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PETITIONER: THE GURU ESTATE THROUGHDWARKADAS GURU AND OTHERS

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAXBIHAR AND ORISSA

DATE OF JUDGMENT: 19/10/1962

BENCH: SHAH, J.C. BENCH: SHAH, J.C. KAPUR, J.L. HIDAYATULLAH, M.

CITATION:  1963 AIR 1452            1963 SCR  Supl. (1) 667

ACT: Income   Tax-Income  from  trust-Exemption  from   taxation- Applicability of the rule-"Exclusively to purposes religious or  charitable" High Court’s jurisdiction  in  references- Binding  on Tribunal’s findings on  facts-Indian  Income-tax Act, 1922 (11 of 1922), ss. 4 (3) (i) and (ii), 66 (2).

HEADNOTE: The  assessee  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 Annadan Patras signed by  the pilgrims.   The 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 Annadan  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 created by  the pilgrims.  and that the assessees were not art  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 private 668 religious  trust  and  that, therefore, the  income  of  the assessees  derived  from  the source  was  not  exempt  from

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liability to tax under ss. 4 (3) (i) and (ii) -of the Act. Held,  that the amounts received by the assessees under  the Annadan Patres 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. Held,  further,  that the High Court erred in  ignoring  the finding  of the Appellate Tribunal that there was  no  trust and in coming to a conclusion, on the asumption that a trust was intended to be created by the  pilgrims, that the  trust was a private trust. 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 court has to advise the Tribunal as  to the  law  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. 166 (2)  of the Act, but jurisdiction  which in substance was appellate.

JUDGMENT: CIVIL  APPELLATE JURISDICTION :  Civil Appeals Nos.  248  to 253 of 1662. 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. Maheshunri, for the appellants in all the appeals. N.   D. Karkhanies and R. N. Sachthey, for the respondent in all the appeals. 1962.  October 19.  The judgment of the Court was  delivered by SHAH,J These six appeals raise a common question as to  the liability              the assessees to ’Pay  income-tax  in respect of certain receipts known as  669 ’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  ’Daksina’  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 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  assesses 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 Apt.  The  assesses 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 Hindu  religion"  and the offerings known as Anndan received by them on  condition 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

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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 his Darshan, I pay unto,.-.....  (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               670               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 Annadan 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 assesses 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  char- itable  purposes, that the assessees were not  shebaits  ap- pointed 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 Panda8  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 creat- ed and the balance was appropriated by them to their own use and that they did not derive income from voluntary contribu- tions applicable solely to religious or charitable  purpose. The  Income-tax Appellate Tribunal confirmed the  order  ob- serving : "Except the bare assertion of the assessee  before us,  there is no evidence to show that the  pilgrims  under- stood either. the character or the implication of the  docu- ment  they were signing.  The assessee has not shown  either that he gave receipts to the pilgrims indicating his trustee position and his undertaking to employ the, receipts  671 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 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. x x x x x".  The Tribunal  also  observed that  the assess 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

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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 assesses 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  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 672 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 be as (without deciding) that a religious, trust  was created for the main purpose of offering Bhog to Lord Jagan- nath  at  Puri  by the execution of  the  Anmdan  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  assesse" 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 per-son               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  a  art  for               application thereto.               (ii)  Any income of a religious or  charitable               institution           derived:            from               voluntary,                673               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

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obligation  for the purposes specified and the assesees  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 exercise  of  its  jurisdiction  by  the  High  Court.   The Tribunal  held that the receipts called Annadan were  earned by the assessees in conduct of their business as Panda8  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 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 674 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 Edvard v. Bristow(1).   The  High Court made  an  order under s.  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  busi- ness  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 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  attempt  to  exercise  not  the   advisory jurisdiction  in  respect of the decision  of  the  Tribunal which alone is confer-red by s. 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 credited by the (1)  (1955) 36 Tax Cas. 207.                             675 pilgrims.    On   that  finding  no  question  as   to   the applicability  of s. 4(3) (1) 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

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reasonably  be arrived 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 for 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 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 religious 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  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 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. Appeals dismissed 676