Full Judgment Text
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PETITIONER:
THE GURU ESTATE THROUGHDWARKADAS GURU AND OTHERS
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAXBIHAR AND ORISSA
DATE OF JUDGMENT:
19/10/1962
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
KAPUR, J.L.
HIDAYATULLAH, M.
CITATION:
1963 AIR 1452 1963 SCR Supl. (1) 667
ACT:
Income Tax-Income from trust-Exemption from taxation-
Applicability of the rule-"Exclusively to purposes religious
or charitable" High Court’s jurisdiction in references-
Binding on Tribunal’s findings on facts-Indian Income-tax
Act, 1922 (11 of 1922), ss. 4 (3) (i) and (ii), 66 (2).
HEADNOTE:
The assessee were members of a joint Hindu family who
carried on the vocation of Pandas or priests who assisted
devotees in performing worship and ceremonies connected with
the pilgrimage to the temple of jagannath at Puri. They
collected from the pilgrims amounts of money known as
Annadan under writings called Annadan Patras signed by the
pilgrims. The claimed that the offerings of Annadan were
exempt from Income-tax under ss. 4 (3) (i) and (ii) of the
Indian Income-tax Act,. 1922. because they were received by
them on condition of utilising the same for the Bhog (food
offering) in the temple of jagannath and were, therefore,
income derived from property held under a trust and, in any
event, income of a religious institution derived from
voluntary contributions applicable solely to religious
purposes. The income-tax authorities rejected the claim and
held that the amount was liable to tax. The Appellate.
Tribunal found that the money paid by the pilgrims as
Annadan was not used for the exclusive purpose of offering
Bhog, that the said amounts were earned by the assessees in
the conduct of their business as Pandas, that the facts did
not indicate that any trust was intended or created by the
pilgrims. and that the assessees were not art institution.
The ’Tribunal accordingly held that the assessees were not
exempt under s. 4 (3) (ii) of the Act from liability to pay
income-tax. On a reference under s. 66 (2) of the Act, the
High Court took the view that it was not necessary to,
decide the question whether the contributions made through
Annadan Patras by the donor would amount to a trust, that
even if it be assumed that a religious trust was created it
was only a private
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religious trust and that, therefore, the income of the
assessees derived from the source was not exempt from
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liability to tax under ss. 4 (3) (i) and (ii) -of the Act.
Held, that the amounts received by the assessees under the
Annadan Patres were not exempt from tax under ss. 4 (3) (i)
and (ii) of the Indian Income-tax Act, 1922 since on the
findings of the Tribunal, they -were not applicable
exclusively to purposes religious or charitable.
Held, further, that the High Court erred in ignoring the
finding of the Appellate Tribunal that there was no trust
and in coming to a conclusion, on the asumption that a trust
was intended to be created by the pilgrims, that the trust
was a private trust.
Under the scheme of the Indian Income-tax Act the function
of determining facts rests with the Tribunal and on the
facts found the High court has to advise the Tribunal as to
the law applicable. In the present case, the High Court
attempted to exercise not the advisory jurisdiction ;in
respect of the decision of the Tribunal which alone is
conferred by s. 166 (2) of the Act, but jurisdiction which
in substance was appellate.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 248 to
253 of 1662.
Appeals from the judgments dated April 1, 1958, of the
-Orissa High Court in Special -jurisdiction Cases Nos. 6 of
1953 and 42 to 45 of 1954 and 7 of 1956.
A. V. Viswanatha Sastri, R. S. Mahanty and B. P.
Maheshunri, for the appellants in all the appeals.
N. D. Karkhanies and R. N. Sachthey, for the respondent in
all the appeals.
1962. October 19. The judgment of the Court was delivered
by
SHAH,J These six appeals raise a common question as to the
liability the assessees to ’Pay income-tax in
respect of certain receipts known as
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’Annadan’ during the assessment years 1946-47 to 1951-52.
The assessees are a Hindu Undivided family, and engage
themselves as Pandas or priests who assist devotees in
performing worship and ceremonies connected with pilgrimage
to the temple, of Jagannath at Puri, and for services
rendered by them they receive certain emoluments which are
called ’Daksina’ or ’Pranami’. It is not disputed that
amounts received as Pranami are profits or gains of business
or vocation carried on by the assessees and liable to
income-tax. Besides Pranami the assessees collect from the
pilgrims amounts of money known as Annadan under writings
executed by the pilgrims. In these appeals the assesses
claim that those amounts are not liable to be included in
their taxable income , because they are exempt under ss. 4
(3) (i) & (ii) of the Indian Income-tax Apt. The assesses
claim that "their estate originally and virtually represents
the Guru Gadi created and established for the main purpose
of propagating the cult of Lord jagannath in different parts
and among different peoples embracing Hindu religion" and
the offerings known as Anndan received by them on condition
utilising the same for the Bhog (food offering) in’ the’
temple of jagannath are exempt from liability to pay income-
tax because, the Annadan offerings are income derived from
property held under a trust and in any event they are income
of a religious institution derived from voluntary
contributions and applicable solely to religious purposes.
