# Azad Ahmad Khan v. Income Tax Appellate Tribunal

- **Citation:** (2023) 8 ILRA 1535
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-07-31
- **Case number:** Writ-C No. 1000800 of 2000
- **Bench:** Vivek Chaudhary
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/azad-ahmad-khan-v-income-tax-appellate-tribunal-50560
- **Pages:** 7

## Headnote

Civil Law - Mussalman Waqf Validating
Act, 1913 - ESt. Duty Act, 1953 -
Explanation to Section 12(1) - Reservation
of interest in favour of settlor and relatives -
Indian Income Tax Act (contextual reference),
Treatment of waqf property in income tax
return,

Waqf-alal-aulad, Titamma (amendment of waqf
deed), Mutwalli, Dedication of property, ESt.
duty liability, Reservation of interest

Valid creation of waqf,Genuineness of waqf
intention, Personal use of waqf property,
Exemption under ESt. Duty Act, Waqf validity,
Beneficiaries of waqf

Held -
Creation of a valid waqf-alal-aulad under the
Mussalman Waqf Validating Act, 1913 mandates
actual dedication of property to Almighty and
divestment of ownership by the waqif. In the
present case, the waqif continued treating the
waqf property as personal property by including
it in income tax returns and selling part of it to
repay personal debts, thereby demonstrating no
genuine intention to create a waqf. Inclusion of
a non-family member as beneficiary further
1536 INDIAN LAW REPORTS ALLAHABAD SERIES
defeats the character of waqf-alal-aulad. Such
conduct
negates
the
essential
legal
requirements of a valid waqf. Furthermore, the
waqif had reserved to himself absolute rights to
amend the waqf deed and made provisions for
his own maintenance, which falls within the
mischief of Section 12 of the ESt. Duty Act,

## Text

8 All. Azad Ahmad Khan Vs. Income Tax Appellate Tribunal
1535
Enterprises
under
the
provisions
of
MSMED Act, 2006 and is allotted
UP50E0002921 as its registration number
which was valid till the date of filing of
reference. The challenge in the petition is
with regard to the nature of the contract.
According to the writ petitioner, the
contract was not with regard to supply of
goods or rendering of services, rather it was
a works contract and thus, out of the
purview of sections 15, 16, 17 and 18 of the
MSMED Act, 2006. This aspect of the
matter no doubt raises a jurisdictional issue
but this jurisdictional issue has been
decided by the arbitrator against the writ
petitioner. The arbitrator under Section 16
of the Arbitration and Conciliation Act,
1996 is empowered to decide the issue
raised in respect of its own jurisdiction.
This aspect has been affirmed by the Apex
Court in the case of Gujarat State Civil
Supplies Corporation Ltd. v. Mahakali
Food Pvt. Ltd. (Unit 2) and another
(supra), as we have noticed above. In such
circumstances, it cannot be said that the
Facilitation Council, ex facie, held no
jurisdiction to entertain and decide the
claim of the second respondent.

18. For the reasons above, without
entering into the merits of the award, we
decline to entertain the writ petition of the
petitioner directly against the award of the
Facilitation Council, particularly, when the
petitioner could have availed the alternative
remedy available to him. The petition is
therefore,
dismissed
on
ground
of
alternative remedy.

19. It is made clear that we have not
expressed any opinion on the merits of the
award or the decision taken by the
Facilitation Council with regards to its own
jurisdiction.
----------
(2023) 8 ILRA 1535
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 31.07.2023

BEFORE

THE HON'BLE VIVEK CHAUDHARY, J.

