Income Tax Appellate Tribunal - Hyderabad
Sri Pedda Jeeyangar Mutt vs Income-Tax Officer on 24 July, 1989
Equivalent citations: [1989]31ITD324(HYD)
ORDER
K.S. Viswanathan, Accountant Member
1. We find it convenient to dispose of these four appeals by the assessees by a common order. The assessees before us are represented by the same counsel and the issues arising in all these appeals are identical. By the consent of the parties, we have consolidated these appeals for the sake of convenience.
2. The issue to be decided in all these appeals is whether the activity undertaken by the assessees would constitute business for the purpose of Section 11(4A). The two assessees are two religious Mutts who are closely connected with the day-today performance of the religious duties and worship in the Venkateswara Swamy Temple at Tirumala. The Mutts have been in existence for several centuries from the time of Saint Ramanuja Charya who founded these Mutts. The Heads of the Mutts are Sanyasies. The Officer of the head of Pedda Jeeyangar is decided by nomination. The ruling Pedda Jeeyangar nominates as Chinna Jeeyangar who acts as the 'alter ego' of the Pedda Jeeyangar during the latter's lifetime and succeeds him at his death. The vacancy of Chinna Jeeyangar is filled in by another Sanyasi by selection as found suitable by the Pedda Jeeyangar. The successive Pedda and Chinna Jeeyangar have come to occupy the positions in this manner over the centuries.
3. Up to 1873 Mahant of Sri Hathiramjee Mutt on the one hand and the Jeeyangars on the other acted as the trustees of the Temple at Tirumala, the former discharging administrative functions and the latter religious functions. The temple revenues consisted of mainly the surplus from the offerings of devotees and pilgrims. This surplus after meeting the cost of administration and maintenance of the temple was being appropriated by the Government but that has now been stopped and it is divided among various parties and both the Mutts are entitled to a share therefrom. In fact, in 1904 a declaratory suit was filed before the High Court of Madras in which Jeeyangar Mutts were the appellants and the Mahant of Hathiramjee Mutt was the respondent. The High Court delivered their judgment on 27-4-1911. They had held that the two Mutts are the Dharmakartas or the trustees of Tirumala Temple and certain other temples. At page 5 of their order, the High Court observed "We therefore consider that the plantiff is entitled to be styled Dharmakarta of the temples shown as Nos. 1 to 4 and 18 in plaint schedule A and of no others: the term Dharamkarta being understood in a limited and special sense as indicated in Sri Sadagopa Ramanuja Jiyangarlu v. Sri Mahant Rama Kesore Dossjee I.L.R. 22 Mad. 189 and not as entailing the full rights and duties of a trustee.
4. The High Court had also set out what were the duties of the Dharmakarta. These have been codified later in the T.T.D. Manual. Shortly, the duties included the keeping in safe custody of the keys of the temple doors, opening the temple for puja etc., supervising the pujas, supervising Hundi collections every night, checking and sealing the Hundies, keeping accounts etc. ,
5. As already stated the Jeeyangars are entitled to a share from the prasadams and panyarams from the temple. Their share a few decades ago was not large enough to be treated as a source of income. However, over the years the temple had become the number one attraction for all Hindus all over the world so that the prasadams and panyarams have greatly increased. Therefore, substantial amount is received by the two Jeeyangars every day. A part of this is distributed by them freely. But still a large quantity would be left and the Jeeyangars had decided to dispose them of to the pilgrims at a price. The sales to the public are at the same rate at which the prasadams are sold by T.T.D. Such sale proceeds of prasadams amounted to substantial sums. For instance for the asst. year 1984-85 Chinna Jeeyangar Mutt had received Rs. 9,47,651. They had also to incur some expenditure in arranging for its sales. In that year, they had paid commission to selling agents at Rs. 56,962.
