COMMISSIONER OF WEALTH-TAX, BHOPAL versus ABDUL HUSSAIN MULLA MUHAMMAD ALI (DEAD) BY L.RS.

Citation: [1988] SUPP. 1 S.C.R. 227 · Decided: 09-05-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

COMMISSIONER OF WEALTH-TAX, BHOPAL 
v. 
ABDUL HUSSAIN MULLA MUHAMMAD ALI 
(DEAD) BY L.Rs. 
MAY 9, 1988 
[R.S. PATHAK, CJ. AND M.N. VENKATACHALIAH, J.] 
Wealth Tax Act, 1957-Sections 5 and 27-Loan-Termed by 
assessee as. 'Quaraza-e-hasana' held includible as wealth of assessee and 
liable to tax. 
Words and Phrases: 'Quaraza-e-Hasana'~Meaning of. 
The assessee-respondent had advanced a sum of Rs.4,00,000 to 
' 
his partner Faizullabhai Mandlawala which sum was employed as a 
part of Mandlawala's capital in their partnership firm. The assessee 
sought to have the value of that loan excluded from his wealih on the 
claim that this loan was what was known to Muslim Law as 'Quaraza-e-
Hasana'-a debt of good faith and goodwill carrying with it no legal 
obligation on the part of the debtor to repay and correspondingly, no 
right on the part of assessee to expect, much le.S enforce a repayment. 
This claim was supported by debtor's declaration that the sum was 
received by him 'without any obligation and without any rate of interest 
and without any consideration.' 
A 
B 
c 
D 
E 
The Wealth Tax Officer and the Appellate Assistant Commis-
sioner found it difficult to accept this claim. The Appellate Tribunal, 
however, accepting the assessee's claim held that the loan partook of the 
character of 'Quaraza-e-Hasana' with its special incidents as known to F 
Muslim Law; that the transaction was one of good faith and goodwill 
. and lacked the concomitants of a legally enforceable claim for repay-
ment and that, therefore, the amount was not a debt due to the assessee. 
The High Court upheld this view. 
It was contended on behalf of the Revenue (I) thatthe Tribunal as G 
well as the High Court erroneously accepted the hypothetical incidents 
of a supposedly peculiar institution of the personal law of the Muslims, 
any rule or tenet of Muslim Law respecting which had not having 
been established; (2) that both the Tribunal and the High Court, while 
rightly noticing that the special incidents of what was called 'Quaraza-e-
Hasana' had not IJeen established, gave the benefit of doubt as to the H 
227 
A 
228 
SUPREME COURT REPORTS 
[1988] Supp. 1 S.C.R. 
very existence of this institution of 'Quaraza-e-Hasana' to the assessee, 
and (3) that the reliance by the High Court on the incidents of 'Hiba-ba-
shart-ul-iwaz', a form of Mussalman gift, was misplaced as this kind of 
gift expressly stipulated contemporaneous liability for a return. 
Counsel for the assessee, sought to support the conclusions of the 
B 
High Court on an alternative and independent ground that, at all 
events, by entering into this transaction the parties must be held not to 
have intended to create a legal obligation between them and that, there-
fore, the debt remained a debt of honour. It was contended that an 
agreement would not, by itself, yield legal obligations unless it was one 
which could reasonably be regarded as having been made in contempla-
tion of creating legal consequences, and that in this case the parties 
C 
must be held to have excluded the contemplation of legal conse-
quences flowing from the transaction. 
Allowing the appeal it was, 
D 
HELD: ( l) As no authoritative text nor any principle or prece-
E 
dent recognised in Muslim Law was cited before the High Court or this 
Court, establishing the nature, content and incidents of the institution 
of 'Quaraza-e-Hasana', it was not possible to say, one way or the other, 
whether Courts could recognise and act upon such a rule of Muslim 
Law much less afford relief to the proponent of that rule. (232G-H; 233A-B] 
(2) If the concept of 'Qard Hasan' was the same as that of 
'Quaraza-e-Hasana', the obligation on the part of the debtor of the loan 
to repay nor the right of tbe creditor to repayment were excluded. The 
only incident appeared to be that it was 'interest-free'. (234C] 
F 
(3) The reliance by the High Court on the concept of mussa!man 
gift 'Hiba-ba-shart-uHwaz' did not help the assessee because this kind 
of gift stipulated liability for return. (232E-FI 
( 4) The debt, though a 'passive debt' would require to be treated 
as due and payable to tbe assessee. It was not the assessee's case that the 
G 
debt was bad and irrecoverable. The debtor's declaration itself estab-
lished its existence. ii3SB] 
(S) Where, as in the instant case, the tax implications of large 
financial obligations were sought to be put an end to, the burden as 
heavy on the assessee to establish that what w

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