(a) Wealth Tax Act (XV of 1963)---

----Ss.3, 2(e)(ii), (m) & 21---Notice issued under S.17 of Wealth Tax Act, 1963--Returns were filed claiming exemption that the ownership in the demised property vested in Almighty Allah by creation of Waqf-ul-Aulad-- Property was bifurcated into five groups with a separate Mutawalli and was rented out---Separate returns were filed ---Assessee claimed to be assessed under S.21, through its beneficiaries on their respective shares and not collectively in the status of A. O. P. ---Assessed by the Assessing Officers collectively in the status of A. O. P. ---Direction by the C.I.T.(A) to assess individually---Appeal by the Department---Direction of the C.I.T. assessee was disapproved by the Tribunal.

(b) Wealth Tax Act (XV of 1963)---

---S.21(1) --Words "on behalf of" are synonymous expression "for the benefit of"- -Provision of this section shall apply to trustees as they were liable to nay wealth tax in the like manner and to the same extent as it would he leviable upon and recoverable from the beneficiary .

(c) Wealth Tax Act (XV of 1963)---

----S.21 ---All the beneficiaries of a trust being locked in beneficial partnership of the Waqf property they constituted an A.O.P. when seen in ;he perspective of the provisions of S. 21(1) of the Wealth Tax Act, 1963.

(d) Wealth Tax Act (XV of 1963)---

----S.2(e)(ii), Explanation---Rented out trust property which was ultimately to devolve upon God Almighy was liable to wealth tax.D

1981 PTD 217 ref.

Zia H. Rizvi for Appellant (in W.T.A. Nos. 27/LB, 28/LB of 1983-84 and 336/LB of 1987-88).

Shafqat Mahmood Chohan, L.A. and Mrs. Fiza Muzaffar, D. R. for Respondent (in W. T. As. Nos. 27/LB, 28/LB of 1983-84 and 336/LB of 1987-88).

Shafqat Mahmood Chohan, L.A. and Mrs. Fiza Muzaffar, D. R. for Appellant (in W.T.A. No.l/LB, 2/LB of 1983-84 and 560/LB to 564/LB of 1991-92).

Zia H. Rizvi for Respondent (in W.T.A. No.l/LB, 2/LB of 1983-84 and 560/LB to 564/LB of 1991-92).

Date of hearing: 15th November 1997.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---The assessee was served with notice under section 17 of the Wealth Tax Act, 1963 for the years 1979-80 and 1980-81. It was, however, noted that five returns were filed on 16-8-1981 with a claim of exemption by five different Mutawallis. Before the assessing officer it was contended that the assessee was a Waqf-ul -Aulad; that its assets belonged to Almighty Allah and therefore, it did not fall within the charging provisions of Wealth Tax or those of subsection (1) of section 2 of the Wealth Tax Act, 1963. The assessing officer found the claim of exemption to be untenable at law. He noted that it was a case of a ' Waqf' and that its Mutawallis or Managers were liable to be assessed as individual as held in the case of CWT, Kerala v. Puthya Ponmanichintakam Waqf cited as (1967) 63 ITR 787. It appears that the assessee after issuance of the notice and during the proceedings unsuccessfully approached Lahore High Court as its Writ Petitions Nos.3493 and 3494 of 1981 were dismissed by the Honourable Judges on 27-1-1982. On receipt of information of the disposal of the writ petition the assessing officer proceeded to examine the various aspects of the Waqf as emerged from the Waqf-ul-Aulad deed dated 20-4-1981. Having done so he proceeded to hold that the properties held by the Waqf were not exempt from levy of tax and that even section 5(2) of the Wealth Tax Act was not attracted in its case. The assessee had supported the rentals received per month by copies of the PT-1 from the Excise and Taxation Department. Besides the five different units of property the assessing officer, by way of an assessment order recorded for the year 1979-80 on 19-6-1982 also included the property held by M/s. SKF and Company (Naqi Market) in the total wealth of the Waqf computed at Rs.6,244,720.

In the year 1980-81 again five returns were filed with the remarks "exempt" by five different Mutawailis. The assessing by repeating his views earlier expressed while framing assessment in the year 1979-80 proceeded to frame assessment as taxable wealth of Rs.6,244,720 by way of an order dated 19-6-1980.

