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PETITIONER: COMMISSIONER OF HINDU RELIGIOUS & CHARITABLEENDOWMENTS.  MYS

       Vs.

RESPONDENT: U.   KRISHNA RAO & ORS.

DATE OF JUDGMENT: 17/10/1969

BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S.

CITATION:  1970 AIR 1114            1970 SCR  (2) 917  1969 SCC  (3) 451

ACT: Madras Hindu Religious and Charitable Endowments Act,  1951, as  amended by Act 27 of 1954-Sections 76(1) and  100-Nature of contribution leviable-Rules prescribing the levy need not be framed for individual temples.

HEADNOTE: In  1955  the Government of Madras framed  Rules  under  the Madras Hindu Religious and Charitable Endowments Act,  1951, as amended by Act 27 of 1954, prescribing a graduated  scale of  rates  of contribution under s. 76(1) of the  Act.   The rules  remained  in  force  in the  State  of  Mysore  after reorganisation  of  the State of Madras and applied  to  the temples in the South Kanara district which was  incorporated in  the  Mysore State.  On a petition by  the  respondents,- trustees of a temple in the South Kanara district, the  High Court  of  Mysore in Devraja Shenoy v. The State  of  Mysore [1960 Mys.  L.J. 245] declared invalid certain provisions of the amended Act imposing control upon the administration  of temples  governed  by  the Act.   Thereafter  the  Assistant Commissioner   of   Religious   Endowments   directed    the respondents  to  pay the arrears of contribution  and  audit fee.  The respondents again moved the High Court challenging the  validity  of the demand.  The High Court  upheld  their plea  on the ground that no rules had been framed  under  s. 100  of the Act, and, therefore, the demand for recovery  of contribution was premature.  The decision of the High  Court was  largely  influenced by some observations  made  in  the judgment in Devraja Shenoy’s case.  The court observed  that since  what was stated in that case on behalf of  the  State wag   that  the  amount  of  contribution  payable  by   the petitioner  (respondent)  temple had to be prescribed  by  a rule  which  ’remained  to be made it meant  that  what  was decided was that no contribution could be recovered from the temple until such a rule was made.  Regarding the demand for arrears  of audit fee the court held that  the  Commissioner had not "determined" the cost of auditing the account of the respondent temple under s. 76 (2) of the Act and the  demand was  "on  that account without competence  or  authority  of law." In appeal to this Court, HELD  : (i) It is true that the High Court declared  invalid

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certain  provisions  of the Act imposing  control  over  the administration of temples governed by the Act.  But on  that account the power to make rules was not restricted nor  were the  rules framed by the government rendered  invalid.   The assumption made by the High Court that the Government had to make under s. 100 rules applicable to each temple separately and prescribing the levy for determining contribution, finds no  support  in  the provisions of the Act  or  its  scheme. Under the Act a fee though levied for rendering services  of a  particular  type need not be co-related to  the  services performed for each individual who is intended to obtain  the benefit  of the services.  The co-relation must  be  between the  expenses incurred by the authority levying the fee  for generally  providing  the service and the aggregate  of  the levy from persons who are to be made subject thereto.  It is a  necessary  corollary that general rules  prescribing  the levy  of fee from religious endowments have to be  made  and not  rules  governing individual endowments.   Such  general rules were in fact framed and were in operation when the 918 demand  was  made.   The concession made  by  the  Advocate- General  at  the hearing in Devraja Shenoy’s  case  did  not oblige the State to frame separate rules in respect of  each individual  religious institution.  Even if the  respondent! temple  did not need the services or did not obtain  benefit of  the  services provided the contribution would  still  be recoverable.   Because the rules were framed at a time  when several  different  kinds of services were  intended  to  be rendered and the court later- struck down certain provisions of  the  Act under which services were to be  rendered,  the rules framed in 1955 cannot be held to be inapplicable. [921 A-B, G; 922 E, G-923 B] H.   H. Sudhindra Thirtha Swatniar v. Commissioner for Hindu Religious  & Charitable Endowments, Mysore, [1963]  Supp.  2 S.C.R. 302,  referred    to. (ii) It  was  not  the  case of  the  respondents  in  their petition  in the High Court that the Commissioner had a  not "determined"  the audit fee under s. 76(2).  It  was  merely asserted  that  the fee demanded was excessive.   Since  the High   Court  proceeded  upon  the  ground  of  absence   of determination  by the Commissioner which was  never  pleaded and the High Court had not determined whether the audit  fee demanded  was for meeting the cost of auditing the  accounts of the respondent temple, the order passed by the High Court must be set aside and the case remanded. [924 C]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2312 of 1966. Appeal from the judgment and order dated November 7, 1962 of the Mysore High Court in Writ Petition No. 781 of 1960. M.   C.  Chagla,  S.  S. Javali and S.  P.  Nayar,  for  the appellants. M.   K. Nambyar, G. L. Sanghi and J. B. Dadachanji for respondents Nos.  1 to 5. The Judgment of the Court was delivered by Shah, J. The Madras Religious and Charitable Endowments  Act 19 of 1951 was enacted to provide for the better administra- tion  and  governance  of  Hindu  Religious  and  Charitable Institutions  and Endowments in the State of  Madras.   This Court in The Commissioner of Hindu Religious and  Charitable Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1) held that ss. 21, 30(2), 31, 55, 56 and 63 to 69  of  Act  19  of 1951 were  ultra  vires,  in  that  they

