Calcutta High Court
Sri Sri Jagannath Jew vs Commissioner Of Income-Tax on 22 June, 1992
Equivalent citations: [1994]205ITR487(CAL)
JUDGMENT Shyamal Kumar Sen, J.
1. Pursuant to the direction of this court made in an application under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following questions :
"(1) Whether, on the facts and in the circumstances of the case and on a proper construction of the will of the late Raja Rajendra Mullick, the Tribunal was right in rejecting the claim of the assessee that the expenses incurred for maintaining horses, carriages and motor cars and allowances paid to the trustees and others to the extent disallowed by the authorities below were also part and parcel of the amount applied for religious and charitable purposes and were in any event bona fide and legitimate expenditure wholly and exclusively incurred for the purpose of earning the income and could not be disallowed in computing the total income of the assessee ?
(2) Whether, on the facts and in the circumstances of the case, the findings of the Tribunal that the apportionment made by the Income-tax Officer was not incorrect and the deduction permitted by the Income-tax Officer was not inadequate are based on no material and/or are perverse?"
2. The facts, briefly stated, as appear from the statement of case are that the Income-tax Officer made certain disallowances out of the claims of the assessee in the assessment year 1982-83 on account of motor car upkeep, trustees' allowance and horses and cartage expenses, etc. They are as follows :
Amount claimed Amount disallowed Rs.
Rs.
(i) Motor car upkeep 28,069.12 17,451.00
(ii) Trustees' allowance 42,000.00 33,600.00
(iii) Horses and cartage expenses 9,315.04 4,658.00
3. The assessee, being aggrieved by the order of the Income-tax Officer for making the above-mentioned disallowances out of his claim, preferred an appeal before the Commissioner of Income-tax (Appeals).
4. The Commissioner of Income-tax (Appeals) followed the judgment in the case of CIT v. Sri Jagannath Jew [1977] 107 ITR 9, wherein the Supreme Court gave its decision with regard to provision to pay remuneration and meet expenses of shebaits and allowances to members of the family, upkeep of horses, carriages, repairs, etc., out of the income. The Commissioner of Income-tax (Appeals) held that the testator gave away the estate to the deity and created an absolute debutter thereby. The assessee was not satisfied with the order of the Commissioner of Income-tax (Appeals) also and he preferred a further appeal before the Tribunal. He agitated the dispute before it. It was contended before the Tribunal that the allowability of the expenses claimed by the assessee was not in dispute and this point was concluded. The Department opposed this contention and submitted that the disallowance of the portion of the expenses was reasonable and should not be interfered with. The Tribunal decided the matter as follows :
"We have carefully examined the decision of the Supreme Court and find that, in the said case, the question for decision was whether the expenses mentioned therein were to be assessed as income in the hands of the assessee or not. The question whether these expenses were to be deducted as expenses was not before the Supreme Court and as such can be decided by this Tribunal as well as the authorities below. In fact, the Income-tax Officer has disallowed a part, allowing part of the expenses which, according to him, was attributable to the other charitable and religious purpose. It may also be mentioned that collection charges at six per cent. of the rent were also allowed whereas one of the main functions of the shebaits (mistakenly stated as trustees) was to collect rent from different tenants. On a careful consideration of the materials on record and facts and circumstances of the case, we are unable to persuade ourselves that the apportionment made by the Income-tax Officer is incorrect or that the deduction permitted by the Income-tax Officer is inadequate."
5. Before us, the contentions raised before the Tribunal were reiterated on behalf of the assessee. It has been submitted that the allowability of the expenses claimed by the assessee was not in dispute before the Supreme Court in the aforesaid case and as such this point is not concluded by the said judgment of the Supreme Court. The learned advocate for the Revenue, on the other hand, opposed this contention and contended that the present dispute is concluded by the aforesaid judgment and decision of the Supreme Court. He further argued that the disallowance of a portion of the expenses is reasonable and should not be interfered with.
6. In the case of CIT v. Sri Jagannath Jew the testator, a wealthy and pious Hindu Brahmin, executed in 1887 a comprehensive will the draftsman of which was an English solicitor. The will opened with the words : "I hereby dedicate and make debutter by Thakoorbaree ...." and specified a mansion built by the testator's father.