2.Learned First Appellate Authority CIT (A) Zone III by way of a consolidated order record for the years 1979-80 and 1980-81 dated 4-6-1983 though rejected the contention that the assessee being Waqf-ul-Aulad was not liable to wealth tax yet allowed the alternate plea and held "the appellant falls legally to be assessed under section 21 through its beneficiaries on their respective shares and not collectively in the status of an A.O.P. as erroneously done by the WTO". The inclusion in the hands of the assessee of the property held by M/s. SKF & Company namely Naqi Market was also disapproved. The assessee, however, still agitates the issue on the ground that the assessee is deriving income from property and is not engaged in any business. It is further stated that no assets are held on which it is liable to pay wealth tax under section 3 read with clauses (e) and (m) of section 2 of Wealth Tax Act, 1963. The department is in cross-appeal in both the years maintains that appellate authority failed to appreciate the provisions of section 21 of the Wealth Tax Act, 1963 and, therefore, was not justified in directing that assessment should be made on the beneficiaries individually.

3. In the year 1982-83 again five returns were filed by declaring nil wealth by five different Mutawallis .namely Raziuddin and Khalid Moeenuddin, Sheikh Nasimuddin Ahmad, Anwar Ahmad, Sh. Saeeduddin and Sh. Muhammad Zaki. The assessing officer attempted his best to persuade the assessee through the aforesaid Mutawallis to join the proceedings. However, on their failure he went ahead to frame assessment to the best of his judgment on 30-6-1987 at the figure earlier adopted in the years 1980-81 and 1981-82 namely at Rs.6,744,720 as not taxable wealth.

4.Learned First Appellate Authority by way of its order dated 24-2 1988 repeated the findings recorded in the earlier two years. Also the contention of the assessee that it was not liable to tax under section 3 read with clauses (e) and (m) of section 2 of the Wealth Tax Act as it was not engaged in any business of the construction and sale or letting out of property was rejected by reference to a decision of the Karachi High Court cited as 1981 PTD 217.

5.In the year 1983-84 as against nil wealth by the five aforesaid Mutawallis for different five units the assessing officer framed an assessment on -31-7-1988 at taxable wealth of Rs.75 lac. Earlier he rejected the claim of the assessee that assessments should be framed under section 21 of the Act through its beneficiaries on their respective shares and not collectively in the status of an A.O.P. In other words the assessing officer refused to give effect to the directions made by the CIT(A), Zone III, Lahore in the appellate order recorded for the years 1979-80 and 1980-81.

6.Assessment in the years 1984-85 to 1987-88 were also framed on 31-7-1988 after observing that Mr. Jamil Hussain, Advocate appearing for the assessee in the year 1983-84 had refused to participate in the proceedings for the years on account of absence of a valid power of the attorney and authority allowed to him by the assessees. His request for adjournment was also refused. Thereafter, the assessing officer proceeded to adopt the value of five units in the hands of the assessee at taxable wealth of Rs.75 lac, Rs.70 lac, Rs.80 lac and Rs.110,000,000 in the four years respectively.

7. By way of a consolidated order recorded on 16-10-1991 for the assessment years 1983-84 to 1987-88 learned First Appellate Authority agreed that the assessee was entitled to the treatment as allowed to it by way. of its earlier order recorded on 4-6-1983 for the assessment years 1979-80 and 1980-81 as also the subsequent order recorded for the year 1982-83 on 24-2.1988. It was accordingly directed that the assessments should be made on behalf of each beneficiary separately. On facts the gross annual letting value of the five units was directed to be determined on the basis the property might reasonably be let out from year to year. The Revenue feels aggrieved of the decision and the direction that the assessments should be made on the beneficiaries individually.

