Full Judgment Text
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PETITIONER:
RADHASOAMI SATSANG, SAOMI BAGH,AGRA
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX
DATE OF JUDGMENT15/11/1991
BENCH:
MISRA, RANGNATH (CJ)
BENCH:
MISRA, RANGNATH (CJ)
KULDIP SINGH (J)
CITATION:
1992 AIR 377 1991 SCR Supl. (2) 312
1992 SCC (1) 659 JT 1991 (4) 313
1991 SCALE (2)1199
ACT:
Income Tax Act, 1961---Sections 11 and 12---Radhasoami
Satsang Property--Income of--Whether entitled to exemption.
HEADNOTE:
The then Satguru of the appellant-Creed was assessed for
the assessment years 1937-38, 1938-39 for the first time. He
was a retired Govt. servant. His pension as well as the
income from the institution were assessed together.
On appeal, the Assistant Commissioner of Income-tax
confirmed the assessments made by the Income-tax Officer.
The Income-tax Commissioner under reference made under
section 66(2) of the Income-tax Act, 1922 held that the
offerings made to the assessee-Satguru were offerings as
held in trust and same were exempted under section 4(3)(1)
of the Act.
When an application under Section 35 of the Act was made
for ratification, whether the offerings received by the
assessee consisted of interest income, property income, and
income derived from sale of books and photographs etc. to be
excluded, the Commissioner directed deletion thereof.
For the year 1939-40, though the Income-tax Officer did
not allow exemption u/s.4(3)(1) of the Act, the Appellate
Assistant Commissioner allowed exemption.
Till 1963-64 the appellant was not taxed and its refund
applications were accepted by the respondent-Revenue.
For the assessment years 1964-65, 1965-66, 1966-67,
1967-68, 1968-69, 1969-70, the assessee-appellant was as-
sessed, treating it to be an association of persons, and
held that the donations and contributions received volun-
tarily had limited religious use.
When the appellant-assesses appealed, the appellate
authority upheld the assessments.
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Against the orders of the Appellate authority the asses-
see appealed before the Income-tax Tribunal. The Tribunal
allowing the appeals of the assessee, held that the assessee
was entitled to the exemption claimed under Section 11 of
the Income-tax Act, 1961.
On the question, referred to the High Court by the
Tribunal, "Whether on the facts and in the circumstances of
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the case the Tribunal was justified in holding that the
income derived by the Radha Swami Satsang, a religious
institution, was entitled to exemption under Sections 11 and
12 of the Income Tax Act, 1961?", the High Court answered
the question in favour of the Revenuerespondent, holding
that the trust deed was revocable and the conditions for
exemption under Sections 11 and 12 of the Act were not
satisfied.
Allowing the appeals of the assessee, this Court,
HELD: 1.01. Assessments are quasi judicial. Each assess-
ment year being a unit, what is decided in one year may not
apply in the following year but where a fundamental aspect
permeating through the different assessment years has been
found as a fact one way or the other and parties have al-
lowed that position to be sustained by not challenging the
order, it would not be at all appropriate to allow the
position to be changed in a subsequent year. [320H, 321 A-B]
1.02. No formal document is necessary to create a
trust. The conditions which have to be satisfied to entitled
one for exemption are: (a) the property from which the
income is derived should be held under trust or legal obli-
gation, (b) the property should be so held for charitable or
religious purposes which enure for the benefit of the pub-
lic. [317 E-G]
1.03. The property was given to the Satguru for the
common purpose of furthering the objects of the Sat Guru.
The property was therefore subject to a legal liability of
being used for the religious or charitable purpose of the
Satsang. [319 E, F]
1.04. The Tribunal was justified in holding that the
income derived by the Radhasoami Satsang was entitled to
exemption under Sections 11 and 12 of the Income Tax Act,
1961. [321 D]
Patel Chhotahhai and Ors. v.Janan Chandra Bask and Ors., AIR
314
1935 Privy Council 97; Acharya Jagdish-Waranand Avadhuta &
Ors. v. Commissioner of Police, Calcutta & Ant., [1983] 4
Sec 522, The Secretary of State for India in Council v.
