Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment years 1965-66 to 1967-68 - Trust was a wakf - Trust deed gave absolute discretion to Mullaji Saheb in utilising income - Though words in deed were very wide in terms, in fact that apparently wide discretion of Mullaji Saheb was bound down by two factors, namely, that assessee was a wakf, a dedication by a Mussalman of property for purposes which, according to notion of Mussalmans, are pious, religious or charitable, and, secondly, it must be used for Dawat purposes, that is, for purposes which go to benefit Dawoodi Bohra community - Whether assessee was entitled to exemption under section 11(1)(a) - Held, yes FACTS The assessee was a trustee of two trust created by two sisters by two different documents. The two sisters belonged to Dawoodi Bohra community and the trusts were executed in respect of certain properties which were situated at Surat and Bombay and by these two trust deeds the properties were vested for the benefit of Dawoodi Bohra community to be managed and applied by the chief of the Dawoodi Bohra community, namely, the Mullaji Saheb and by his successors-in-office. In respect of the income for the assessment years under consideration the ITO held that the trust was not entitled to exemption. He based his reasons mostly on the clauses giving absolute discretion to the Dai-ul-Mutlak in utilising the income. He also laid stress on clause 4 of the trust deed which gave the power to sell the property in certain circumstances to the Dai-ul-Mutlak. The trustees carried the matter in appeal and the AAC confirmed the order of the ITO and negatived the claim of the assessee. Thereafter, the matter was taken in further appeal to the Tribunal. The dedication of the properties was, according to the Tribunal, made purely for religious purposes in respect of the Dawoodi Bohra community and the fact that Dai-ul-Mutlak for the time being in office had been given absolute power to utilise the income would not mean that the trust was not for religious purposes. The Tribunal, therefore, allowed exemption. On reference : HELD It was clear…

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