8.Parties have been heard. Learned counsel for the assessee maintains that this is a case of Waqf-ul-Aulad for self-maintenance and support of family but ultimate beneficiary is the Almighty as the property will finally devolve on Anjuman Hamiyat Islam no descendent of the Waqif or the creator of Waqf is left out as a beneficiary. According to the learned counsel originally it was contemplated at one Waqf but subsequently on account of certain difficulties and disputes between the beneficiaries the matter was taken to the Court for arbitration. The award was announced on 19-7-1957 and it was made a Rule of Court on 22-7-1959. According to the learned counsel the award bifurcated the subjected matter of the Waqf property into five groups with a separate Mutawallis for each group. However, Naqi Market was not included in the aforesaid five groups/units as it was constructed on a plot owned by a Joint Stock Company, which was being assessed separately. The declaration of nil wealth or exemption claimed by the five Mutawallis by way of five separate returns filed in respect of different units as created by the award is also supported for two reasons. Firstly that neither the trustees or Mutawallis own the property nor the trust as such is engaged into any business of construction or letting out to make the property comprising any units as liable to wealth tax. Further, states that the five units of properties are being separately assessed to various provincial levies and that these are otherwise identifiable and specific potion, which have no concerned with each other. For the assessee it is further contended that definition of net wealth as given in subsection 2(e) of the Wealth Tax Act, 1963 presupposes that the immovable property which is to be included in the net wealth of an assessee should be owned by it. On the other hand, accordingly to the learned counsel the concept of ownership is necessarily that the most significant of its incidents namely the right of disposal is not available with the Mutawallis or beneficiaries in case of Waqf-ul-Aulad. The provisions of the section 2(m) of the Act in the view of the learned counsel suggest absolute ownership of the property to be included in the net wealth while the properties in questions at the valuation day did neither belong to the trustee nor to beneficiaries. Learned counsel claims that ultimate ownership in the demised property vests in Almighty Allah and, therefore, is beyond the purview of charging provisions as contained in section 3 of the Wealth Tax Act. Learned counsel has also attempted to create a distinction between trust and Waqf to contend that superior Courts in India appear to be under the influence of the general characteristic and attributions of the Secular trust and, therefore, their view is not in accordance with Islamic Law. From the definition of the word "Waqf" as made by the Great Imams including Imam Muhammad and Imam Abu Yousaf he proceeds to contend that maintenance of one's family is a noble and pious an act as it could be for the maintenance of charity. It is claimed that Waqf-ul-Aulad is one of the most distinctive institutions of the Islamic law which could not be properly appreciated by those trained and instructed in secular system. The judgment of the Privy Council in re: Abu-ul-Fateh Muhammad Ishaq v. Rasarnaya reported as (1894) ILR Vol. 22 page 619-Calcutta is cited as an example which was set at naught by the enactment of Muslim Validation Act No.6 of 1913 whereby the Waqf-ul-Aulad was found valid and legally enforceable. The claim that the assessee does not fall within the ambit of explanation to section 2(m) of the Wealth Tax Act is repeated. Again from the distinction of the word Mutawalli and beneficiary he attempts to draw a conclusion that even section 21 of the Wealth Tax Act was not applicable to the case of the assessee and, therefore the direction of the First Appellate Authority though apparently favourable to the assessee that the beneficiaries should be assessed individually was still not in accordance with law. The provisions of section 21 are described only the machinery provisions which could not be employed, according to the learned counsel, for the purpose of directing framing of assessment in the hands of Mutawalli to the extent of the interest of a beneficiary. However, lastly the learned counsel as an alternate plea supports the impugned direction for framing of assessment in the hands of individual assessees.

9. Mr. Shafqat Mahmood Chohan learned L.A. assails the nature of Waqf on the basis of the ratio settled in PLD 1959 (W.P.) Peshawar 152 re: Haji Mian Muhammad Tila Muhammad and others. In that case their Lordships disapproved the creation of a trust which was "only veil to cover arrangement for the arrangement of the settler family and a device to make the property inalienable". The impugned assessment orders in all the years under review are supported with reference to the aforesaid case from the Indian jurisdiction reported as Commissioner of Wealth Tax, Kerala v. Puthiya Ponmanichintakam Waqf. By explaining the provisions of section 2(e) and (m) of the Wealth Tax Act read with section 21 learned L.A. assails the impugned relief allowed by the First Appellate Authority by way of the aforesaid three orders recorded for the assessment years involved. Finally it is stated that the assessee trust is an A.O.P. as contemplated in explanation (iii) to section 2(m) of the Wealth Tax Act as well as section 2(e)(ii) of section 2 as substituted by Wealth Tax Amendment Ordinance; 1980 w.e.f. 28-6-1979.