Radha Swami Sat Sang, 13 ITR 520; All India Spinners’Associ-
ation v. Commissioner of Income Tax, Bombay, 12 ITR 482;
TM.M. Sankaralinga Nadar & Bros. & Ors. v. Commissioner of
Income-tax, Madras, 4 ITC 226; Hoystead & Ors. v. Commis-
sioner of Taxation, 1926 A.C. 155 and Parashuram Pottery
Works Co. Ltd. v. Income-tax Officer, Circle 1, Ward A
Rajkot, 106 ITR 1 at p.10, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10574-
10583 of 1983.
From the Judgment and Order dated 7.7.1980 of the Alla-
habad High Court in I.T.R. No. 948 of 1975.
V.Gourishanker, B.V. Desai, S.K. Aggarwal and Ms. Vinita
Gharpade for the Appellants.
S.C. Manchanda, B.B.Ahuja, Manoj Arora and Ms. A. Subha-
shini (N.P.) for the Respondent.
The Judgment of the Court was delivered by
RANGANATH MISRA, CJ. Radhasoami Satsang, an assessee
under the Income Tax Act in these appeals by special leave
assails the decision of the Allahabad High Court on refer-
ence under Section 256 of the Income tax Act. 1961. The
following question had been referred by the Tribunal to the
High Court:
"Whether on the facts and in the circumstances
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of the case Tribunal is justified in holding
that the income derived by the Radha Swami
Satsang, a religious institution, is entitled
to exemption under sections 11 and 12 of the
income Tax Act, 1961’."’
The ambit and purport of the question would not be
properly appreciated unless the background is indicated. The
assessee is the Radhasoami Satsang, Agra. This sect was
founded by Swami Shiv Dayal Singh in 1861. The tenets of
this faith, inter alia, accept the position that God is
represented on earth by a human being who is called the Sant
Satguru. The first of such gurus .was the thunder himself
and he was popularly known as ’Soamiji Madharaj’ The second
Satguru (1889-1898) was Rai
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Bahadur Salig Ram and he was known as ’Bazoor Maharaj’. The
third sant Satguru was Pandit Brahma Shanker Misra (1898-
1907) and was widely known as ’Maharaj Sahib’. These three
Satgurus have been regarded as the real exponents of the
creed. Out of donations and offerings made to the Satgurus,
large funds were built up and properties were acquired over
the years. During the time of the third Satguru, in 1902,
the members of the creed at a largely attended convention
established a Central Council and the right, title and
interest of all the properties - movable and
immovable---which had by then been collected were vested in
the Council under the directions of Maharaj Sahib. In June,
1904 the constitution and bye-laws of the Central Council of
Radhasoami Satsang were drawn up in a formal way and a body
by the name ’Radhasoami Satsang Trust’ was set up. A trust
deed was executed by some members of the Central Council in
October, 1904.. A set of bye-laws were also framed.
On the death of third Satguru which took place in Octo-
ber 1907, the oread split into two and came to be known as
Swami Bagh Sect and the Dayal Bagh Satsangis respectively.
Disputes arose as to the management of the shrines and the
administration of the properties which had vested in the
trustees under the Trust Deed of 1904. The Dayal Bagh Sat-
sangis claimed that all the properties were held in a trust
for a public purpose of a charitable and religious nature
and prayed for a decree by going to the Civil Court The
litigation had started in the form of an application under
section 3 of the Charitable and Religious Trusts Act, 1920
but was converted into a regular suit and eventually ended
with the decision of the Privy Council in the case of Patel
Chhotahhai and Ors. v. Jnan Chandra Basic and Ors., AIR 1935
Privy Council 97. The Judicial committee reversed the deci-
sion of the High Court and held that even if the trust came
into existence it was difficult to hold that it was of a
public, charitable or religious character as contemplated by
the Charitable and Religious Trust Act, 1920.