The will proceeded : "I do hereby dedicate and make debutter in the name and for the worship of my Thakoor Sree Sree Jagannath Jew the following properties . . . ." and these words were followed by a list of properties and a string of directions addressed to "shebaits and trustees" or "shebaits or trustees" or these two mentioned singly. The testator further provided: "I hereby give, dedicate and make debutter all the jewels .... heretofore used, for the worship of the Thakoors...." and the will have the particulars of the jewels and other ornaments. Besides directions for spending amounts on charitable objects like feeding the poor, maintenance of a garden, a menagerie of non-carnivorous animals and birds and an art gallery, the will also provided for payment of certain fixed allowances to the acting shebaits as well as the widows of deceased shebaits, maintenance of horse-drawn carriages and motor cars for the use of the shebaits, medical aid to the shebaits and their families, expenses on account of sraddha ceremony of the ancestors and other private donations. For the assessment year 1956-57, it was claimed on behalf of the assessee, the deity, that the provisions in the will for the remuneration of the shebaits and the allowances to the widows of the deceased shebaits created a charge on the income of the trust estate and should, therefore, be treated as diversion of the income before it accrued in the hands of the trustees. The Income-tax Officer rejected the contention and held that, under the will, the shebaits and trustees were to collect the income of the whole debutter property in the first instance and, after paying the Government revenues and taxes and rates and other outgoings, perform the puja and other ceremonies for the worship of the family deity and, thereafter, spend amounts on charitable and public purposes and, lastly, to pay the remuneration, allowances and private donations. The Income-tax Officer determined the income of the trust estate at Rs. 2,91,625 and deducted therefrom the amounts spent on charitable objects such as feeding of the poor, maintenance of the art gallery and menagerie and sought to tax the balance of Rs. 1,32,023. A similar assessment was made for 1957-58 also. The Appellate Tribunal upheld the assessment substantially but held that the direction contained in the will for the expenditure on the performance of sraddha and other ceremonies for the spiritual benefit of the testator and his ancestors must be held to be obligations created by the testator which the trustees or the shebaits were obliged to discharge before applying the income for the benefit of the deity. On a reference, the High Court held that, under the will, the entire beneficial interest in the properties did not vest in the assessee deity and the only income which could be subjected to income-tax in the hands of the assessee would be the beneficial interest of the said deity under the will which would be expenses incurred for the seva or puja of the deity and for the various religious ceremonies connected with the deity and the value of the residence of the deity. On appeal by the Department to the Supreme Court, it was held, reversing the decision of the High Court, on an interpretation of the will, (i) that the testator gave away his estate to the deity and created an absolute debutter thereof and obligated the managers of the debutter with responsibility to discharge certain secular but secondary behests including benefit to family members, their residence and transportation. The deity was the legal owner of the whole estate and liable to be assessed as such, (ii) That the directions in the will did not divert the income at source but merely directed the shebaits to apply the income received from the debutter properties for the specified purposes, and, therefore ; (a) the income of the deity was not restricted to the amounts spent by the shebaits for the daily puja and religious ceremonies to the deity ; (b) the amount spent for the remuneration of the shebaits, payment of allowances to the widows of shebaits, expenditure in maintaining horses, carriages and cars and repairs, etc., could be included in the income of the assessee ; (c) the surplus income of the estate after defraying expenses were not held in trust for charitable purposes and were not exempt from taxation under Section 4(3)(i) of the Indian Income-tax Act, 1922 ; and (d) the amounts spent for performing sraddha and other ceremonies for the spiritual benefit of the testator, etc., were not diverted by an overriding title.
7. The Supreme Court, in the aforesaid decision at page 24 of the report, observed as follows :
"The crux of the matter, agitated before us, is the determination of the true intention of the testator and this has to be gathered from the name used, the recitals made and the surrounding circumstances- From a bestowal of reflection on the subject and appraisal in the light of the then conditions, sentiments and motivations of the author, we are inclined to the view that Raja Mullick, the maker of the will, dedicated as debutter to his maker and Thakoor the entire estate, saddling the human agents or shebaits with duty to apply the income for godly and near-godly uses and for reward of the shebaits and for their happy living. Of course, he had horses and carriages and other items to make life enjoyable. Naturally, his behest covered the obligation to keep these costly things in good condition and regular use. The impact on the mind, if one reads the provisions reclining in a chair and lapsing into the mood of the maker of the will, is that he gave all he had to his Thakoor, as he unmincingly said, and thus dedicated to create an absolute debutter. The various directions are mostly either religious or philanthropic but not so remote as to be incongruous with dedication to an idol or creation of a debutter. The quantum of expenditure on the various items is not so decisive of the character of the debutter as absolute or partial as the accent on and subjective importance of the purposes, in the setting of the totality of commands and cherishments. His soulful wishes were for the religious and charitable objects and the other directions were secondary in his estimate. Not counting numbers nor computing expenses, marginally relevant though they are, but feeling the pulse of his passion to do godly good and promote public delight, that belights the spirit of his testament. Essentially, Raja Rajendra Mullick gave away his estate to his Thakoor and created an absolute debutter. He obligated the managers of the debutter with responsibility to discharge certain secular but secondary behests including benefit to family members, their residence and transportation.
How then do we reconcile such a conclusion with the many points forcefully urged by Shri B. Sen and adverted to earlier ? We think that the expressions 'shebaits and trustees', 'shebaits or trustees', 'shebaits', 'trustees' and 'trusts' were indiscriminately used, indifferent to sharp legal semantics and uncertain of the precise import of these English legal terms in the Indian context. More, an English solicitor's familiar legal diction superimposed on an unfamiliar Indian debutter, rather than an exercise in ambiguity or deliberate dubiety, explains the odd expressions in the will. The author merely intended to dedicate to Sree Jagannathji and manage through shebaits. Of course, the reference to the board of trustees, the majority vote and the like, strike a discordant note but the preponderant intent is what we have held it is.
