1962-VIL-31-SC-DT

Equivalent Citation: [1963] 48 ITR (SC) 53, 1963 AIR 1452, 1963 SCR Supl. (1) 667

SUPREME COURT OF INDIA

Appeals Nos. 248 to 253 of 1662

Dated:19.10.1962

GURU ESTATE

Vs

COMMISSIONER OF INCOME-TAX

For the Appellant: A. V. Viswanatha Sastri, R. S. Mahanty and B. P. Maheshunri,

For the Respondent: N. D. Karkhanies and R. N. Sachthey,

Bench

SHAH, J.C., KAPUR, J.L. AND HIDAYATULLAH, M, JJ.

JUDGMENT

SHAH J. 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 Annadan during the assessment years of 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 especially 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 disputed that amounts received as Pranami are profits or gains of business or vocation carried on by the assessees and liable to incometax. 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 section 4(3)(i) and (ii) of the Indian Income-tax Act. The assessees 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 the Hindu religion" and the offerings known as Annadan received by them on condition of 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 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 the Darshan, I pay up to (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 himself and the people of the district to which I belong. I,. signed this Attika Annadan."

The amounts received or collected from the pilgrims under Annadan Patras (which were also styled as Attika Patras) were credited in an account known as Annadan Accounts and expenses of "food offerings" to the diety were defrayed out of that fund. The assessees claim that out of the unspent balance they purchased property in the name of the diety Jagannath.

The Income-tax Officer held that Annadan received by the assessees was not exempt from 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 a 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 purposes. 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 document they were signing. The assessee had not shown either that he gave receipts to the pilgrims indicating his trustee position and his undertaking to employ the receipts 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... This itself as a fact shows that the money paid by the pilgrims was not used for the exclusive purpose of offering Bhog 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 once 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" The Tribunal also observed that the assessees were not an institution and they were not exempt under section 4(3)(i) 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 the 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 assessees had not proved that they were under any obligation to devote the income to any particular use." The assessees then moved the High Court for an order under section 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 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 is assumed (without deciding) that a religious trust was created for the main purpose of offering Bhog to Lord Jagannath at Puri by the execution of the Annadan 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 assessees derived from that source was not exempt from liability to pay income-tax under clause (i) or clause (ii) of sub-section (3) of section 4 of the Indian Income-tax Act.

The material part of sub-section (3) of section 4 of the Indian Income-tax Act as it stood at the relevant time was as follows :

"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 (i) 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 clause (i) of subsection (3) if it be derived from property held under a trust or other legal obligation, solely for religious or charitable purposes, and under clause (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 a 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 the conduct 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 advice 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 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 Edwards v. Bairstow [1953] 28 I.T.R. 579; (1955) 36 Tax, Cas.207. The High Court made an order under section 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 business of pilgrim-traffic." Under the Income-tax Act, on conclusions 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 attempted to exercise not the advisory jurisdiction in respect of the decision of the Tribunal which alone is conferred by section 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 created by the pilgrims. On that finding no question as to the applicability of section 4(3)(i) 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 reasonably be arrived at 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 of 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 section 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 finding 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 the assessees, and on the assumption that a trust was created they regarded the trust as a private 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 section 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 section 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 those appeals.

Appeals dismissed.