10.Having considered the submissions made at the Bar for the parties we have concluded that the learned First Appellate Authority failed to appreciate the real issue before it or to examine the exact nature and connotation of the provisions as contained in section 21 of the Income Tax Act. These provisions were recently examined by us in an order recorded on 2-4-1998 in W.T.A. Nos.359 and 360/LB of 1985-86 (assessment year 1982-83 and 1983-84), W.T.A. No.180/LB of 1988-89 (assessment year 1987-88) W.T.A. No.340 and 341/LB of 1985-86 (assessment years 1982-83 and 1983-84), W.T.A. Nos.214 to 216/LB of 1987-88 (assessment year 1984-85 to 1986-87 and W.T.A. Nos.1255 to 1257 of LB/1991-92 (assessment years 1988-89 to 1990-91) re: M/s. Razzaq Trust, Lahore v. WTO, Circle-1, Lahore 1998 PTD 2054. Incidentally in that case the learned First Appellate Authority allowed relief to that assessee namely M/s. Razzaq Trust, Lahore through an order recorded on 18-12-1985 with reference to the case of the present assessee. After citing a portion of the judgment of the Supreme Court of India in re: CITAP v. Trustees of H.E.H. Nizam's family cited as (1977) 108 ITR 555 learned First Appellate Authority directed "that the beneficiaries be assessed separately and independently on their respective definitive and determinate share". We maintained the direction but in the process we held that the learned First Appellate Authority failed to appreciate the provisions of section 21 which were to be read with other charging as well as machinery provisions of the Act. Before us the assessee in that case had argued that section 21 being a special provision had an overriding effect on other provisions to the effect that in similar situation an assessment could be made in the hands of a trustee only to the extent of individual interest of a beneficiary. The contention was rejected and we held that if an A.O.P. was liable to pay wealth tax under any provision of the Act its status or extent of tax liability will not be effected by section 21 which simply provided for levy and recovery of wealth tax "in the like manner and to the same extent as it could be leviable upon and recoverable from the person on whose behalf assets are held". Further that the total impart of section 21 was that wealth tax could be levied and recoverable both from the persons and holder of assets as well as those who held them for others. To strengthen our view we quoted a portion appearing at page 595 of the aforesaid judgment of the Supreme Court of India in re: Trustees of H.E.H. Nizam's family. Finally it was held that an assessment on the beneficiaries or the trustees could be made only to the extent of the interest of the beneficiaries which was clearly determinable on the valuation date.

11. In the case before us the assessee it-self provided details of different properties bifurcated by the award into five units. The record maintained by the Provincial Excise and Taxation Department was also provided to say each separate unit of property being managed through its respective Mutawalli was being assessed to various taxes including the rental income on the income-tax side. Therefore, for various other reasons as discussed by us in the case of M/s. Razzaq Trust, Lahore we are of the view that each of the five units in which the original trust had been fragmented is liable to be treated as an A.O.P. and brought to tax as such.

12. The learned counsel for the assessee has not addressed us at any length as to its common ground of appeal in the three years involved that the appellant-Trust was not engaged in any business and for that reason did not hold any assets on which it could be said to be liable to wealth tax under section 3 read with clauses (e) and (m) of section 2 of the Wealth Tax Act, 1963. This aspect was also considered by us in the said case of M/s. Razzaq Trust inasmuch as the similar contention was made by that assessee before us. The issue as to how and when joint co-owners of the property could be treated as an A.O.P. was discussed in detail to conclude that where property was actually let out on the valuation day or in the immediate preceding year past, the burden of proving the "purpose" as contemplated in explanation to subsection 2(e)(ii) of the Act stood discharged. The various units of the property of the assessee trust are fetching rent and admittedly the beneficiaries are being assessed to income-tax wherever applicable on rental income Therefore, the purpose to hold this property for letting out stood established. In order to bring itself out of the ambit of the aforesaid explanation it was for the assessee to establish that the property was not held for the purpose of letting out. Nothing having been said in this regard before the authorities below or even before us we will hold that the units of the trust are liable to wealth tax in respect of the properties let out.

