Patna High Court
Raja P. C. Lall Chaudhary vs Commissioner Of Income-Tax Bihar And ... on 24 February, 1956
Equivalent citations: [1957]31ITR226(PATNA), AIR 1956 PATNA 314
JUDGMENT
BENERJI, J. - This is a reference under section 66 (1) of the Income-tax Act by the Income-tax Appellate Tribunal, Patna. The questions referred for our decision is as under :
"Whether on a true construction of the documents, it can be held that a private trust was created and the income in the sum of Rs. 2,051 alleged to have been received under the said deed by the deity, Sree Bala Tripura Sundari, was not assessable in the hands of the assessee ?"
The facts giving rise to the reference are as fallows : The assessee installed a deity, Sree Bala Tripura Sundari, in a temple in Purnea City, and for the performance of the worship of the deity he allotted a sum of Rs. 200 per moth out of his income from a fair known as Gulabbagh Hat. He also allotted a sum of Rs. 1,000 per year for the repairs and maintenances of the temple, which sum too, was payable from the income of that fair. The assessee created a legal obligation on himself by executing a deed of dedication in favour of the deity on the 23rd May, 1947, in which the details of the amounts dedicated were given, and it was stipulated as fallows :
"I, the executant, have installed an idol of Shree Bala Tirpura Sundari... according to Vedic rites and have appointed Kumar Bhubneshwari Chand Lal Choudhary and manager of Raj Nazarganj as her shebaits and managers. Now it is necessary to make arrangement of money for performance of her puja, archa bhog, rag and other daily expenses. Therefore, I, the executant, of may own accord and free will thought it desirable to allot Rs. 200 per month and Rs. 2,400 per year for puja, archa, bhog, rag etc. per day and Rs. 1,000 every year in the month of September-October for the repairs and other works of the said Mandir, in all Rs. 3,400 out of the income of Gulabbagh Hat and it will be the first charge on the income of Gulabbagh Hat."
It was further mentioned in the deed that the bhog-rag of Deviji would be performed daily out of this income of Rs. 200 per month; that if any stranger and guest came to the Mandir, he should be duly attended to; and that the salary of the servant would be said every months. In terms of the deed, the assessee had deducted a sum of Rs. 2,051 showing the same as expenses towards the maintenance of the temple of the deity. This was disallowed, and an appeal before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, Patna Branch failed. Thereafter, on a prayer made by the assessee, the Appellate Tribunal has submitted the statements of the case and referred the question mentioned above for answer of this Court.
The main argument of Mr. S. K. Mazumdar, appearing on behalf of the assessee, is that, as a legal obligation had been created and the income from the Gulabbagh Hat settled on trust in favour of the deity, the expenses incurred for maintenance of the temple was exempt from taxation. The argument so advanced has to be judged in the light of the provisions of section 4, sub-section 3 (i), of the Income-tax Act. This clause, as it stood before, runs as fallows : "Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes and in the case of a property so held in part only for such purposes the income applied or finally set apart for application thereto". If the provision of this clause is attracted by the facts of this case, there can hardly be any doubt that the income shall not be included in the total income of the person receiving the same. For the purpose of the case it may be assumed that the assessee has created a legal obligation for religious purpose and that a sum of Rs. 2,400 out of the income of Gulabbagh Hat has been made the first charge for the maintenance of the deity and for repairs of the temple. As it is accepted in the circumstances of the case that a private religious trust been created by the assessee it is no longer necessary to refer to the cases cited by Mr. Mazumdar in order to ascertain the creation of a valid trust. The question is, however whether this income from Gulabbagh Hat can be exempted from taxation under section 4 (3) (i) of the Income-tax Act. It is true that the assessee has made a part of his income a charge to meet the obligation created by the deed of dedication, but no property has been set apart exclusively for the maintenance of the deity. It is hardly possible, therefore, to hold, in the circumstances of this case, that the income that the assessee is deriving from the Hat is from property held under trust or other legal obligation. The decision in Raja Bijoy Singh Dudhuria v. Commissioner of Income-tax, Bengal can hardly be of any assistance to the assessee. In the case, the stepmother of the assessee had obtained a decree for maintenance and by virtue of the right she claimed a share in the income, being a member of a Hindu undivided family. It was held by their Lordships of the Judicial Committee that the income which was given to the lady was never the income of the assessee. It was the allocation of a sum out of revenue before it became income in his hands. In the case of Commercial; of Income-tax, Punjab, v. Thakur Dass Bhargava a trust for the sum of Rs. 32,500 was already created by an agreement between the assessee sand the other party, who happened to be an accused and there relatives, in a case in which the assessee agreed to act as lawyer, and it was not disputed that the payment received were on behalf of the trust and not by the assessee in his capacity as an individual, In these circumstances it was held that the sum of money received by the assessee was on behalf of, and therefore clothed with, a trust and, accordingly could not be held to be his income. It is clear from the facts of this case that the sum of money received by the assessee was for the specific purpose of creating a trust and, therefore, attracted the principles laid down in the case of Bijoy Singh Dudhuria v. Commissioner of Income-tax, Bengal.