The question of assessing the income for the first time
arose in the assessment year 1937-38. The Income Tax Officer
relied upon the observations of the Privy Council and com-
pleted assessments for two years being 1937-38 and 1938-39
treating the then Satguru, Sri Madho Prasad Sinha as the
assessee. He was a retired Assistant Accounts Officer and
was earning a pension. His pension as also the income from
the institution were tagged together for assessment. The
Appellate Assistant Commissioner confirmed the assessments.
Assessee then filed applications under section 66(2) of the
Income-tax Act of 1922 for reference. The Commissioner took
the view that the offerings though made to the Satgurus were
not used for their personal benefit and held that even
though no formal
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316
trust had been created by the donors in respect of offer-
ings, the guru impressed the offerings with trust character
at the time of receipt, and treated the offerings as held in
trust. He was, therefore, of the view that such offerings
were exempt under section 4(3)(1) of the Income-tax Act,
1922 and directed that the offerings be deleted from the
assessment for the two years. He accordingly held that no
reference under Section 66(2) was necessary to be made. an
application under section 35 of the Act was later filed for
ratification by pointing out that offerings received by the
Satgurus consisted of interest income, property income, and
income derived from sale of books and photographs etc. and
the same should also be excluded. On 8.12.1945 the Commis-
sioner directed deletion thereof.
For the year 1939-40, the income-tax Officer did not
grant exemption under section 4(3)(1) of the Act but the
appeal challenging the assessment was accepted by the Appel-
late Assistant Commissioner in September, 1947 upholding the
assessee’s claim of exemption.
Nothing substantial happened until the assessment year
1963-64. During this period refund applications of the
Satsang were accepted by the department on the basis that
the income was exempt and as tax had been deducted at source
the same was refundable. For the first time claim for refund
in the years 1964-65, 1965-66 and 1966-67 was not allowed
and the assessee was treated as an association of persons
and taxed; subsequentiy for the assessment years 1966-67,
1967-68 and 1968-69 and 196970 assessments were also com-
pleted. The Income-tax Officer did not accept the assessee’s
claim of exemption and proceeded to hold that the donations
and contributions had been received voluntarily and had been
limited to religious use but there was no obligation to do
so. The assessee appealed but the appellate authority upheld
the assessments for the years referred to above. The asses-
see then appealed to the Tribunal. The Tribunal examined the
matter from various aspects and held:
"So far as the Radhasoami sect is concerned
its properties were held only for the further-
ance of the object of the Satsang and this
object was to propagate the religion known by
the name of Radhasaomi. This was a purely
religious purpose as held by the Privy Council
and therefore the objects of the assessee are
clearly religious objects."
While the Tribunal did not accept that the words ’held
under trust’ merely meant a consideration of the factual
position and that if the income had been applied for reli-
gious purpose it was unnecessary to find out whether in law
a trust had been created or not. But the Tribunal was of
317
the opinion that the words legal obligation were much wider
and the activities of the Satsang could be brought within
the purview of that expression. It finally held that the
assessee was entitled to the exemption claimed under s. 11.
The High Court did not accept the conclusions of the
Tribunal by heavily relying upon the revocability of the
trust as clearly specified in the document and accepting the
stand of the Revenue that exemption under s. 11 was subject
to the provisions of ss.60 to 63 of the Act and on the
finding that the trust was revocable it upheld liability,
Section 11(1) of the Act, as far as relevant, provides:
"Subject to the provisions of sections 60-63,
the following income shall not be included in
the total income of the previous year of the
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person in receipt of the income:
(a) income derived from property held
under trust wholly for charitable or religious
purposes, to the extent to which such income
is applied to such purposes in India; and
Co) where any such income is accumulated
or set apart for application to such purposes
in India, to the extent to which the income so
accumulated or set apart is not in excess of
25% of the income from such property;.."
The conditions which have to be satisfied to
entitle one for exemption, therefore, are:
(a) the property from which the income is
derived should be held under trust or other
legal obligation.
(b) the property should be so held for
charitable or religious purposes which enure
for the benefit of the public.
It is well-settled that no formal document is necessary to
create a
trust.