Writ-C No. 1000800 of 2000

Azad Ahmad Khan ...Petitioner
Versus
Income Tax Appellate Tribunal
 ...Respondent

Counsel for the Petitioner:
Z. Zilani, Amar Mani Tiwari, Nazam Zafar,
Pradeep Agarwal, Rafat Siddiqui, Z. Jilani

Counsel for the Respondent:
S.C. Misra, Manish Mishra

Civil Law - Mussalman Waqf Validating
Act, 1913 - ESt. Duty Act, 1953 -
Explanation to Section 12(1) - Reservation
of interest in favour of settlor and relatives -
Indian Income Tax Act (contextual reference),
Treatment of waqf property in income tax
return,

Waqf-alal-aulad, Titamma (amendment of waqf
deed), Mutwalli, Dedication of property, ESt.
duty liability, Reservation of interest

Valid creation of waqf,Genuineness of waqf
intention, Personal use of waqf property,
Exemption under ESt. Duty Act, Waqf validity,
Beneficiaries of waqf

Held -
Creation of a valid waqf-alal-aulad under the
Mussalman Waqf Validating Act, 1913 mandates
actual dedication of property to Almighty and
divestment of ownership by the waqif. In the
present case, the waqif continued treating the
waqf property as personal property by including
it in income tax returns and selling part of it to
repay personal debts, thereby demonstrating no
genuine intention to create a waqf. Inclusion of
a non-family member as beneficiary further
1536 INDIAN LAW REPORTS ALLAHABAD SERIES
defeats the character of waqf-alal-aulad. Such
conduct
negates
the
essential
legal
requirements of a valid waqf. Furthermore, the
waqif had reserved to himself absolute rights to
amend the waqf deed and made provisions for
his own maintenance, which falls within the
mischief of Section 12 of the ESt. Duty Act,
1953. As a result, the petitioner cannot claim
exemption from eSt. duty. The writ petition is
accordingly dismissed.

Case Law Discussed:

1. Chhedi Lal Misra Vs Civil Judge, Lucknow;
(2007) 4 SCC 632

2. Controller of ESt. Duty Vs B.B. Nigudkar;
(1988) 170 ITR 578 (Bom.)

3. Mohammad Ali Mohammad Khan Vs Mt.
Bismillah Begam; AIR 1930 PC 255

4. Hamid Hussain Vs Controller of ESt. Duty;
(1972) 83 ITR 309 (All.)

(Delivered by Hon'ble Vivek Chaudhary, J.)

1. By the present writ petition, the
petitioner is challenging the assessment
order
dated
31.01.1989,
passed
by
respondent No. 3; order dated 16.09.1991
whereby
Appellate
Authority
partly
allowed petitioner"s appeal against the
assessment
order
and;
order
dated
30.11.1999, passed by the Income Tax
Appellate Tribunal whereby it dismissed
petitioner"s appeal.

2. Brief facts of the case are that one
Gulam Ahmad Khan was running a
engineering workshop in the name and
style M/s. General Engineering Works. On
25.08.1951, he claims to have created a
waqf-alal-aulad under the provisions of the
Mussalman Waqf Validating Act, 1913
(hereinafter referred to as the Act of 1913)
through a registered deed and transferred
his business to the waqf and became its
first mutwalli. Gulam Ahmad Khan was
isueless and claims to have adopted his
nephew Sardar Abdullah Khan alias Azad
Ahmad Khan, the petitioner, as his son. As
per the terms of the Waqf deed, an amount
of Rs. 100 out of the total proceeds of the
M/s. General Engineering Works was to be
spent towards almighty and rest of the
proceeds were to be utilised as per the
wishes of the waqif Gulam Ahmad Khan
during his lifetime. Gulam Ahmad Khan
also reserved to himself right to effect
titamma of the original waqf deed and sell
off the assets entrusted to the waqf
including M/s. General Engineering Works.
With regard to succession of mutwalli, it
provided that one Mst. Hasina Khatun
would be the next mutwalli and after her
demise, her children and their descendants
were to succeed her as mutwalli. In case,
Mst. Hasina Khatun was to die issueless,
then Inam Ahmad Khan, who is the brother
of waqif Gulam Ahmad Khan and after him
his son Azad Ahmad Khan and his
descendants would succeed as Mutwalli of
the Waqf. As per clause C (jim) of the
waqf-deed, after death of Gulam Ahmad
Khan, Rs. 100 were to be continued to
spent towards charitable purposes and with
regard to rest of the proceeds from the waqf
property, Rs. 400 was to be paid to Inam
Ahmad Khan for helping Mst. Hasina in
managing the waqf property and the
remaining amount was to be divided
amongst Inam Ahmad Khan, Azad Ahmad
Khan and Mst. Hasina Khatun. It is an
admitted fact that even after creating the
waqf, Gulam Ahmad Khan continued to
mention the waqf property as his personal
property while filing his income tax
returns.
Waqif
Gulam
Ahmad
Khan
amended the original waqf-deed by a
titamma dated 22.01.1980. As per the
relevant amendments effected by the
titamma, the waqf now excludes Inam
8 All. Azad Ahmad Khan Vs. Income Tax Appellate Tribunal
1537
Ahmad Khan from ever becoming a
mutwalli and he was also ousted from
receiving any benefits out of the waqf
property. Since, Mst. Hasina Khatun died
issueless, therefore, two-third of share
would now go to Azad Ahmad Khan and
one-third was to be utilised for charitable
purposes. It is also disclosed in the titamma
that a portion of the property of the
workshop was rented out and machineries
lying in the workshop were sold to pay off
personal debts of the waqif Gulam Ahmad
Khan.

