Estate Duty Act 1953 | Alleged Waqif Not Entitled To Exemption U/S 12 If He Reserves Right To Amend Waqf Deed: Allahabad High Court

The Allahabad High Court has held that exemptions cannot be claimed from paying estate duty under Estate Duty Act, 1953 if waqif has a reserved right to amend the waqf deed and provisions therein to derive gains from the waqf property.

The petitioner is the adopted child of one Gulam Azad Khan who allegedly created a waqf-alal-aulad under the Mussalman Waqf Validating Act, 1913. As per the Waqf deed, Rs. 100 out of total proceeds of M/s. General Engineering Works (waqf property) 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 the right to make changes in the waqf deed and sell off the assets entrusted to the waqf including M/s. General Engineering Works.

In the line of succession, a non-blood relative had also been included. Further, Gulam Azad Khan treated the alleged waqf property as his personal property for income tax purposes. Certain portions were sold to repay his debts. He also changed the line of succession in the original waqf deed.

Petitioner, after inheriting the property, claimed immunity from paying estate duty on the said land under Estate Duty Act, 1953. The Income Tax Department passed assessment order in 1989 against the petitioner, which were unsuccessfully challenged before the Income Tax Appellate Tribunal.

Counsel for the Petitioner argued that settled law is that once a waqf is created the waqif stands divested of his title to the waqf properties. Tribunal erred in holding that it was not valid waqf. Further it was argued that the waqif could create interest in his as well as for his relatives are per the explanation to Section 12(1) of the 1953 Act.

Counsel for Respondent contended that the waqf was created only for tax evasion purposes. Gulam Azad Khan had no intention to give effect to the waqf as he kept the rights to change the deed and to dispose of the property with himself. Further, the income from the waqf property reflected in the income tax returns filed by the alleged waqif.

A bench comprising of Justice Vivek Chaudhary observed that waqf can be created for maintenance and support of the family, children or descendants of waqif. Including a third party without establishing a relationship with her goes against the tenants of 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”, said the Court while observing that there was no actual dedication of the property to Almighty.

The Court held that to avail exemptions from paying estate duty under Section 12 of the 1953 Act, there should not be any reservation of interest in the settled property for life by the settler. Gulam Azad Khan had life interest in the settled property (alleged waqf property) as he had made changes in the waqf deed less than a year before his death.

Citing the decision of a division bench of the Allahabad High Court in Hamid Hussain v. Controller of Estate Duty [(1972) 83 ITR 309], the Court held that the no exemption could be claimed in the present case since the Gulam Azad Khan had reserved the absolute right to amend the provisions of the waqf deed.

Case Title: Azad Ahmad Khan vs. Income Tax Appellate Tribunal [ Writ C No. 1000800/2000]

Case Citation: 2023 LiveLaw (AB) 239

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