What do the esteemed scholars say regarding the following issue: Zaid has some amount of interest-based money, and he wishes to use it to dig a well in a mosque. Is it permissible for him to do so? And is it allowed for worshippers to perform wudu (ablution) using water from such a well?
It is obligatory to give formal ownership of the mentioned amount to a deserving (needy) person and to give it in charity without the intention of reward. Therefore, it is mandatory upon the said person to make a deserving person the owner of that amount. Then, if the deserving person, of his own will and choice, uses it to dig a well or spend it on any charitable work, he has the right to do so, but he is not obligated. However, if the person spent the amount himself without making a deserving person its owner, and had a well or something similar built, then using such a well for wudu (ablution), and performing prayer or other acts of worship is permissible though disliked (makruh).
ففی معارف السنن: من ملك بملك خبیث ولم یمکنه الرد إلی المالک فسبیله التصدق علی الفقراء اھ (۱/ ۳۴)۔