3. Gulam Ahmad Khan died issueless
on 02.12.1980, and as per the terms of the
amended deed, petitioner Azad Ahmad
Khan, became mutwalli of the waqf. The
petitioner filed returns under Estate Duty
Act, 1953 (hereinafter referred to as the Act
of 1953) with regard to the properties of the
waqf and claimed immunity from paying
estate duty on the same. However, a show
cause notice was issued to the petitioner on
24.11.1988 seeking explanation for the
exemption claimed by him from paying
estate duty. Petitioner submitted his reply
on 29.12.1988 and on the basis of the same
impugned
assessment
order
dated
31.01.1989 is passed. Petitioner challenged
the assessment order before the Appellate
controller of Estate Duty, which upheld the
assessment order by its order dated
16.09.1991. Against the same, petitioner
preferred an appeal before the Income Tax
Appellate Tribunal, which was dismissed
by order dated 30.11.1999.

4. Shri Pradeep Agarwal, learned
counsel for the petitioner challenges the
judgment and order of the Tribunal on the
ground that the Tribunal was wrong in
holding that the waqf created by late Gulam
Ahmad Khan was not a valid waqf as he
never intended to give effect to the waqf
deed. He submits that it is a settled law that
once a waqf is created the waqif stands
divested of his title to the waqf properties.
In support of his argument learned counsel
for the petitioner relies upon the judgment
of the Supreme Court in the case of
'Chhedi Lal Misra v. Civil Judge,
Lucknow'; (2007) 4 SCC 632. The second
ground of challenge is that the Tribunal
erred in holding that section 5 and 12 of the
Act of 1953 are applicable in the present
case. He submits that the Tribunal has
misinterpreted the explanation to Section
12(1) of the Act of 1953 and wrongly held
that since waqif has reserved to himself the
right to modify the deed therefore, it
amounts to reservation in the property for
life. Whereas as per the explanation
reservation of interest must be for settler
himself as well as for any of his relatives.
Unless the interest is reserved for both, the
waqif as well as any of his relatives, such
reservation would not amount to passing of
the property upon settler"s death. In support
of his contention counsel for the petitioner
relies upon a Division Bench Judgment of
the Bombay High Court in the case of
"Controller
of
Estate
Duty
v.
B.B.
Nigudkar" reported as (1988) 170 ITR 578.
Relevant paragraph of the same reads,

"...We
have
considered
the
Explanation to section 12(1) carefully. In
our view, the word "and" used in the
Explanation to section 12(1) cannot be
read as "or" as held by the Gujarat and the
Madras High Court decisions: Kikabhai
Samsuddin v. CED, [1969] 73 ITR 241
(Guj) and CED v. K.A. Kader, [1974] 96
ITR 289 (Mad). It may be true that if there
was any reservation of interest in favour of
the settlor/deceased, the provisions of
subsection (1) of section 12 would have
applied. The Explanation is, however, to
our mind, enacted to meet a situation
1538 INDIAN LAW REPORTS ALLAHABAD SERIES
where reservation of interest is for the
settlor as well as his relatives and an
argument might be advanced that the
reservation of interest being not for the
settlor himself alone, sub-section (1) would
not apply. Any decision where a contrary
view may have been taken has not been
brought to our notice."