There are two cases which go directly against the argument advanced by Mr. Mazumdar. The first one is J. K. Trust, Bombay v. Commissioner of Income-tax, Bombay. In this case the assessee were trustee of a rust known as J. K. Trust for a sum of rupees one lakh, and it was not disputed that the trust was for charitable purposes. It was also not disputed that, as far as the sum of rupees one lakh was concerned, it was property which was held for charitable purposes. It was property which was held for charitable purposes within the managing agents and in such a capacity they earned commission, and the question before their Lordships was whether this commissions, which was utilised for the purpose of the trust, was exempt from taxation. Their Lordships held that section 4 (3) (i) did not confer any exemption upon income which is settled upon a charitable trust and that the exemption is only conferred upon income which is derived from property which is settled upon the charitable trust. It was also held that it was not sufficient for a person to make a trust of his future income to claim exemption under section 4 (3) (i) and unless the property from which that income was derived was also made the subject of a trust, the mere making of trust with regard to the income would not be sufficient to claim exemption under section 4 (3) (i). There fore, as the commission derived by the managing agents was not from the trust fund, the income that came to their hands by utilising rupees one lakh kept as a security for their agency was not free from taxation.
In the case of A. Eggar v. Commissioner of income-tax, Burma, the assessee was permitted to accept an appointment on condition that he assigned the whole of his salary he received therefrom, to be held in trust for the benefit of the University and its students. It was held that, although the salary in question might be treated as trust money, the assessee could not derive any benefit out of section 4 (3) (i) of the Income-tax Act as the income in question could not be considered as income from property so held. It is clear, therefore, that in the case before us the assessee is not entitled to claim exemption under section 4 (3) (i) of the Income-tax Act.
It seems from the statement of the case by the Income-tax Tribunal that the argument placed before it was on the assumption of the dedication being in the nature of a private trust. If that be so, the assessee is not entitled to any relief. The exemption granted by the clause is confined to public religions trusts and does not extend to private religious trusts not enuring for the public benefit. The recitals in the deed are not very helpful, and mere attendance to strangers and guests happening to come to the temple cannot clothe the dedication with the character of a public religious trust.
Moreover, the alleged legal obligation to allocate the sum does not accrue until the income from the fair in the hands of the assessee. The tolls collected from the fair represent the income of the assessee, and not until the whole or apart of such income is in his hands is he in a position to discharge that obligation. It follows, accordingly that the sum so collected is income of the assessee in the first instance and is, therefore, attracted to tax.
It has then to be examined if the provisos to section 16 (1) (c) of the income-tax Act are attracted to the facts of this case. In my view, they do not, for the simple reason that the assets from which the temple is to be maintained remain the property of the assessee and a part of the income from these assets is applied for an obligation created by the assessee himself. I find, therefore, that the income in the sum of Rs. 2,051 was not received under the need of deduction to the deity and, therefore, it is assessable in the hands of the assessee.
The question is accordingly answered against the assessee who will pay Rs. 32 (sic) as costs to the Income-tax Department.
CHOUDHARY, J. - I agree.
Reference answered accordingly.