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infringed  the guarantee of the fundamental rights in  Arts. 19(1)(f),  25  and 26 of the Constitution  of  India.   This Court  also-held  that  S.  76(1)  providing  for   imposing liability  for  payment  of contribution which  was  of  the nature  of a tax and not a fee, was beyond  the  legislative competence of the State Legislature. The  Legislature then amended the Act by Madras Act  27  of, 1954.   On August 11, 1955, the Government of Madras  framed Rules  under the Act prescribing a graduated scale of  rates of contribution under s. 76(1). (1)  [1954] S.C.R. 1005.  919 The respondents who are trustees of the Venkataramana Temple at  Mulki,  District South Kanara, moved a petition  in  the High   Court  of  Madras  for  an  order   restraining   the Commissioner  of Hindu Religious and  Charitable  Endowments from  enforcing  the provisions of the Amending  Act  27  of 1954.   Under  the  scheme of  reorganization  of  State  of Madras,  the petition was transferred for trial to the  High court  of Mysore.  The High Court of Mysore by  order  dated March 16, 1959, held that ss. 21, 30(2), 31, 63 to 69 and 89 as  amended by Act 27 of 1954 were invalid : Devraja  Shenoy v. The State of Madras(1). The  Assistant Commissioner of Religious Endowments  Mysore, issued on September 30, 1959 directing the respondent to pay the  arrears  of  contributions  and  audit  fee  under  the Commissioner’s  demand  notice  dated June  25,  1957.   The respondents  moved  another petition in the  High  Court  of Mysore  challenging  the validity of the demand.   The  High Court  upheld the plea on the ground that no rules had  been framed  under S. 100 of the Act, and therefore,  the  demand for  levy of contribution was Premature, and that audit  fee demanded by the Commissioner was without determination under s.  76(2)  of  the  Act and was  "on  that  account  without competence  or authority of law".  With certificate  granted by  the  High Court, the Commissioner of Hindu  Religious  & Charitable Endowments has preferred this appeal. The  provisions of the Act which are relevant may  first  be read:               S.  71  "(1) The trustee  of  every  religious               institution shall keep regular accounts of all               receipts and disbursements.               (2)   The   accounts   of   every    religious               institution,  the annual. income of  which  as               calculated for the purposes of section 76  for               the  fasli year immediately preceding  is  not               less  than  sixty thousand  rupees,  shall  be               subject  to concurrent audit, that is to  say,               the  audit  shall  take  place  as  and when               expenditure is incurred.               (3)               (4)   The audit shall be made-               (a)   in  the case of a religious  institution               the  annual  income  of  which  calculated  as               aforesaid  for  the  fasli  year   immediately               preceding  is  not  less  than  one   thousand               rupees,   by   auditors   appointed   in   the               prescribed manner,               (b)               (1)   (1960) Mys.  L.J. 245.               920               S.    76-"(1)  In  respect  of  the   services               rendered by the Government and their  officers               and  for  defraying the expenses  incurred  on               account  of  such  services  every   religious