13. The contention of the learned counsel for the assessee that since the properties in question are ultimately to vest in Almighty Allah their value cannot be assessed to wealth tax is also not correct. Although the case cited at the Bar for the Revenue re: Haji Mian Muhammad is distinguishable inasmuch as the legal heirs of the Waqif had challenged the vires and effectiveness of the Waqif yet we find that the Assessing Officer considered the issue in its right perspective on the basis of the aforesaid judgment from Indian jurisdiction. In that case their Lordships of the Kerala High Court were examining the comparable provisions of section 3 of the Indian Wealth Tax Act, 1957. Before them it was contended for the Waqif that its asset belong to ,Almighty Allah and that Almighty did not come within the purview of section 3 the charging section of Wealth Tax Act, 1957. Their Lordships agreed to this extent that properties of a Waqf did not vest in a Mutawalli but in Almighty. For this they relied upon a reported judgment cited as Bid'ya Varuthi Thirtha v. Baluswami cited as AIR 1922 PC 123. Reference was also made to the judgment of the Supreme Court in the case of the very Waqf with which they were dealing namely CIT v. Puthiya Ponmanichintakam Waqf cited as (1962) 44 ITR 172 (SC) wherein it was noted that the word ' Waqf' literally meant detention. Their Lordships of the Kerala High Court also agreed that a Mutawalli was not a trustee in the technical sense of the term. However, they found that a Mutawalli had to be assessed to wealth tax "in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held". Thus relying upon a judgment of the Supreme Court in re: Ahmad Husain v. Kallu Mian Sajhi Firm cited as (1929) AIR 1929 All. 277, their Lordships held that Allah Almighty was juristic person. Strength was also sought for this conclusion from another reported judgment in re: Muhammad Ishaq v. CIT cited as (1951) 19 ITR 70 wherein it was held "God is a juristic person". The following portion of the order recorded by Malik, C.J. and Bhargava, J. was reproduced; "It must be held that God Almighty in the capacity of a transferee receiving property under a deed of Waqf is a juristic entity and is, therefore, a person as used in the last sentence of sector 16(3)(b) of the Indian Income Tax Act". Again referring to section 21(1) of the Act and examining the word "on behalf of" reliance was placed upon a reported judgment in re: Suhashiai Karuri v. WTO cited as (1962) 46 ITR 953 to hold it synonymous expression "for the benefit of". It was, therefore, agreed that the trustees held property for the benefit of beneficiaries and not on their own behalf and that the provisions of section 21(1) apply to them as they were liable to pay wealth tax in the like manner and to the same extent as it would be leviable upon and recoverable from the beneficiary.

14.In the case before us the units of trust admittedly comprises of a number of beneficiaries who are represented by a Mutawalli though could not be technically called a trustee. However, all the beneficiaries being locked in beneficial ownership of the Waqf property definitely constitute an A.O.P. when seen in the perspective of the aforesaid provisions of the Wealth Tax Act, 1963. The property in question is also fetching rent for them and hence the purpose as contemplated in explanation to section 2(e)(ii) is also fully answered. ,The assessing officer in the year 1979-80, as remarked earlier, rightly rejected the contention that since the property was ultimately to devolve upon God Almighty the trust was not liable to wealth tax. The aforesaid judgment of the Kerala High Court adequately answers the contentions made at the Bar for the assessee.

15. Therefore, the aforesaid and other reasons as detailed in the case of M/s. Razzaq Trust, Lahore decided on 2-4-1998 we will rejected the appeals of the assessee in the years 1979-80, 1980-81 and 1982-83 and allow the departmental appeals. The direction of the First Appellate Authority to assess the beneficiaries under section 21 on their respective shares is disapproved. 'However, as noted 4bove the five units of properties being specific and distinguishable units managed by different Mutawallis are liable to wealth tax separately through their trustees or Mutawallis as contemplated in section 21(1) of the Wealth Tax Act, 1963. Since none of the parties has addressed us on factual aspects with regard to the estimation of value of the trust properties we will refrain from making any order in that behalf. As a result of our order, however, the value of every unit shall be determined in all the years involved and as said above assessed in the hand of the, respective Mutawalli.

M.B.A./539/Trib.Order accordingly