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PETITIONER: RADHASOAMI SATSANG, SAOMI BAGH,AGRA

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX

DATE OF JUDGMENT15/11/1991

BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) KULDIP SINGH (J)

CITATION:  1992 AIR  377            1991 SCR  Supl. (2) 312  1992 SCC  (1) 659        JT 1991 (4)   313  1991 SCALE  (2)1199

ACT:     Income  Tax Act, 1961---Sections 11 and  12---Radhasoami Satsang Property--Income of--Whether entitled to exemption.

HEADNOTE:     The then Satguru of the appellant-Creed was assessed for the assessment years 1937-38, 1938-39 for the first time. He was  a  retired Govt. servant. His pension as  well  as  the income from the institution were assessed together.     On  appeal,  the Assistant  Commissioner  of  Income-tax confirmed the assessments made by the Income-tax Officer.     The  Income-tax Commissioner under reference made  under section  66(2)  of the Income-tax Act, 1922  held  that  the offerings  made  to the assessee-Satguru were  offerings  as held  in trust and same were exempted under section  4(3)(1) of the Act.     When an application under Section 35 of the Act was made for  ratification,  whether the offerings  received  by  the assessee consisted of interest income, property income,  and income derived from sale of books and photographs etc. to be excluded, the Commissioner directed deletion thereof.     For the year 1939-40, though the Income-tax Officer  did not  allow exemption u/s.4(3)(1) of the Act,  the  Appellate Assistant Commissioner allowed exemption.     Till 1963-64 the appellant was not taxed and its  refund applications were accepted by the respondent-Revenue.     For  the  assessment years  1964-65,  1965-66,  1966-67, 1967-68,  1968-69, 1969-70, the assessee-appellant  was  as- sessed,  treating  it to be an association of  persons,  and held  that the donations and contributions  received  volun- tarily had limited religious use.     When  the  appellant-assesses  appealed,  the  appellate authority upheld the assessments. 313     Against the orders of the Appellate authority the asses- see  appealed before the Income-tax Tribunal.  The  Tribunal allowing the appeals of the assessee, held that the assessee was  entitled to the exemption claimed under Section  11  of the Income-tax Act, 1961.     On  the  question,  referred to the High  Court  by  the Tribunal, "Whether on the facts and in the circumstances  of

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the  case  the Tribunal was justified in  holding  that  the income  derived  by  the Radha Swami  Satsang,  a  religious institution, was entitled to exemption under Sections 11 and 12  of the Income Tax Act, 1961?", the High  Court  answered the  question  in favour of the  Revenuerespondent,  holding that  the  trust deed was revocable and the  conditions  for exemption  under  Sections  11 and 12 of the  Act  were  not satisfied. Allowing the appeals of the assessee, this Court,     HELD: 1.01. Assessments are quasi judicial. Each assess- ment year being a unit, what is decided in one year may  not apply  in the following year but where a fundamental  aspect permeating  through the different assessment years has  been found  as a fact one way or the other and parties  have  al- lowed  that position to be sustained by not challenging  the order,  it  would  not be at all appropriate  to  allow  the position to be changed in a subsequent year. [320H, 321 A-B]     1.02.   No  formal  document is necessary  to  create  a trust. The conditions which have to be satisfied to entitled one  for  exemption  are: (a) the property  from  which  the income is derived should be held under trust or legal  obli- gation, (b) the property should be so held for charitable or religious  purposes which enure for the benefit of the  pub- lic. [317 E-G]     1.03.   The  property was given to the Satguru  for  the common  purpose of furthering the objects of the  Sat  Guru. The  property was therefore subject to a legal liability  of being  used for the religious or charitable purpose  of  the Satsang. [319 E, F]     1.04.   The Tribunal was justified in holding  that  the income  derived  by the Radhasoami Satsang was  entitled  to exemption  under Sections 11 and 12 of the Income  Tax  Act, 1961. [321 D] Patel Chhotahhai and Ors. v.Janan Chandra Bask and Ors., AIR 314 1935  Privy Council 97; Acharya Jagdish-Waranand Avadhuta  & Ors.  v. Commissioner of Police, Calcutta & Ant.,  [1983]  4 Sec  522,  The Secretary of State for India  in  Council  v. Radha Swami Sat Sang, 13 ITR 520; All India Spinners’Associ- ation  v.  Commissioner of Income Tax, Bombay, 12  ITR  482; TM.M.  Sankaralinga Nadar & Bros. & Ors. v. Commissioner  of Income-tax,  Madras, 4 ITC 226; Hoystead & Ors.  v.  Commis- sioner  of  Taxation, 1926 A.C. 155 and  Parashuram  Pottery Works  Co.  Ltd.  v. Income-tax Officer, Circle  1,  Ward  A Rajkot, 106 ITR 1 at p.10, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos.  10574- 10583 of 1983.     From the Judgment and Order dated 7.7.1980 of the  Alla- habad High Court in I.T.R. No. 948 of 1975.     V.Gourishanker, B.V. Desai, S.K. Aggarwal and Ms. Vinita Gharpade for the Appellants.     S.C. Manchanda, B.B.Ahuja, Manoj Arora and Ms. A. Subha- shini (N.P.) for the Respondent. The Judgment of the Court was delivered by     RANGANATH  MISRA,  CJ. Radhasoami Satsang,  an  assessee under  the Income Tax Act in these appeals by special  leave assails  the decision of the Allahabad High Court on  refer- ence  under  Section 256 of the Income tax  Act.  1961.  The following question had been referred by the Tribunal to  the High Court:               "Whether on the facts and in the circumstances