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             institution  shall from the income derived  by               it,  pay  to the  Commissioner  annually  such               contribution not exceeding five per centum  of               its income as may be prescribed.               (2)   Every religious institution, the  annual               income   of   which,  for   the   fasli   year               immediately  preceding as calculated  for  the               purposes  of  the levy of  contribution  under               sub-section (1), is not less than one thousand               rupees,   shall   pay  to   the   Commissioner               annually, for meeting the cost of auditing its               accounts,  such further sum not exceeding  one               and  a  half per centum of its income  as  the               Commissioner may determine.               (3)               (4)   The  Government shall pay the  salaries,               allowances,  pensions  and  other   beneficial               remuneration  of  the  Commissioners,   Deputy               Commissioners,  Assistant  Commissioners   and               other  officers and servants (other than  exe-               cutive  officers  of  religious  institutions)               employed for the purposes of this Act and  the               other  expenses incurred. for  such  purposes,               including the expenses of Area Committees  and               the cost of auditing the accounts of religious               institutions.               (5)               S.    100-"(1)  The Government may make  rules               to  carry  out all or any of the  purposes  of               this Act and not inconsistent therewith.               (2)   In particular, and without prejudice  to               the  generality of the foregoing  power,  they               shall have power to make rules with  reference               to the following matters               (c)   the method of calculating the income  of               a  religious  institution for the  purpose  of               levying contribution and the rate at which  it               shall be levied; Rules were framed by the State of Madras on August 11,  1955 authorising the imposition of a graded levy of contribution. The  Rules framed by the Government of the State  of  Madras remained   in   force   in  the  State   of   Mysore   after reorganization  of the State. of Madras, and applied to  the temples in the South Kanara District which was  incorporated in  the  Mysore State.  It is true that the  High  Court  of Mysore declared invalid certain provisions of  921 the Act imposing control upon the administration of  temples governed by the Act.  But on that account the power to  make rules  was not restricted, nor were the rules framed by  the Government rendered invalid.  The decision of the High Court that  no rules for the levy of contribution were framed  was largely influenced by the observations made in the  judgment in  devraja Shenoy’s case(1).  It was observed in that  case that  since the respondents had applied for restraining  the State  from enforcing any of the provisions of the  Act,  an investigation  into the sustainability of that  claim  would have involved determination of the validity of s. 76(1)  and of  any  demand for contribution under  its  provisions  and since the Advocate General appearing for the State, in  that case  had informed the Court that the question did not  fall to be determined because rules prescribing the  contribution payable by the respondent-temple "had yet to be made,  which meant that until such rule was made no contribution could be demanded", the conclusion reached by the Court was in  truth

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"a decision on one of the material questions arising in that case,  and  binding on all the parties to  that  case."  The Court proceeded to observe :               "In   that   view   of  the   matter   it   is               incontrovertible  that what was stated in  the               previous case on behalf; of the State was that               the  amount  of contribution  payable  by  the               petitioners  (respondent)  temple  should   be               prescribed by a rule which remained to be made               which  means  that what was  decided  by  this               Court  was that no such contribution could  be               recovered  from that temple until such a  rule               was made.               The  impugned  demand made on  June  25,  1957               before  this  Court rendered its  decision  in               Devraja  Shenoy’s  case(1) on March  10,  1959               having  no efficacy or effect, since it was  a               plainly premature demand made even before  the               liability  to Day the contribution  came  into               existence,  has  to  be  and  is   accordingly               quashed." This view, in our judgment, proceeds upon an incorrect  view of  the  true nature of the contribution leviable  under  s. 76(1)  of  the Act.  The assumption made by the  Court  that under the Act the Government had to make under S. 100  rules applicable  to  each temple separately and  prescribing  the method for determining contribution finds no support in  the provisions of the Act or its scheme. The true nature of the contribution eligible under S.  76(1) under  Madras Act 19 of 1951 was explained by this Court  in H.  H. Sudhindra Thirtha Swamiar v. Commissioner  for  Hindu Religious & Charitable Endowments, Mysore (2) It was pointed out that (p. 323) (1)  (1961) Mys.  L.J. 245. (2) [1963] Supp. 2 S.C.R. 302. 922               "A levy in the nature of a fee does not  cease               to  be of that character merely because  there               is  an element of compulsion  or  coerciveness               present in it, nor is it a postulate of a  fee               that it must have direct relation to the  ac-               tual  services  rendered by the  authority  to               individual  who  obtains the  benefit  of  the               service.  If with a view to provide a specific               service,  levy is imposed by law and  expenses               for maintaining the service are met out of the               amounts  collected  there being  a  reasonable               relation  between  the levy and  the  expenses               incurred  for rendering the service, the  levy               would be in the nature of a fee and not in the               nature of a tax.  It is true that ordinarily a               fee is uniform and no account is taken of  the               varying  abilities  of  different  recipients.               But  absence of uniformity is not a  criterion               on  which alone it can be said that it  is  of               the  nature of a tax.  A fee being a  levy  in               consideration   of  rendering  service  of   a               Particular   type,  co-relation  between   the               expenditure  by  the Government and  the  levy               must undoubtedly exist, but a levy will not be               regarded  as  a  tax  merely  because  of  the               absence  of  uniformity in its  incidence,  or               because   of  compulsion  in  the   collection               thereof,  nor  because  some  of  the  contri-               butories  do  not obtain the  same  degree  of