The magnitude of the expenditure on the items, secular and sacred, may vaguely affect the conclusion but cannot conclusively decide the issue, the religious uses related to Sree Jagannathji, the Lord of the Universe, cannot be narrowly restricted to rituals but must be spread out to embrace universal good, especially when we read the mind of a Hindu highly evolved and committed to a religion whose sweep is vasudhaiva kutumbakam (All creation is His family). The blurred lines between the spiritual and the secular, in the context of this case, do not militate against our construction.
We are not unmindful of the stress Shri B. Sen placed on the passage in B.K. Mukherjea, which we may extract :
'But it happens in some cases that the property dedicated is very large, and the religious ceremonies which are expressly prescribed by the founder cannot and do not exhaust the entire income. In such cases, some portion of the beneficial interest may be construed as undisposed of and cannot but vest as secular property in the heirs of the founder. There are cases again where although the document purports, on the face of it, to be an out and out dedication of the entire property to the deity, yet a scrutiny of the actual provisions reveals the fact that the donor did not intend to give the entire interest to the deity, but reserved some portion of the property or its profits for the benefit of his family relations. In all such cases the debutter is partial and incomplete and the dedicated property does not vest in the deity as a juridical person. It remains with the grantees or secular heirs of the founder subject to a trust or charge for the religious uses. The earliest pronouncement of the law on the subject is to be found in the decision of the Judicial Committee in Sonatun Bysack v. Sreemutty Juggutsoondree Dossee [1959] 8 MIA 66 (PC), which was followed and applied in the subsequent case of Ashutosh Dutt v. Doorga Churn Chatterjee [1879] LR 6 IA 182 ; ILR 5 Cal 438 (PC)'."
8. Again, at page 29, the Supreme Court observed as follows :
"The High Court, in a laconic paragraph, dismissed this contention but Shri Sen submitted that there was merit in it and had to be accepted. We agree with the High Court because the terms in which the directions are couched do not divert the income at the source but merely command the shebaiis to apply the income received from the debutter properties for specified purposes. We may quote to illustrate :
'I direct that the shebaits and trustees shall out of the debutter funds maintain and keep a sufficient number of carriages and horses for their use and comfort and that of their families and after providing for the purposes aforesaid out of the debutter income I direct the shebaits and trustees to pay to each of the shebaits for the time being who shall actually take part in the performance of the duties of the shebaits and the execution of the trusts of this fund as and by way of remuneration for their services the sum of rupees five hundred a month. . . .' 'I direct that the widows of my three deceased sons, Greendro, Soorendro and Jogendra, who assist in the work of preparing articles of offerings to the Thakoors and for the feeding and distribution to the poor and all the widows of shebaits hereby appointed and future shebaits who shall in like manner assist in the said work shall be fed and clothed and maintained and shall receive a remuneration of the sum of rupees fifty each a month from the income of the debutter fund. . . .' So the shebaits first get the income and then apply it in conformity with the directives given in the will. The rulings relied on by both sides do not shake the position we have taken and may not merit any discussion.
These conclusions we have drawn mean that the appeals have to be allowed and the reference answered in favour of the Revenue and against the assessee. Accordingly, we answer questions Nos. 1 and 2 referred at the instance of the assessee, against him and the other two questions referred at the request of the Revenue, affirmatively. While answering the above questions, we may state that all income earmarked for religious and charitable purposes conforming to Section 4(3)(i) read with the Explanation to Section 4(3) of the 1922 Act shall not be included in the total income. It is also made clear that whatever income was agreed to be excluded in terms of the concession made by the Revenue in the High Court shall remain excluded."
9. In our view, the Tribunal was correct in holding that the question before the Supreme Court in the case of the same assessee reported in CIT v. Sri Jagannath Jew [1977] 107 ITR 9 was whether the expenses mentioned therein were to be assessed as income in the hands of the assessee or not. The question whether these expenses were to be deducted as expenses was not before the Supreme Court and, as such, it was open to the Tribunal as well as the authorities below to decide the said question. The Income-tax Officer has, however, disallowed a part and allowed the other part of the expenses which, according to the Income-tax Officer, was attributable to the other charitable and religious purposes. On a consideration of the materials on record and facts and circumstances of the case, the Tribunal maintained the order of the Income-tax Officer partly allowing the expenses incurred on motor car upkeep expenses and partly allowing the expenses incurred on trustees' remuneration.
10. In our view, the question whether, if the claim of the assessee that the expenses incurred for maintaining horses, carriages and motor cars and allowances paid to the trustees and others to the extent disallowed by the authorities below were also part and parcel of the amount applied for religious and charitable purposes and were in any event bona fide and legitimate expenditure wholly and exclusively incurred for the purpose of earning the income is a question of fact which requires consideration. It does not appear from the record that the Income-tax Officer has gone into the question whether the said expenses were incurred for religious and charitable purposes.
11. We. therefore, decline to answer the questions and the matter is remanded to the Tribunal with a direction to decide the same and to refer the same to the concerned Assessing Officer for proper determination taking fresh evidence in detail, if necessary.
Ajit K.Sengupta, J.
12. I agree.