The reference itself accepts the position that the
assessee is a religious institution. There has been some
amount of debate in the forums below as to whether Radha-
soami Satsang is a religion. This Court in Acharya Jagdish-
waranand ,Avadhuta & Ors. v. Commissioner of Police, Calcut-
ta & Anr., [1983] 4 SCC 522 while examining the claim of
Anand Marg is to be treated as a separate religion indicat-
ed:
"The words ’religious denomination’ in Article
25 of the Constitution must take their colour
from the word ’religions’ and
318
this be so the expression religious denomina-
tion must also satisfy three conditions:
(i) it must be a collection of individu-
als who have a system of beliefs of doctrines
which they regard as conductive to their
spiritual well-being, that is, a common faith,
(ii) common organisation; and
(iii) designation by a distinctive name."
In that case Anand Marg was held to be a ’religious
denomination’ within the Hindu religion. It is not necessary
for us to decide whether Radhasoami Satsang is a denomina-
tion of the Hindu religion or not as it is sufficient for
our purposes that the institution has been held to be reli-
gious and that aspect is no more in dispute in view of the
frame of the question.
The question of assessment to income-tax arose only
following the decision of the Privy Council in the dispute
between the two factions. The Judicial Committee found that
the properties which were the subjectmatter of the suit were
acquired with the moneys presented to the Sant Satguru in
the form of bhents or other contributions by the followers
of the Radhasoami faith. The Judicial Committee found that
it was almost inconceivable that the followers of the faith
when making their gifts to the Sant Satguru intended to
create a trust within the meaning of the Act 14 of 1920 of
which they, the donors and the worshippets, should be the
beneficiaries. The Privy Council further also found that it
could not be said that the donors of the gifts were the
authors of the alleged public trust. The question was exam-
ined keeping the provisions of the 1920 Act in view. The
requirements of s. 11 of the Income Tax Act are considerably
different from what the Judicial Committee of the Privy
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Council was required to consider.
We have already pointed out that after 1907 the denomi-
nation got divided. The claim of Dayalbagh group for exemp-
tion under the IncomeTax Act came for consideration before
the Allahabad High Court in the case of The Secretary of
State for India in Council v. Radha Swami ,Sat Sang, 13 ITR
520. There it was found that the offerings made by the
Dayalbagh Satsangis to Sahebji Maharaj and the property
which had grown out of them and which admittedly stood in
the name of the Sabha and the property which at all material
times had stood in the name of the Sabha vested in the Sabha
for the benefit of the Satsangis and Sahebji Maharaj had no
beneficial or personal interest in that. What has been found
for the Dayalbagh Satsangis on this score is fully applica-
ble so far as the assessee is concerned, There is no dispute
that the properties of the assessee are
319
also recorded in the name of the Sabha (Central Council) and
there is no personal interest claimed by the Sant Satguru in
such property. Ever the years the Satguru has never claimed
any title over, or beneficial interest in, the properties
and they have always been utilized for the purpose of the
religious community. The test applied by the Privy council
in the case of A 11 India Spinners’ Association v. Commis-
sioner of Income - Tax. Bombay 12 ITR 482 is indeed applica-
ble to the facts of the present case and the result would
then be in favour of the assessee. We would like to point
out that even if the trust was revocable, the property was
not to go back to the Satguru on revocation. The constitu-
tion and the bye-laws on record indicate in clause 1(b):
"1. The constitutional powers of the Central
Council Radhasoami
Satsang ..................... are as below:
(b) to collect, preserve and administer the
properties movable and immovable that have
been or may hereafter be dedicated to Radha-
soami Dayal or that may be acquired for or
presented to the Radhasoami Satsang for the
furtherance of the objects of the Satsang."
This envisages that where the property was given to the Sant
Satguru, it was intended for the common purpose of further-
ing the objects of the Sant Satguru and the Central Council
had the authority to manage the property. Clause 9 of the
document stipulated that the properties would vest in the
trust and clause 25 provided that the trust shall be revoca-
ble at the discretion of the Council and the trustees shall
hold office at its pleasure. Upon revocation the property
was not to go back to the Satguru and at the most. in place
of the trust, the Central Council would exercise authority.