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             service as others may." Under the Act a fee though levied for rendering services  of a  particular type is not to be, co-related to the  services performed for each individual who is intended to obtain  the benefit  of the services.  The co-relation must  be  between the  expenses incurred by the authority levying the fee  for generally  providing  the service and the aggregate  of  the levy from persons who are to be made subject thereto.  It is a  necessary  corollary  that under the  Act  general  rules prescribing  the levy of fee from religious endowments  have to be made, and not rules governing individual endowments. The  Act does not contemplate separate rules to be  made  in respect  of each religious institution likely to obtain  the benefit  of  services rendered by the State  for  which  the contribution  is  to  be  levied.   The  concession  by  the Advocate-General at the hearing in Devraja Shenoy’s  case(1) does not oblige the State to frame separate rules in respect of  each individual religious institution.  The rules  under the  Act  have to be general.  And such rules were  in  fact framed  and were in operation.  We are unable therefore,  to agree with the High Court that appropriate rules were not in existence at the time when the demand was made, and on  that account the demand was premature. If  services are provided, assuming that  the  Venkataramana temple either does not need the services, or does not obtain the. (1)  (196)) Mys.  L. J. 245.  923 benefit  of  the services, the contribution would  still  be recoverable.   We  are also unable to  accept  the  argument raised  that  because the rules were framed at a  time  when several  different  kinds of services were  intended  to  be rendered and the Court later struck down certain  provisions of  the  Act under which services were to be  rendered,  the rules framed in 1955 were rendered inapplicable. The  order passed by the High Court upholding the  claim  of the  respondent-temple  on  this  part  of  the.  case  must therefore, be set aside. The  High  Court has not investigated the  question  whether there  is  a  reasonable relation  between  the  expenditure incurred  by the Government for providing services  and  the amounts   intended  to  be  collected  from  the   religious institutions  for  whose,  benefit the services  are  to  be rendered.  Since this is a matter to be decided on evidence, we  do  not  propose to enter upon  that  question  in  this appeal. The second question relates to the levy of audit fee.  Under S.  76(2)  of the Act audit fee is not to be  prescribed  by rules  :  the  Commissioner has to  determine  the  fee  for auditing  the  accounts of each  religious  endowment.   The power  of  the  Commissioner  is  subject  to  a  three-fold restriction  : (1) that the annual income of  the  religious institution for the relevant year preceding the year is  Rs. 1,000/-  or more; (2) that the fee does not exceed 11/5%  of the  income; and (3) that the fee is levied for meeting  the cost of auditing the accounts of the religious  institution. In  the  present case, conditions (1) & (2)  are  satisfied. But the High Court was of the view that the Commissioner had not  determined  the cost of auditing- the accounts  of  the respondent-temple, and proceeded to observe "It  is  sufficient  to  say that the  demand  made  of  the petitioners’ temple for the payment of a sum of Rs. 1, 1 62- 8  3 nP towards the audit of its accounts in respect of  the year  1963 fasli does not rest upon any  determination  made under  Section  76(2)  and is  therefore  one  made  without

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competence or the authority of law." In so observing, in our judgment, the High Court erred.   It was  not the case of the respondents in their petition  that the  Commissioner had not determined the audit fee under  s. 76(2).   In  paragraph-12  of the  petition  it  was  merely asserted that the fee determined by the Commissioner at  the rate of 1-1/2% of the income was excessive.  It is true that the Commissioner may not under S. 76(2) of the Act impose  a flat  rate  of  audit  fee  on  the  religious  institutions governed by the provisions of the Act : he has to  determine audit fee for meeting the costs of auditing the accounts  as a per- 924 centage  of the income of each religious  institution.   The Commissioner  has to determine, having regard to  the  facts and circumstances of each case, the fee (being not more than the maximum prescribed) for meeting the cost of audit of the institution.   That  im.plies that the Commissioner  has  to form  an  estimate  of  the reasonable  cost  which  may  be incurred in making an effective audit of the accounts of the religious  institution,  and  to  state it  in  terms  of  a percentage  of the income.  The percentage of income  levied as audit fee must of necessity be based on an estimate,  and the  demand will not be struck down merely because it  turns out that the amount demanded is not precisely equivalent  to the cost actually incurred for auditing the accounts. Since  the High Court has proceeded upon the ground  of  ab- sence of determination by the Commissioner, which was  never pleaded,  and the High Court has not determined whether  the audit  fee  ;demanded was in truth for meeting the  cost  of auditing,  the  accounts of the  Venkataramana  temple,  the order  passed by the High Court in respect of this  part  of the case must also be set aside. The order of the High Court is set aside and it is  directed that  the case do stand remanded to the High Court and  that the  High Court do dispose of the case according to law  and in the light of the observations made in this judgment. Costs of this appeal will be costs in the High Court.    Y.P.                Case remanded.                             925