6. The two Mutts have been regularly filing their income-tax returns and they were accepted to be charitable institutions eligible for exemption under Section 11. Such returns filed by Pedda Jeeyangar Mutt for the asst. years 1984-85, 1985-86 and 1986-87 and Chinna Jeeyangar Mutt for the asst. year 1984-85 had been accepted by the Income-tax Officer under Section 143(1). The Commissioner was of the opinion that the acceptance of the returns was erroneous and prejudicial to revenue. The sale of prasadams according to the Commissioner amounted to business and therefore the assessee is not entitled to exemption under Section 11 and they would be caught in the net of Section 11(4A). However, he concluded in his order that the Income-tax Officer had not examined the main issue i.e. whether the activity regarding the receipt of prasadams and panyarams and their disposal in the market would amount to business and whether Section 11(4A) would be applicable. This enquiry according to the Commissioner was essential for determining the admis-sibility of Section 11. He, therefore, set aside the assessment with a direction to redo it according to law.
7. The assessees are on appeal against this order. Sri Tiruvengadam, learned counsel for the Mutts, after tracing the history of the two Mutts submitted that the Mutts were merely Dharmakartas who were saddled with certain duties of over-seeing the pujas in the temple. These duties were also their rights. The share in the prasadams given to them was to meet the expenditure incurred in carrying out the duties. Unlike other cases where the remuneration for such duties is given in cash, in this case the remuneration or reimbursement is in kind i.e. a share in prasadams. Since the remuneration was received in kind and since the assessee's Mutts have expenditure to incur, the Mutts had converted the payment in kind to cash. Sri Thiruvengadam submitted that such conversion of a receipt in kind to cash may not represent any business activity. To show that no income arises merely on conversion of an asset into cash, he cited the decision of the Supreme Court in the case of Raja Mohan Raja Bahadur v. CIT [1967] 66 ITR 378. In that case, the assessee was carrying on money-lending business and they had received as part of discharge of debt certain Bonds. These bonds were later sold by them. The department assessed them for the year when the Bonds were converted into cash. The Supreme Court however held that the income accrued when the bonds were received and not when they were converted. Following this ratio, he has submitted that the mere conversion of the prasadams into cash do not give rise to income and has no relevance in the assessment. According to him, there are no business activities at all and so Section 11 (4A) would not be applicable.
8. Sri Radhakrishnamurthy for the department submitted that it was not necessary for the Tribunal to go into the merits of the issue. He submitted that the Commissioner has not decided anything on merits. The Commissioner found that the Income-tax Officer has not made any enquiry about the activities of the assessee in order to show whether Section 11(4A) would be applicable. This amounted to a failure on the part of the Income-tax Officer to make necessary enquiries. Such failure made the order erroneous and prejudicial to revenue. As regards the merits, he submitted that it was open for the assessee to claim before the Income-tax Officer that Section 11(4A) would not be applicable. At this stage all that required is to see prima facie case is made out for enquiry.
9. We have considered the submissions. It is true, as Sri Radhakrishna Murthy stated that the failure of the Income-tax Officer to make enquiries would constitute a ground for the Commissioner to treat the order as erroneous. Please see the decision of the Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375. However, in order to apply this principle, it must be shown that an enquiry was necessary and the Income-tax Officer had failed to do it. Whether an enquiry was necessary or not would depend upon the facts and the circumstances of the case. In this case, the Income-tax Officer was dealing with the assessments of two very ancient religious Mutts and their association with the religious functions in the Tirumala Temple were quite well-known. Even then he had called for the books of accounts and examined them before he completed the assessments. Surely, the Income-tax Officer must have been aware of the nature of the assessees. He has also seen the accounts and therefore he must have been prima facie satisfied that the activities do not amount to business. Even at this stage, the Commissioner could hold that the order is erroneous. But in order to do so, the Commissioner should bring some further material. Therefore, it is necessary for the Tribunal to look into the merits of the case to decide whether Section 11(4A) would be applicable or not. We are dealing with the activities of two ancient religious Mutts. These Mutts exist for the proper conduct of the pujas and connected religious activities in the Tirumala Temple. The Jeeyangars had been described by the High Court as Dharmakartas. They have not been equated with the trustee because they do not own any of the trust properties. However, they have got certain rights and duties in the Temple. The High Court has not accepted the plea that there was difference between the right and duty. According to their Lordships, there was no difference at all. They have observed: -
In our opinion this distinction between rights and duties is, in most cases, a distinction without a difference. There is such a thing as a right to perform a duty; and where a duty is cast upon a man in virtue of his connection with an institution, or an abstract personality (as distinguished from a specific individual who might absolve him from performance), and where it is primarily for the benefit of such an institution or personality, he may reasonably claim the aid of the law to prevent his being abstracted in performance of the same. On the other hand, in conceding such a right, it must be borne in mind that it is granted in the interests of the institution or abstract personality and not of the individual claiming it: and that where the right has ceased to be beneficial to the former, it should be refused. These are the general principles to be borne in mind in dealing with the numerous claims set up by the plaintiff regarding the performance of specific acts of a more or less secular nature. His claims to enjoy for his own benefit certain honours and emoluments in virtue of his office and to perform certain religious functions stand of course upon a different footing.
