Judgment

VENKATACHALIAH, J. :- These appeals, by special leave, by the Commissioner of Wealth-tax, Bhopal, arise out of the opinion rendered by the High Court of Madhya Pradesh, Bhopal, in four consolidated wealth-tax references under S. 27(l) of the Wealth tax Act, 1957. They raise a short but interesting question touching the incidents of what is described as the Quaraza-e-Hasana said to be a transaction known in and peculiar to the personal law of the Muslims.

2. The matters arise out of the proceedings concerning the assessment to wealth-tax of the Respondent, Abdul Hussain Mulla Mohammad Ali (the assessee) for the four assessment-years 1957-58 to 1960-61.

In the original-returns for the assessment year 1957-58 relevant to the valuation date 31-3-1957, the assessee filed a return of net wealth of Rs. 8,57,9 10/- which included a sum .of Rs. 4,00,000/- representing the principal value of the loan advanced by the assessee to a certain Faizullabhai Mandlawala, Sidhpur. Both the assessee and the said Faizullabhai Mandlawala were partners of a firm carrying on business under the name and style Rising Sun Flour & Oil Mills at Ujjain. The borrower had employed this sum as part of his capital in the firm. In the revised return, filed by him, the assessee, however, sought to have the value of that loan excluded from his wealth, on the claim that this loan was what was known to Muslim Law as Quaraza-e-Hasana - a debt of good faith and good-will carrying with it no legal obligation on the part of the debtor to repay and correspondingly, no right on the part of the asessee to expect, much less enforce a repayment. The claim for the non-inclusion of this asset in the wealth of the assessee was sought to be supported by the declaration dated 26-3-1965 furnished by the debtor that the sum was received by him without any obligation and without any rate of interest and without any consideration. Reliance was also placed on some extracts of the Quran said to relate to this transactions.

Both the Wealth-tax Officer and the Appellate Assistant Commissioner in the appeal found it difficult to accept this claim and, accordingly, brought this sum of Rs. 4,00,000/- to tax on the respective valuation dates.

However, the Income-tax Appellate Tribunal, Indore Bench, accepting the assessees appeals held that the loan partook of the character of Quaraza-e-Hasana with its special incidents as known to Muslim Law; that the transaction was one of good faith and goodwill and lacked the concommitants of a legally enforceable claim for repayment and that, therefore, the amount was not a debt due to the assessee.

3. The High Court before which the Tribunal, at the instance of the Revenue, stated a case and referred two questions of law for opinion upheld the view that had commended itself to the Tribunal and answered the questions against the Revenue. The two questions so referred were :

(1) "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 4 lakhs cannot be included in the total assets of the assessee?"

(2) "Whether on the facts and in the circumstances of the case the Tribunal was justified in accepting that the amount of Rs. 4 lakhs was in the nature of Quaraza-e-Hasana particularly when Rs. 1,21,500/- out of Rs. 4 lakhs has been repaid?".

4. Shri B. B. Ahuja, learned counsel for the Revenue, contended that the Tribunal as well as the High Court fell into a serious error in their acceptance of the hypothetical incidents of a supposedly peculiar institution of the personal law of the Muslims, respecting which nothing tangible by way of evidence as to the existence of such rule or tenet of Muslim law was forthcoming. Learned Counsel invited our particular attention to the following observations of the Tribunal :

" the learned counsel for the assessee, Mr. Chitale, has also stated before us that he has not come across any judicial decision defining or describing the exact characteristics of the ex