BHAGWATI, J. : This is a reference which comes before us on a requisition under section 66 (2) of the Income-tax Act, 1922. There are two questions referred to us but they both relate to the same point, namely, whether the income of the assessee derived from properties held by it is exempt from tax under section 4 (3) (i). There is also a reference to section 4 (3) (ii) in the second question, but that is obviously due to some mistake because, as pointed out by the Tribunal, the claim for exemption under section 4 (3) (ii) was expressly given up by counsel who appeared on behalf of the assessee before the Tribunal and the only claim pressed was for exemption under section 4 (3) (i). We will, therefore, delete the words ''and/or 4 (3) (ii)'' in the second question and confine the scope of the inquiry before us to the determination of the question whether the income of the assessee is exempt from tax under section 4 (3) (i) which was the only question debated before the Tribunal. In order to answer this question it is necessary to state a few facts.

2. Hazrat Pirmohamed Shah Saheb was a renowned Muslim Saint who lived in Gujarat in the early half of the eighteenth century. He preached what is called by the Tribunal "a sectarian doctrine" and gathered around him a large following during his lifetime. From out of his followers who were considerable in number, he initiated 100 as his disciples and those initiated came to be known as Murids. He, however, did not permit Murids to initiate others as Murids with the result that after his death there could be no further Murids by initiation. But the descendants of Murids, became Murids and the class of Murids was, therefore, constituted of the descendants of the original Murids initiated by the Saint. The Murids came mostly, if not entirely from Sunni Bohra community, Sunni being one of the two main sects of the Muslim community, namely, Sunni and Shia. On the death of Hazrat Pirmohamed Shah Saheb which occurred sometime in 1742 A. D. his disciples i.e., Murids and other devotees subscribed moneys and collected donations for the purpose of building a Roza or Dargah i.e., a Mousoleum to commemorate his memory. Out of those moneys, a Roza was built and there was also built alongside the Roza a mosque for the purpose of offering Ratias and prayers. In accordance with Islamic doctrine, all Muslims, whether Murids or non-Murids, had unrestricted access to the Roza and the mosque. Now the maintenance of the Roza and the mosque required moneys and so also did the observance of festive occasions such as Urs, death anniversaries etc., at these institutions. Several gifts of properties were, therefore, made by Murids for these purposes and certain properties were also purchased by persons in management out of offerings made at these institutions. All these properties were treated as properties of the Roza and the income from these properties after payment of municipal taxes, insurance premia and other outgoings in respect of the properties was utilised for maintenance of the Roza and the mosque and observance of festive occasions such as Urs, death anniversaries etc. It appears from the statement of receipts and expenditure for the years 1942-43 to 1956-57 produced before the Tribunal which is Annexure 'L' to the Statement of Case that during those years a part of the surplus income of the properties after meeting this expenditure on the maintenance of the Roza and the mosque and the observance of festive occasions such as Urs, death anniversaries etc., was also utilised for running Madrassas and Library and payment of expenses on items such as Langar and Bhandar for giving food to pilgrims attending the Roza and the mosque on festive occasions. This statement also shows that after meeting the aforesaid expenditure, there was a surplus of receipts over expenditure every year, but this surplus was at no time utilised for the personal benefit of the Murids. The Murids, however, had two kind