In support of their plea the assessees rely upon the Annadan
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Patras signed by the pilgrims, in the following form
" Written by of village Thana etc. Coming:
to the sacred place of Sri Jagannathji and
having his Darshan, I pay unto,.-..... (name,
of Panda), Gaudbad sahi, puri Town for the
Bhog of Sree Jagannathji, Rs ................
The Pandaji will utilise, this amount for the
Bhog of Jagannathji and the Prasad will be
enjoyed by
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himself and the people of the district to
which I belong. I........... signed this
Atika Annadan’ .
The amounts received or collected from the pilgrims under
Annadan Patras (which were also styled as Atika Patras) were
credited in an account known as Annadan Account, and
expenses of "food offerings" to the deity were defrayed out
of that fund. The assesses claim that out of the unspent
balance they purchased property in the name of the deity
Jagannath.
The Income-tax Officer held that Annadan received by the
assessees was not exempt from the liability to tax, for in
his view there was no valid trust in writing and ’there was
no authority to enforce the obligation’ that the amounts
received by the assessees be spent for religious and char-
itable purposes, that the assessees were not shebaits ap-
pointed under writing and the income sought to be taxed was
in the nature of voluntary contributions and was not derived
from property held under a trust or other legal obligation.
In appeal the Appellate Assistant Commissioner, Cuttack
Range, confirmed the order. He held that the assessees as
Panda8 held a trust fund in their charge every year from
which no income was received but a part of the fund was
spent by them for the purpose for which the trust was creat-
ed and the balance was appropriated by them to their own use
and that they did not derive income from voluntary contribu-
tions applicable solely to religious or charitable purpose.
The Income-tax Appellate Tribunal confirmed the order ob-
serving : "Except the bare assertion of the assessee before
us, there is no evidence to show that the pilgrims under-
stood either. the character or the implication of the docu-
ment they were signing. The assessee has not shown either
that he gave receipts to the pilgrims indicating his trustee
position and his undertaking to employ the, receipts
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for the purposes of the supposed trust. Out of these funds
collected, a major portion is spent upon loans to pilgrims,
charity, expenses for feeding the pilgrims and other items.
x x x x This itself as a fact shows that the money paid by
the pilgrims was not used for the exclusive purpose of
offering Bhog. x x x x x Having-regard to the way in which
the pilgrims are attracted, brought to Puri, treated there,
taken to the temple, fed and ultimately induced to make a
payment, there is only one conclusion possible that the
business of pilgrim traffic was carried on by the assessee.
The facts do not show that any trust was intended or created
by the pilgrims. x x x x x". The Tribunal also observed
that the assess were not an institution and they were not
exempt under s. 4 (3) (ii) of the Act from liability to pay
income-tax, especially because the objects for which Annadan
fund was to be expended were not public objects, and the
payments made by the pilgrims as Annadan could not be said
to be for the benefit of the public or- for charity.
The Tribunal declined to submit a statement of the case on
question of law. alleged to arise out of their order because
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in their view in disposing of the appeal it was found that
"no trust was intended to be created as alleged by the
assessees and that the assessees had not proved that they
were under any obligation to devote the income to any
particular use". The assesses then moved the High Court for
an order under s. 66 (2) of the Indian Income-tax Act
calling upon the Tribunal to state the case. The High Court
directed the Tribunal to state the following point of law
arising out of the case and to refer it for decision :
"Whether, on the facts of this case, the
amounts received by the assessee under the
Attika Patra are liable to tax."
At the hearing of the reference the High Court was of the
opinion that "it was not necessary to discuss
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the larger question whether the contributions made through
Annadan Patra, by the donor would amount to a trust or else
whether it is a mere device to give the entire income to the
Panda for his own benefit". They then observed that "even
if it be as (without deciding) that a religious, trust was
created for the main purpose of offering Bhog to Lord Jagan-
nath at Puri by the execution of the Anmdan Patra the
essential question on which the ’assessability of this
income to income-tax depends, is whether such a trust is a
private religious trust or, a public religious trust". The
Court proceeded to consider the appropriate tests for
ascertaining whether the trust was public or private, and
held, that the trust created by the Annadan Patra was, a
private religious trust and: the income of the assesse"
derived from that source was not exempt from liability to
pay income-tax under cl. (i) or cl. (ii) of sub-s. (3) of s.
4 of the Indian Income-tax Act.
The material part of sub-s. (3) of s. 4 of the Indian
Income-tax Act as it stood at the relevant time was as
follows
S. 4 (3) ,,Any income, profits or gains
falling within the following classes shall not
be included in the total income of the per-son
receiving them:
(i) Subject to the provisions of clause (c)
of sub-section (1) of section 16, any income
,derived from property held under a trust or
other legal obligation solely for religious or
charitable purposes, where such purposes
relate to anything done within the taxable
territories and in the case of property so
held in part only for such purposes, the
income applied or finally set a art for
application thereto.