Thus, in this case, there is no difference between the right and the duties. A Dharmakarta or a trustee exist mainly for the duty they owe to the beneficiaries or the temple. What is endeavoured to be established is the total absence of any peculiar gain in the discharge of duties or in the association of their rights. There is no such object in these two trusts. It is in this factual background that one should look into the principle to be applied in deciding whether an activity would be a business activity or not. The Supreme Court in the case of Lakshminarayan Ram Gopal & Sons Ltd. v. Government of Hyderabad [1954] 25 ITR 449 had emphasised the need to look into the objects of an assessee to decide whether they would constitute business activity or not. At pages 460 & 461, they observed as follows : -
As was observed by Lord Sterndale, M.R. in Commissioners of Inland Revenue v. The Korean Syndicate Limited: -
If you once get the individual and the company spending exactly on the same basis, then there would be no difference between them at all. But the fact that the limited company comes into existence in a different way is a matter to be considered. An individual comes into existence for many purposes, or perhaps sometimes for none, whereas a limited company comes into existence for some particular purpose, and if it comes into existence for the particular purpose of carrying out a transaction by getting possession of concessions and turning them to account, then that is a matter to be considered when you come to decide whether doing that is carrying on a business or not.
Justice Rowlatt followed the above view of Lord Sterndale, M.R. in Commissioners of Inland Revenue v. Birmingham Theatre Royal Estate Co. Limited, and held that When you are considering whether a certain form of enterprise is carrying on business or not, it is material to look and see whether it is a company that is doing it." The objects of an incorporated company as laid down in the memorandum of association are certainly not conclusive of the question whether the activities of the company amount to carrying on of business. (See Commercial Properties Ltd., In re and East India Prospecting Syndicate v. Commissioner of Excess Profits Tax, Calcutta). But they are relevant for the purpose of determining the nature and scope of such activities.
If we apply this principle we find that there is no element of business at all. The Mutts were doing then- duties and in order to meet the expenditure in connection with the duty they were receiving a share in the prasadams. Some decades ago, these shares of the prasadams was just sufficient to meet the expenditure. It so happens because of large number of pilgrims, their share has gone up and they are forced to part with the surplus. They give a good part from prasadams to others freely. But the surplus has to be disposed of. They cannot be preserved because they are perishable. They cannot be thrown out, it would be sacrilege. At the same time, if disposed of to the public, it would fetch them funds which would be useful for carrying on the activities of the Mutt. As Sri Thiruvengadam had pointed out that the remuneration or the reimbursement has already been given to them in terms of the share in the prasadams. The mere Act of converting that share into cash does not involve any business activity.
10. Under these circumstances, we are satisfied that there is no business activity undertaken by these two Mutts. Therefore, provisions of Section 11(4A) are not attracted. The assessees continue to have the right for exemption under Section 11.
11. The appeals stand allowed.