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             of  the case Tribunal is justified in  holding               that  the  income derived by the  Radha  Swami               Satsang, a religious institution, is  entitled               to  exemption under sections 11 and 12 of  the               income Tax Act, 1961’."’     The  ambit  and  purport of the question  would  not  be properly appreciated unless the background is indicated. The assessee  is  the Radhasoami Satsang, Agra.  This  sect  was founded  by  Swami Shiv Dayal Singh in 1861. The  tenets  of this  faith,  inter alia, accept the position  that  God  is represented on earth by a human being who is called the Sant Satguru.  The first of such gurus .was the  thunder  himself and he was popularly known as ’Soamiji Madharaj’ The  second Satguru (1889-1898) was Rai 315 Bahadur Salig Ram and he was known as ’Bazoor Maharaj’.  The third  sant Satguru was Pandit Brahma Shanker  Misra  (1898- 1907)  and was widely known as ’Maharaj Sahib’. These  three Satgurus  have  been regarded as the real exponents  of  the creed. Out of donations and offerings made to the  Satgurus, large funds were built up and properties were acquired  over the  years. During the time of the third Satguru,  in  1902, the  members of the creed at a largely  attended  convention established  a  Central  Council and the  right,  title  and interest    of   all   the   properties   -   movable    and immovable---which had by then been collected were vested  in the Council under the directions of Maharaj Sahib. In  June, 1904 the constitution and bye-laws of the Central Council of Radhasoami Satsang were drawn up in a formal way and a  body by  the name ’Radhasoami Satsang Trust’ was set up. A  trust deed was executed by some members of the Central Council  in October, 1904.. A set of bye-laws were also framed.     On the death of third Satguru which took place in  Octo- ber  1907, the oread split into two and came to be known  as Swami  Bagh Sect and the Dayal Bagh Satsangis  respectively. Disputes  arose as to the management of the shrines and  the administration  of  the properties which had vested  in  the trustees  under the Trust Deed of 1904. The Dayal Bagh  Sat- sangis claimed that all the properties were held in a  trust for  a public purpose of a charitable and  religious  nature and  prayed  for a decree by going to the  Civil  Court  The litigation  had started in the form of an application  under section  3 of the Charitable and Religious Trusts Act,  1920 but  was converted into a regular suit and eventually  ended with the decision of the Privy Council in the case of  Patel Chhotahhai and Ors. v. Jnan Chandra Basic and Ors., AIR 1935 Privy Council 97. The Judicial committee reversed the  deci- sion of the High Court and held that even if the trust  came into  existence  it was difficult to hold that it was  of  a public, charitable or religious character as contemplated by the Charitable and Religious Trust Act, 1920.     The question of assessing the income for the first  time arose in the assessment year 1937-38. The Income Tax Officer relied  upon the observations of the Privy Council and  com- pleted  assessments for two years being 1937-38 and  1938-39 treating  the  then Satguru, Sri Madho Prasad Sinha  as  the assessee.  He was a retired Assistant Accounts  Officer  and was  earning a pension. His pension as also the income  from the  institution  were tagged together for  assessment.  The Appellate Assistant Commissioner confirmed the  assessments. Assessee then filed applications under section 66(2) of  the Income-tax Act of 1922 for reference. The Commissioner  took the view that the offerings though made to the Satgurus were not  used  for  their personal benefit and  held  that  even though no formal