It is on record that there has been no Satguru long before
the period of assessment under consideration. As a fact,
therefore, the Tribunal was justified in holding that the
property was subject to a legal liability of being used for
the religious or charitable purpose of the Satsang. This
aspect had not been properly highlighted before the High
Court.
One of the contentions which the learned senior counsel
for the assessee-appellant raised at the hearing was that in
the absence of any change in the circumstances, the Revenue
should have felt bound by the previous decisions and no
attempt should have been made to reopen the question. He
relied upon some authorities in support of his stand. A full
Bench of the Madras High Court considered this question in
T.M.M Sankaralinga Nadar & Bros. & Ors, v. Commissioner of
Income-Tax, Madras, 4 ITC 226. After dealing with the con-
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cession the Full Bench expressed the following opinion:
320
"The principle to be deducted from these two
cases is that where the question relating to
assessment does not vary with the income every
year but depends on the nature of the property
or any other question on which the rights of
the parties to be taxed are based, e.g.,
whether a certain property is trust property
or not, it has nothing to do with the fluctua-
tions in the income; such questions if decided
by a Court on a reference made to it would be
res judicata in that the same question cannot
be subsequentiy agitated."
One of the decisions referred to by the Full Bench was
the case of Hoystead &Ors. v. Commissioner of Taxation 1926
AC 155. Speaking for the Judicial Committee Lord Shaw stat-
ed:
"Parties are not permitted to begin fresh
litigations because of new views they may
entertain of the law of the case, or new
versions which they present as to what should
be proper apprehension by the Court of the
legal result either of the construction of the
document or the weight of certain circum-
stances. If this were permitted litigation
would have no end, except when legal ingenuity
is exhausted. It is a principal of law that
this cannot be permitted, and there is abun-
dant authority reiterating that principle.
Thirdly, the same principle - namely, that of
setting to rest rights of litigants, applies
to the case where a point, fundamental to the
decision, taken or assumed by the plaintiff
and traversable by the defendant, has not been
traversed. In that case also a defendant is
bound by the judgment, although it may be true
enough that subsequent light or ingenuity
might suggest some traverse which had not been
taken."
These observation were made in a case where taxation was in
issue.
This Court in Parashuram Pottery Works Co. Ltd. v.
Income-Tax Officer, Circle 1, Ward A, Rajkot, 106 ITR 1 at
p. 10 stated:
"At the same time, we have to bear in mind
that the policy of law is that there must be a
point of finality in all legal proceedings,
that stale issues should not be reactivated
beyond a particular stage and that lapse of
time must induce repose in and set at rest
judicial and quasi-judicial controversite as
it must in other spheres of human activity."
Assessments are certainly quasi-judicial and
these observations equally apply.
321
We are aware of the fact that strictly speaking resjudi-
cata does not apply to income-tax proceedings. Again, each
assessment year being a unit, what is decided in one year
may not apply in the following year but where a fundamental
aspect permeating through the different assessment years has
been found as a fact one way or the other and parties have
allowed that position to be sustained by not challenging the
order, it would not be at all appropriate to allow the
position to be changed in a subsequent year.
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On these reasonings in the absence of any material
change justifying the Revenue to take a different view of
the matter- and if there was not change it was in support of
the assessee- we do not think the question should have been
reopened and contrary to what had been decided by the Com-
missioner of Income-Tax in the earlier proceedings, a dif-
ferent and contradictory stand should have been taken. We
are, therefore, of the view that these appeals should be
allowed and the question should be answered in the affirma-
tive, namely, that the Tribunal was justified in holding
that the income derived by the Radhasoami Satsang was enti-
tled to exemption under ss. 11 and 12 of the Income Tax Act
of 1961.
Counsel for the Revenue had told us that the facts of
this case being very special nothinng should be said in a
manner which would have general application. We are inclined
to accept this submission and would like to state in clear
terms that the decision is confined to the facts of the case
and may not be treated as an authority on aspects which have
been decided for general application.
We direct the parties to bear their respective costs.
V.P.R. Appeals
allowed.
322