5. Learned counsel for the respondent,
Shri
Manish
Mishra
opposes
the
submissions made by the counsel for the
petitioner. He submits that there is no
perversity in the judgment of the Appellate
Tribunal. He further submits that Gulam
Ahmad Khan created the waqf only to
avoid tax liabilities. Gulam Ahmad Khan
never intended to give effect to the waqf
since he kept including the waqf property
and income from M/s General Engineering
Works in his annual income tax returns.
Counsel for the respondent even questions
the validity of the waqf and submits that as
per the waqfnama, it was a waqf-alal-aulad,
created under Section 3(a) of the Act of 1913.
However, including Mst. Hasina Khatun as
one of the beneficiaries, who did not have
any blood or family relations with Gulam
Ahmad Khan, is against the objectives of
waqf-alal-aulad. He further submits that
Gulam Ahmad Khan also throughout treated
the waqf property as his personal and never
actually delivered/dedicated it to the waqf
and instead sold certain machineries without
seeking any permission from a Court. Since
there was no such action taken on the part of
Gulam Ahmad Khan which would amount to
creation of a valid waqf, therefore it has been
rightly held in the impugned order that the
waqf was never created and therefore this
petition is liable to be dismissed.

6. I have perused the record with the
assistance of counsels and considered their
submissions.

7. As per the waqf-deed, a waqf-alalaulad was created under the provisions of
the Act of 1913. As per Section 3(a) of the
Act of 1913, a waqf could be created for
maintenance
and
support,
wholly
or
partially, of waqif"s family, children or
descendants. Inclusion of Mst. Hasina
Khatun as one of the beneficiary of the
usufruct of the waqf property, without
establishing waqif Gulam Ahmad Khan's
relationship with her, goes against the
tenets of a waqf-alal-aulad. Further, no
doubt creation of a waqf divests the waqif
of the waqf property and dedicates it to the
almighty, but, there should be actual
dedication/delivery of possession of the
waqf property to constitute a valid waqf.
When the waqif is himself the first
mutwalli of the waqf, it becomes difficult
to establish actual dedication/delivery of
possession, and thus, his subsequent
conduct with regard to the waqf property
becomes relevant to decide whether there
was an actual dedication and creation of a
waqf. In the present case even after
dedicating M/s General Engineering Works
to almighty, waqif Gulam Ahmad Khan
continued to show the same as his own
property in income tax returns filed by him.
He even sold off some of the waqf property
to pay off his personal debts without seeking
necessary permisssion from appropriate
authority. Furthermore, there is no evidence
on record to prove that Gulam Ahmad Khan
ever spent Rs. 100 towards any charitable
purpose. Absence of any real dedication and
subsequent treatment of the property by
waqif Gulam Ahmad Khan as his personal
property, thus, falls into the exception to the
rule, once a waqf always a waqf, carved out
by their Lordships in the case of Chhedi Lal
Mishra (supra) relied upon by the counsel for
the petitioners. Aforesaid judgment which is
relied upon by the counsel for the petitioner
also reads in para 7:
8 All. Azad Ahmad Khan Vs. Income Tax Appellate Tribunal
1539

"7. Having gone through and
considered the judgment of the learned
Single Judge of the Allahabad High Court,
we see no reason to take a view different
from those expressed therein. In our view,
the law relating to the creation and
continuation of wakfs has been correctly
explained by the learned Judge in keeping
with the well-established principles that
once a wakf is created, the wakif stands
divested of his title to the properties which
after the creation of the wakf vests in the
Almighty. It is no doubt true that in a
given case the creation of a wakf may be
questioned if it is shown that the wakif
had no intention to create a wakf but had
done so to avoid a liability""(emphasis
added)

8. Privy Council in the case of
"Mohammad Ali Mohammad Khan v. Mt.
Bismillah Begam"; AIR 1930 PC 255 has
held that when there is no intention to
dedicate the waqf property to the almighty
rather there were some ulterior motives, the
deed can not be treated to be a valid waqf.
Relevant part of the judgment reads,