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316 trust  had been created by the donors in respect  of  offer- ings, the guru impressed the offerings with trust  character at the time of receipt, and treated the offerings as held in trust.  He was, therefore, of the view that  such  offerings were  exempt  under section 4(3)(1) of the  Income-tax  Act, 1922  and  directed that the offerings be deleted  from  the assessment  for the two years. He accordingly held  that  no reference  under Section 66(2) was necessary to be made.  an application under section 35 of the Act was later filed  for ratification by pointing out that offerings received by  the Satgurus consisted of interest income, property income,  and income  derived from sale of books and photographs etc.  and the  same should also be excluded. On 8.12.1945 the  Commis- sioner directed deletion thereof.        For the year 1939-40, the income-tax Officer did  not grant  exemption  under section 4(3)(1) of the Act  but  the appeal challenging the assessment was accepted by the Appel- late Assistant Commissioner in September, 1947 upholding the assessee’s claim of exemption.      Nothing substantial happened until the assessment  year 1963-64.  During  this  period refund  applications  of  the Satsang  were accepted by the department on the  basis  that the income was exempt and as tax had been deducted at source the same was refundable. For the first time claim for refund in  the years 1964-65, 1965-66 and 1966-67 was  not  allowed and  the assessee was treated as an association  of  persons and  taxed; subsequentiy for the assessment  years  1966-67, 1967-68  and 1968-69 and 196970 assessments were  also  com- pleted. The Income-tax Officer did not accept the assessee’s claim of exemption and proceeded to hold that the  donations and contributions had been received voluntarily and had been limited  to religious use but there was no obligation to  do so. The assessee appealed but the appellate authority upheld the assessments for the years referred to above. The  asses- see then appealed to the Tribunal. The Tribunal examined the matter from various aspects and held:               "So  far as the Radhasoami sect  is  concerned               its properties were held only for the further-               ance  of  the object of the Satsang  and  this               object was to propagate the religion known  by               the  name  of Radhasaomi. This  was  a  purely               religious purpose as held by the Privy Council               and therefore the objects of the assessee  are               clearly religious objects."      While the Tribunal did not accept that the words  ’held under  trust’  merely meant a consideration of  the  factual position  and that if the income had been applied for  reli- gious purpose it was unnecessary to find out whether in  law a trust had been created or not. But the Tribunal was of 317 the opinion that the words legal obligation were much  wider and  the activities of the Satsang could be  brought  within the  purview  of that expression. It finally held  that  the assessee was entitled to the exemption claimed under s. 11.     The  High  Court did not accept the conclusions  of  the Tribunal  by  heavily relying upon the revocability  of  the trust as clearly specified in the document and accepting the stand of the Revenue that exemption under s. 11 was  subject to  the  provisions  of ss.60 to 63 of the Act  and  on  the finding  that the trust was revocable it  upheld  liability, Section 11(1) of the Act, as far as relevant, provides:               "Subject to the provisions of sections  60-63,               the following income shall not be included  in               the  total income of the previous year of  the