(ii) Any income of a religious or charitable
institution derived: from
voluntary,
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contributions and applicable solely to
religious or charitable purposes."
It is manifest on a bare perusal of the two clauses that
income of the assessees would be admissible to exemption
under cl. (i) of sub-s. (3) if it be derived from property
held under a trust or other legal obligation, solely for
religious or charitable purposes, and under cl. (ii) if it
be income of a religious or charitable institution derived
from voluntary contributions applicable exclusively to
purposes religious or charitable. Income sought to be taxed
does not answer either of these descriptions; it is not
income derived from property held under a trust or other
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obligation for the purposes specified and the assesees are
not an institution religious or charitable. They are
members of joint Hindu family who carry on the vocation of
Pandas: and the income on the findings of the Tribunal is
not applicable exclusively to purposes religious or
charitable. On this limited ground the claim of the
assessees for exclusion of the receipts under the Annadan
Patras from their total income is liable to be rejected.
This interpretation of the relevant provisions is sufficient
to dispose of the appeals, but we deem it necessary, having
regard to the manner in which the case was approached by the
High Court, to indicate the restrictions inherent in the
exercise of its jurisdiction by the High Court. The
Tribunal held that the receipts called Annadan were earned
by the assessees in conduct of their business as Panda8 and
the facts did not indicate that any trust was intended or
created by the pilgrims. Under the scheme of the Income-tax
Act the function of determining facts rests with the
Tribunal, and on the facts found the High Court has to
advise the Tribunal as to the law applicable. The Tribunal
having found that the receipts were in the nature of income
of a business, and no trust was ever intended by the
pilgrims who
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gave Annadan the High Court had to record its opinion on the
basis of those facts. A finding of fact recorded by the
Tribunal may not be regarded as final if it is not supported
by any evidence, or is founded upon a view of facts ’which
cannot reasonably be entertained, or upon a misconception,
vide Edvard v. Bristow(1). The High Court made an order
under s. 66(2) because in their opinion the consideration
whether the pilgrims understood the true character or the
implication of the Annadan Patras signed by them was
irrelevant, and that merely because there was a breach of
trust committed by the assessees, the trust was not
destroyed. But it was not open to the High Court to ignore
the finding of the Tribunal that there was no trust, and the
receipts under Annadan Patras were income from ""the busi-
ness of pilgrim traffic". Under the Income-tax Act, on
conclusions on questions of fact recorded by the Tribunal,
if a question of law arises, the High Court will deliver its
opinion provided it is properly referred. The conclusion of
the Tribunal was based on a review of the evidence. The
Tribunal on the evidence relating to the manner in which the
pilgrims were attracted, brought to Puri, treated there and
taken to the temple, fed and ultimately induced to make a
payment inferred that the receipts were in the course of
business.
At the hearing of the reference the High Court addressed
itself to a question which was not referred by the Tribunal.
The High Court on the assumption that a trust was intended
to be created by the pilgrims by giving Annadan, proceeded
to hold that the trust was a Private trust. In so holding
the High Court attempt to exercise not the advisory
jurisdiction in respect of the decision of the Tribunal
which alone is confer-red by s. 66(2) of the Indian Income-
tax Act, but jurisdiction which in substance was appellate.
The Tribunal had recorded a finding that there. was in fact
no trust intended or credited by the
(1) (1955) 36 Tax Cas. 207.
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pilgrims. On that finding no question as to the
applicability of s. 4(3) (1) in any event could arise. It
was open to the assessees to demand that a question that the
finding was based on no evidence or’ that it could not
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reasonably be arrived by any person acting judicially and
properly instructed as to the relevant law. Some vague
statement was made in the application to the High Court for
an order for calling for a statement of the case that the
finding was based on no evidence, but the High Court was not
asked to call upon the Tribunal by an order under s. 66(2)
to submit a statement on the question that the finding, that
there was no trust was based on no evidence. On the
question referred the High Court was bound to accept the
findings of the Tribunal and to decide the question of law,
if any, arising therefrom. The High Court however ignored
the finding that the income received as Annadan was part of
the income or properties of a business carried on by the
assessees, and on the assumption that a trust was created
they regarded the trust as a private religious trust. In so
doing the High Court did not in substance answer the
question submitted to it.
Normally in circumstances such as this case discloses, we
would have called for a finding from the High Court on the
question which was referred by the Tribunal, but on the view
we have already expressed no useful purpose will be served
by adopting that course. On the true meaning of s. 4(3) (i)
in the absence of any finding that the Annadan income was
derived from property held under a religious or charitable
trust, the claim of the assessees for exemption must fail.
Their claim to exemption under s. 4(3) (ii) must fail
because they are not a religious or charitable institution.
The appeals therefore fail and are dismissed. There will be
no order as to the costs of these appeals.
Appeals dismissed
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