the entire income in the hands of the enema. We have no reason to interfere with the orders of the officers below."
4. It is contended by the learned counsel for the petitioner that the assesses was liable to be taxed on only 60% of the income as the rest had already been validly assigned in pursuance to a deed of decimation. Ho referred to section 40 of the Income-tax Act and C /. T. v. C. It Palm (1) but the same does not apply to this case. A reference to third proviso to section 16(1)(e) is also not relevant as the assesee is neither a settler or a disposer. The learned counsel also referred to Raja Refry Singh Budhuria v. C I. T. (2) and C. I. T. v. Abubaker 4bdul Ashman (3) but the same would not be attracted to the case in hand.
(1) (1971) 23 Taxation 129
(2) (1933) 1 1 T R 135
(3) (1945) ITR 139
5. It may be noted here that the petitioner, according to the Wolf deed is one of the Mutwallis.
According to the award, which may at the, most be considered to be an arrangement later se the Mutwallis, the had to manage a definite portion of the property as a Mutwelli. The is, therefore, specifically covered by the provisions of section 41, the relay portion of which reads as under :- "In the case of income, profits or gains chargeable under this Act.
' Any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or trustees under any Wakf deed which is valid under the Musselman Wahl Valid.** Act, 1913) are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such trustee or trustees in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such lumps, profits or gains are receivable, and all the provides of this Mt shall apply accordingly."
6.
The -Ate, point is whether the assesses was liable to be taxed for the entire income tax his hands or was to be taxed only for that portion which wax retained under the deed of declaration. The learned counsel refers to page 259 of the Jurisprudence by Sigmoid, 1966 Edition. He also drew our attention to section 6 of the Transfer of Property Act. It was gated that the deed of declaration by the petitioner created a lawful assignment are therefore, the same was valid under the Income-tax Act to attract an exemption of that portion of the income in the hands of the 01010600. Reference was also made to para. 202 of Mohammadan Law by Mulls, 15th Edition.
7. We, however, do not agree that the contention being raised by the learned counsel for the annum is in any way relevant. The guerdon involved is not whether the deed of declaration validly assumed a portion of the income to the petitioner's son but whether the assignment attracted an exemption under the Income-tax Act to that extent As discussed above the cue of the petitioner can be brought under section 41 of the Income-tax Act. The finding of fact given by all the Income- tax authorities is that the entire income accrued to the assesses, who could spend it for his well being and for his line of the family members. The Appellate Assistant Commissioner also held that the assesses was not bound in law to give any sham of the income to his son. It is the assesses himself who divested himself of the share of the income to give the same to leis sou. In this view of the matter the essence is liable to be taxed for the entire income as his one may at the most fall under the first proviso to section 41. No other provision of the Income-tax Act will, however, be attracted. The petitioner thus applied a part of his Income for his son. It is, therefore, a case of application of income and not of a valid or legal assignment attracting exemption under the law The question referred to us is, therefore, answered in the affirmative, The petitioner shall pay the costs of this petition.