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             person in receipt of the income:                    (a)  income  derived from  property  held               under trust wholly for charitable or religious               purposes,  to the extent to which such  income               is applied to such purposes in India; and                    Co) where any such income is  accumulated               or set apart for application to such  purposes               in India, to the extent to which the income so               accumulated  or set apart is not in excess  of               25% of the income from such property;.."               The  conditions which have to be satisfied  to               entitle one for exemption, therefore, are:                    (a) the property from which the income is               derived  should be held under trust  or  other               legal obligation.                    (b)  the property should be so  held  for               charitable  or religious purposes which  enure               for the benefit of the public. It  is well-settled that no formal document is necessary  to create a trust.     The  reference  itself  accepts the  position  that  the assessee  is  a religious institution. There has  been  some amount  of debate in the forums below as to  whether  Radha- soami Satsang is a religion. This Court in Acharya  Jagdish- waranand ,Avadhuta & Ors. v. Commissioner of Police, Calcut- ta  &  Anr., [1983] 4 SCC 522 while examining the  claim  of Anand Marg is to be treated as a separate religion  indicat- ed:               "The words ’religious denomination’ in Article               25 of the Constitution must take their  colour               from the word ’religions’ and               318               this be so the expression religious  denomina-               tion must also satisfy three conditions:                    (i) it must be a collection of  individu-               als who have a system of beliefs of  doctrines               which  they  regard  as  conductive  to  their               spiritual well-being, that is, a common faith,               (ii) common organisation; and               (iii) designation by a distinctive name."     In  that  case Anand Marg was held to  be  a  ’religious denomination’ within the Hindu religion. It is not necessary for  us to decide whether Radhasoami Satsang is a  denomina- tion  of the Hindu religion or not as it is  sufficient  for our purposes that the institution has been held to be  reli- gious  and that aspect is no more in dispute in view of  the frame of the question.     The  question  of assessment to  income-tax  arose  only following  the decision of the Privy Council in the  dispute between the two factions. The Judicial Committee found  that the properties which were the subjectmatter of the suit were acquired  with the moneys presented to the Sant  Satguru  in the  form of bhents or other contributions by the  followers of  the Radhasoami faith. The Judicial Committee found  that it was almost inconceivable that the followers of the  faith when  making  their gifts to the Sant  Satguru  intended  to create  a trust within the meaning of the Act 14 of 1920  of which  they, the donors and the worshippets, should  be  the beneficiaries. The Privy Council further also found that  it could  not  be said that the donors of the  gifts  were  the authors of the alleged public trust. The question was  exam- ined  keeping  the provisions of the 1920 Act in  view.  The requirements of s. 11 of the Income Tax Act are considerably different  from  what the Judicial Committee  of  the  Privy

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Council was required to consider.     We have already pointed out that after 1907 the  denomi- nation got divided. The claim of Dayalbagh group for  exemp- tion  under the IncomeTax Act came for consideration  before the  Allahabad  High Court in the case of The  Secretary  of State for India in Council v. Radha Swami ,Sat Sang, 13  ITR 520.  There  it  was found that the offerings  made  by  the Dayalbagh  Satsangis  to Sahebji Maharaj  and  the  property which  had grown out of them and which admittedly  stood  in the name of the Sabha and the property which at all material times had stood in the name of the Sabha vested in the Sabha for the benefit of the Satsangis and Sahebji Maharaj had  no beneficial or personal interest in that. What has been found for the Dayalbagh Satsangis on this score is fully  applica- ble so far as the assessee is concerned, There is no dispute that the properties of the assessee are 319 also recorded in the name of the Sabha (Central Council) and there is no personal interest claimed by the Sant Satguru in such property. Ever the years the Satguru has never  claimed any  title over, or beneficial interest in,  the  properties and  they have always been utilized for the purpose  of  the religious  community. The test applied by the Privy  council in  the case of A 11 India Spinners’ Association v.  Commis- sioner of Income - Tax. Bombay 12 ITR 482 is indeed applica- ble  to the facts of the present case and the  result  would then  be in favour of the assessee. We would like  to  point out  that even if the trust was revocable, the property  was not  to go back to the Satguru on revocation. The  constitu- tion and the bye-laws on record indicate in clause 1(b):               "1.  The constitutional powers of the  Central               Council                             Radhasoami               Satsang  .....................  are as below:               (b)   to collect, preserve and administer  the               properties  movable  and immovable  that  have               been  or may hereafter be dedicated to  Radha-               soami  Dayal  or that may be acquired  for  or               presented  to the Radhasoami Satsang  for  the               furtherance of the objects of the Satsang." This envisages that where the property was given to the Sant Satguru, it was intended for the common purpose of  further- ing the objects of the Sant Satguru and the Central  Council had  the authority to manage the property. Clause 9  of  the document  stipulated that the properties would vest  in  the trust and clause 25 provided that the trust shall be revoca- ble at the discretion of the Council and the trustees  shall hold  office at its pleasure. Upon revocation  the  property was not to go back to the Satguru and at the most. in  place of the trust, the Central Council would exercise  authority. It  is on record that there has been no Satguru long  before the  period  of assessment under consideration. As  a  fact, therefore,  the Tribunal was justified in holding  that  the property was subject to a legal liability of being used  for the  religious  or charitable purpose of the  Satsang.  This aspect  had  not been properly highlighted before  the  High Court.     One of the contentions which the learned senior  counsel for the assessee-appellant raised at the hearing was that in the absence of any change in the circumstances, the  Revenue should  have  felt bound by the previous  decisions  and  no attempt  should  have been made to reopen the  question.  He relied upon some authorities in support of his stand. A full Bench  of the Madras High Court considered this question  in T.M.M Sankaralinga  Nadar & Bros. & Ors, v. Commissioner  of Income-Tax,  Madras, 4 ITC 226. After dealing with the  con-

