the Guru Estate Through Dwarkadas Guru and Others v. the Commissioner of Income-Tax Bihar and Orissa

Judgment

1 S.C.R. THE GURU ESTATE THROUGH DWARKADAS GURU AND OTHERS THE CO.MMISSIONER OF INCOME-TAX BIHAR AND ORISSA (J. L. KAPUR, M. HrnAYATULLAH and J.C. SHAH, JJ.) Income Tax-Income from trust-Exemptiou from taxation-Applicability of the rule-'' Exclusively to purposes religioU8 or charitable"-High Court's jurisdiction in references-Binding on Tribunal's findings on facts-Indian Income-tax Act, 1922 (11of1922), ss. 4 (3) (i) and (ii), 66 (2). The assessees 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 A nnadan Patras signed by the pilgrims. The assessees 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 A nnadan 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 c;eated by the pilgrims. and that the assessees were not an 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 privat~ )§62 Octob1r1 19. Guru Est•lf tlo.u1h Dwark•il.s Guru Commissi.ner •/ lncoTlll•Tax Bili•r an4 Oriss• Silail,J. 608 SUPREME COURT REPGRTS [1963] SUPP. religious trust and that, therefore, the income of the assessaes derived from the source-wa; not exempt from liability to tax u11der ss. 4 (3) (i) and (ii) of the Act. Held, tha.t the amounts received by the assessees under tke Annadan PatrM 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.

H•ld, further, that the High Court erred in ignoring the finding ;or the Appellate Tribunal that there was no trust and in coming to a conclusion, on the assumption that a trust was intended to be created by the pilgrims, that the trust was a private tru•t. 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 uourt has to advise the Tribunal as to the Ja.w 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. 66 (2) of the Act, but jurisdiction which in substance was appellate. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 248 to 253 of 1962. 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 ..

Makeshwari, for the appeilants in all the appeals. N. D. Karkhanies and R. N. Saohthey, for the respondent in all the appeals. 1962. October 19. The Judgment of the Court was delivered by Sl'IAH, ].-These six appeals raise a common question as to the liability of the assessees to pay income-tax in respect of certain receipts known as 1 S.C.R. '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 'Dakshina' or 'Pranami'. It is not disp4ted 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 assessees 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 Act. The asscssees claim that "their estate originally and virtually represent5 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 Annadan received by them on condition utilising the same for the Bhog (food offering) in the ~emple of Jagannath are exempt from liability to pay mcome-tax because, the Annadan offerings are !ncome derived from property held under a trust and m any event they are income of a religious institution derived fro~ yoluntary contributions and applicable solely to religious purposes.

In support of their plea the assessees rely upon the Annn;dan Pritras signed by the pilgrims, in the following form :- "Written by ......... of village ......... Thana ...... etc. Coming to the sacred place of Sri Jagan· nathji and having his Darsan, I pay unto .... \~me of Panda), Gaudbad Sahi, Puri Town for the .. Bh?g o\ ~ree J aganna thji, Rs .......... The Pandaj1 w'.~l ut1hse this amoun.t for the Bhog of J asannath JI and the Prasad will be enj0yed by 1!62 G1Jru Estatt lliroufh Dwark4atls Guru Commi.ss.iotUr of Jntome~T ax Bih«r a'ld Orissa Shsh,.J. ""' EH•li lhr1111ih D..otkrils G•tu C1mm.itsif111r 1f lncm,.Ta BU..v .,,,Orii. .. Sltah, J. 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 Annadt.in 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 assessees 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 charitable purposes, that the assessees were not shebaits appointed 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 Pandas 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 created and the balance was appropriated by them to their own use and that they did not derive income from voluntary contributions applicable solely to religious or charitable purpose. The Income-tax Appellate Tribunal confirmed the order observing : "Except the bare assertion of the assessee before us, there is no evidence to show that the pilgrims understood either the character or the implication of the docu~ent they were signing. The assessee ~as _not s~o~n .either. that he gave receipts to the pilgnms mdicating his tru~tee position and his unde1taking to employ the receipts I s.c.R. 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 busil).ess 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 assessees 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 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 asses. sees had not proved that they were under any obligation to devute the income to any particular use". The assessees 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 l~w 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 Guru Estate tlarou1h Dwarkadas Guru Com:rtissiour a.f Iruwu-T a BifrM t111dOrisJa Shah, .I. 'uru Es.tali tliroueh Dwarka.dar Guru c~mmissioner of llfnc.nv.Tax Bilit:r anJ. Orissa Sh•h, J. the larger question whether the contributions made through Amiadan 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 assumed (without deciding) that a religious trust was created for the main purpose of offering Bhog to LordJagannath at Puri by the execution of the Annadan Patra, the essential que.stion 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 Annndan Patra was a private religious trust and the income of the assessees 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 person 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 apart for application thereto. (ii) Any income of a religious or charitable institution derived. from voluntary 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 obligation for the purposes specified and the assessees 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 ex ere ise of its jurisdiction by the High Court. The Tribunal held that the ~eceipts called Annadar: were earned by the assessees m theconduct of their business as Pandas 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 app!icable. T.he Teribunal having found that the receipts were m the nature of income of a business and no trust was ever intended by the pilgrims wh~ IH2 Guru &1111< tloroat Dwarkodlls Guru Commisri.n1' of lnc"1fll-T ox Bihtt mu! Orissa Shalt, J. G•"'

Es1ai. llirough D-'<adal Guru Ootn111Wion1r oj lnC'1m1-T t»t Bihar and Oriua Shah, J. 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 Edward v. Bristow(1). The High Court made an order under s. 66(21 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 oprn 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 business 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 assump· tion 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 Higli Court attempted to exercise not the advisory jurisdic· tion in respect of the decision of the Tribunal which alone is conferred bys.

66(2) of the Indian Incometax Act, but jurisdiction which in substance was appellate. The Tribunal had recorded a finding that there was in fact no trust intended or created by th~ ti) (l!IM) 86 Tu ea.. 2071 pilgrims. On that finding no question as to the applicability of s. 4(3) (i) in any event could arise. It was open to the assessees to demand that a question that the fi,nding was based on no evidence or that it could not reasonably be arrived by any pers0n acting judicially and properly instructed as to the relevant law. Some vague statement was made in the appli· cation to the High Court for an order for calling for a statemeut 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 reli~ous 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 !n the absence ?f any finding that the Annadan m~ol?e was de~IVed from property held under a rehg10us or chantable trust, the claim of the assessees for exemption must fail.

Their claim to exemption un?e! 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: Appeqlq dismissed, Guru li:sloll th,....., Dwark•das Gan- Commissimur t.!I Income-Tax Biht. and Ori.1sa Shah, J.