"On a careful consideration of
the whole evidence, their Lordships have
come to the conclusion that defendant No.
2 executed the deed of wakf but without any
intention of divesting himself of his
ownership of the property, and that his real
intention was to utilise the document
should it become necessary as a shield
against any claims that the appellant might
have against him either then or at any
future time. Their Lordships are therefore
of opinion that this appeal should be
allowed and the decree of the Subordinate
Judge should be restored and that the
appellant should have his costs in the Chief
Court and of this appeal. They will humbly
advise His Majesty accordingly."

9. Actions of the waqif Gulam Ahmad
Khan shows that he has throughout treated
the
waqf
property
as
his
personal,
therefore, it could rightly be held that there
was no actual dedication of property and he
had no intention to create a waqf and as
such the deed can not be held to have
constituted a valid waqf.

10. The second ground of challenge
that the Appellate Tribunal has wrongly
interpreted the explanation to Section 12(1)
of the Act of 1953 and read the word "and"
as "or" to reject petitioner"s claim for
exemption from paying estate duty also
does not hold good as waqif Gulam Ahmad
Khan had, while executing the waqf deed
made
provisions
for
maintenance
of
himself, his brother and the petitioner, who
himself claim to have been adopted as a
son by the waqif Gulam Ahmad Khan.
Therefore, the conditions laid down in the
case of B.B. Nigudkar (supra) as relied
upon by the counsel for the petitioner is
already fulfilled. Furthermore, what is
required to avail the exemptions from
paying estate duty as provided under
Section 12 of the Act of 1953 is that there
should not be any reservation of interest in
the settled property for life by the settler.
For reference Section 12 of Act of 1953
reads,

"12. (1) Property passing under
any settlement made by the deceased by deed
or any other instrument not taking effect as a
will whereby an interest in such property for
life or any other period determinable by
reference to death is reserved either expressly
or by implication to the settlor or whereby the
settlor may have reserved to himself the right
by the exercise of any power, to restore to
himself or to re-claim the absolute interest in
such property shall be deemed to pass on the
settlor's death:
1540 INDIAN LAW REPORTS ALLAHABAD SERIES

Provided that the property shall
not be deemed to pass on the settlor's death
by reason only that any such interest or
right was so reserved if by means of the
surrender of such interest or right the
property is subsequently enjoyed to the
entire exclusion of the settlor and of any
benefit to him by contract or otherwise, for
at least two years before his death.

Explanation."A settlor reserving
an interest in the settled property for the
maintenance of himself and any of his
relatives (as defined in section 27) shall be
deemed to reserve an interest for himself
within the meaning of this section.

(2)
Notwithstanding
anything
contained
in
sub-section
(1),
where
property is settled by a person on one or
more other persons for their respective
lives and after their death, on the settlor for
life and thereafter on other persons and the
settlor dies before his interest in the
property becomes an interest in possession,
the property shall not be deemed to pass on
the settlor's death within the meaning of
this section."

11. As Gulam Ahmad Khan reserved
to himself the right to modify the terms of
the waqf-deed and he actually effected a
titamma not less than a year before his
demise goes to show that he had reserved
life interests in the property while settling it
through the waqf deed. This issue has
already been decided by a Division Bench
of this Court in a reference by Central
Board Direct Taxation in the case of
"Hamid Hussain v. Controller of Estate
Duty'; (1972) 83 ITR 309, relevant
paragraphs of the same reads,

"17. It is next contended on
behalf of the accountable person that the
deceased had no interest in the property
which could attract the provisions of
section 12. It is pointed out that after
vacating the office of mutawalli in 1950, he
had no interest left in the wakf property.
Now, section 12(1) speaks of property in
which the deceased settlor has reserved to
himself an interest in the property passing
under the settlement for life or any other
period determinable by reference to death.
Upon analysing the terms and conditions of
the wakf deed, as last amended, it appears
that the settlor retained to himself the right
to reside in certain specified house
properties and the power to amend the
terms of the wakf deed, the list of
beneficiaries and the extent of their shares.
Are these conditions sufficient to bring the
property within the scope of section 12"
The power to amend the terms of the
settlement is couched in the following
language:

"7. (e) In future also, I the wakif
during my life-time, shall have the right of
making
amendments;
alterations,
cancellations and additions of conditions in
this wakf deed, as warranted by the
prevailing conditions, which right I enjoy
at present; and during my life-time I shall
specially
have
the
power
to
make
amendments in the rights of the grantees, to
include some stranger amongst them and to
exclude any body and to increase or
decrease the amount of their shares."

18. The power reserved by this
clause is expressed in the widest termst.
While perhaps it does not extend to the
power of revoking the wakf, it enables the
settlor to travel over a wide field, curtailing
interests presently enjoyed on the one hand,
and in creating or enlarging them in other
directions. In so far as the power is
exercised for the purpose of including some
8 All. Shri Dewesh Kumar Ex-Sr. Supervisor M/S Tata Engg. & L. Co. Ltd. Vs. M/S Tata
 Engineering & Locomitove Co. Ltd. Lko.
1541
one not already a beneficiary, it could
extend to including the settlor himself. The
wide amplitude of power in the clause
supports such a conclusion. If that be so,
the settlor has reserved to himself the right
to benefit from the wakf property for life by
the simple device of including himself in the
list of beneficiaries or grantees.

"..

23. In the instant case, it is true
that the settlor had not included himself in
the list of beneficiaries and that so long as
he did not do so, he was not entitled to the
benefits enjoyed by the other beneficiaries.
But the power to do so vested in him
absolutely. It was a power which he could
exercise in his absolute discretion. We see
little difference between a case where the
settlor
included
himself
among
the
beneficiaries and left it to the absolute
discretion of the trustees to extend the
benefit of the trust income to him and the
instant case where the settlor had reserved
to himself the right to include his name
among
the
beneficiaries
thereby
automatically entitling himself to the
benefit of the income of the wakf property.
The power to amend the wakf deed so as to
include himself among the beneficiaries is
only an instance of the wide powers
reserved by the settlor to himself. As we
have said the powers under clause 7(e) are
expressed in the widest termst. So long as
the character of the wakf is maintained, it
is open to the settlor to make any
changes"and changes which may directly
benefit him"in the terms and conditions of
the deed. We are of opinion that the settlor
reserved an interest in the wakf property
for life and therefore the case falls within
the scope of section 12. And that would
mean, as was held by the Bombay High
Court in Khatizabai Mohomed Ibrahim v.
Controller of Estate Duty [[1959] 37 I.T.R.
(E.D.) 53 (Bom.).] , that not merely the
interest so reserved but the whole of such
property must be deemed to pass on the
death of the settlor."

12. Since waqif Gulam Ahmad Khan
reserved to himself the absolute right to
amend the waqf deed and made provisions
therein for his maintenance out of the waqf
property therefore it is held that petitioner
cannot claim exemptions from paying
estate duty.

13. In light of the above, this writ
petition is dismissed accordingly.
----------
(2023) 8 ILRA 1541
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 21.07.2023

BEFORE

THE HON'BLE ALOK MATHUR, J.

Writ-C No. 1001398 of 2002

Shri Dewesh Kumar Ex- Sr. Supervisor
M/S Tata Engg. & L. Co. Ltd. ...Petitioner
Versus
M/S Tata Engineering & Locomitove Co.
Ltd. Lko. ...Respondents

Counsel for the Petitioner:
S. Banerji, Pushpila Bisht, S.P. Mishra,
Suresh Chandra Tiwari, Vivek Mishra

Counsel for the Respondents:
C.S.C., J.N. Mathur, Mudit Agarwal

Held:
Order of Dy. Labour Commissioner dated
05.12.2000 rejecting reference under Section
4(K) of U.P. Industrial Disputes Act, 1947 - Held
to be illegal and arbitrary - Petitioner had
invoked conciliation mechanism after being
dismissed
-
Conciliation
Officer
exceeded