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cession the Full Bench expressed the following opinion: 320               "The  principle to be deducted from these  two               cases  is that where the question relating  to               assessment does not vary with the income every               year but depends on the nature of the property               or  any other question on which the rights  of               the  parties  to  be taxed  are  based,  e.g.,               whether  a certain property is trust  property               or not, it has nothing to do with the fluctua-               tions in the income; such questions if decided               by a Court on a reference made to it would  be               res judicata in that the same question  cannot               be subsequentiy agitated."     One  of the decisions referred to by the Full Bench  was the case of Hoystead &Ors. v. Commissioner of Taxation  1926 AC 155. Speaking for the Judicial Committee Lord Shaw  stat- ed:               "Parties  are  not permitted  to  begin  fresh               litigations  because  of new  views  they  may               entertain  of  the  law of the  case,  or  new               versions which they present as to what  should               be  proper  apprehension by the Court  of  the               legal result either of the construction of the               document  or  the weight  of  certain  circum-               stances.  If  this were  permitted  litigation               would have no end, except when legal ingenuity               is  exhausted. It is a principal of  law  that               this  cannot be permitted, and there is  abun-               dant  authority  reiterating  that  principle.               Thirdly, the same principle - namely, that  of               setting  to rest rights of litigants,  applies               to the case where a point, fundamental to  the               decision,  taken or assumed by  the  plaintiff               and traversable by the defendant, has not been               traversed.  In that case also a  defendant  is               bound by the judgment, although it may be true               enough  that  subsequent  light  or  ingenuity               might suggest some traverse which had not been               taken." These observation were made in a case where taxation was  in issue.     This  Court  in  Parashuram Pottery Works  Co.  Ltd.  v. Income-Tax  Officer, Circle 1, Ward A, Rajkot, 106 ITR 1  at p. 10 stated:               "At  the  same time, we have to bear  in  mind               that the policy of law is that there must be a               point  of finality in all  legal  proceedings,               that  stale issues should not  be  reactivated               beyond  a particular stage and that  lapse  of               time  must  induce repose in and set  at  rest               judicial  and quasi-judicial controversite  as               it must in other spheres of human activity."               Assessments  are certainly quasi-judicial  and               these observations equally apply. 321     We are aware of the fact that strictly speaking resjudi- cata  does not apply to income-tax proceedings. Again,  each assessment  year being a unit, what is decided in  one  year may not apply in the following year but where a  fundamental aspect permeating through the different assessment years has been  found as a fact one way or the other and parties  have allowed that position to be sustained by not challenging the order,  it  would  not be at all appropriate  to  allow  the position to be changed in a subsequent year.

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   On  these  reasonings  in the absence  of  any  material change  justifying the Revenue to take a different  view  of the matter- and if there was not change it was in support of the assessee- we do not think the question should have  been reopened  and contrary to what had been decided by the  Com- missioner  of Income-Tax in the earlier proceedings, a  dif- ferent  and contradictory stand should have been  taken.  We are,  therefore,  of the view that these appeals  should  be allowed and the question should be answered in the  affirma- tive,  namely,  that the Tribunal was justified  in  holding that the income derived by the Radhasoami Satsang was  enti- tled to exemption under ss. 11 and 12 of the Income Tax  Act of 1961.     Counsel  for the Revenue had told us that the  facts  of this  case being very special nothinng should be said  in  a manner which would have general application. We are inclined to  accept this submission and would like to state in  clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application. We direct the parties to bear their respective costs. V.P.R.                                               Appeals allowed. 322