TaxTMI 
TaxTMI 
1964 (9) TMI 55
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....provides that "The property aforesaid shall be managed by the Acharya with the assistance of a committee in accordance with the provisions of the scheme." Under clause 2, the committee consists of nine persons as detailed therein. Clause 16(1), which is material, is as follows: "16. (1) The Acharya shall be entitled to set aside for his personal use a sum of Rs. 2,000 per month and his personal expenditure other than that referred to in sub-clauses (a) and (b) below shall be kept within that amount and shall, so long as it is within that amount, be subject to the control of the committee. In very exceptional circumstances the committee shall have power for reasons to be recorded in writing to sanction expenditure in excess of this amount. As an alternative to the provisions mentioned in the earlier part of this clause the Acharya shall from time to time and for such period or periods as he thinks fit, be at liberty: (a) to keep to himself for his personal use the 'Nam' and the 'Bhets' presented to him, (b) to draw the expenses of and incidental to his household including....
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....ted October 28, 1959, the Tribunal held that the amount of Rs. 2,000 per month was the income of the applicant and had rightly been brought to tax. In regard to household expenses, the Tribunal in the said appeals held that an amount of Rs. 6,000 per year for each of the years then under consideration was attributable to the high office which the applicant held. The Tribunal, therefore, excluded an amount of Rs. 6,000 for each year from the amounts expended by the trust as household expenses. A copy of the said order of the Appellate Tribunal is annexed hereto as annexure "B" and forms part of the case. 6. In respect of the assessment years 1958-59 and 1959-60, which are presently in question, the Appellate Tribunal followed its own earlier decision as referred to in the last preceding paragraph and confirmed the additions to the income of the applicant (i) Rs. 2,000 per month for both the years and (ii) of the household expenses in the relevant year less Rs. 6,000. A copy of the order of the Tribunal is annexed hereto as annexure "D" and forms part of the case. 8. The applicant's contentions briefly are that the amount of Rs. 2,000 per month received by him is a compensa....
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.... his hands as perquisite? We consider that the following questions arise out of the two applications and refer the same to the High Court: "(1) Whether the amount of Rs. 2,000 per month which the Acharya is entitled to set aside for his personal use under the scheme is liable to be brought to tax as income of the applicant? (2) Whether, in view of the said scheme, any expenses incurred by the funds of the institution on account of residence, food, clothing and servants are liable to be included in the income of the applicant?" P.D. Desai and M.M. Thakore for the assessee J.M. Thakore (Advocate-General) for the Commissioner P. D. Desai and M. M. Thakore, for the assessee J. M. Thakore(Advocate-General) for the Commissioner JUDGMENT The judgment of the court was delivered by BHAGWATI J.--This reference raises two questions relating to the assessment of the assessee who is the Acharya, that is, spiritual preceptor of one of the two dioceses of the religious denomination known as Swaminarayan Sampradaya. In order to be able to arrive at a proper determination of these questions, it is necessary to go a little into the history of this Sampradaya culminating....
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....o the income derived from the properties and the Dharmada Vero, there were two other sources of income, namely, Nam Vero, that is, salutation tax, which represented a sort of voluntary contribution made by the followers to the Acharya and Bhets, that is, presents given by the followers to the Acharya. Now in connection with the properties of this diocese, a suit being Suit No. 22 of 1902 was filed in the District Court of Ahmedabad and in that suit the question whether the properties were the private properties of the Acharya or were properties held in trust for public purposes of a charitable or religious nature was canvassed. The suit was decided by Mr. Knight, who was the District Judge, and on appeal being taken to the High Court, the judgment of Mr. Knight was confirmed with some slight modifications. The result was that all the properties were held to be properties belonging to a public religious trust, barring Nam Vero and Bhets which were declared to be the personal income of the Acharya intended for his personal maintenance and benefit and not for the support of the institution. It was also held that the Acharya had an unfettered power of disposal over the surplus income o....
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....f the institution." The allowance being in substitution of Nam Vero and Bhets just as Nam Vero and Bhets were intended for the personal use of the Acharya, so also was the allowance meant for the personal use of the Acharya. The obligation of the trust to defray expenses for providing residence, food, clothing, servants, horses, carriages, elephant, etc., for the Acharya and the members of his household and to meet customary expenditure on official tours or on other official occasions which existed when Nam Vero and Bhets were the personal income of the Acharya remained unaffected by the allowance since the allowance was only in lieu of Nam Vero and Bhets and this obligation was in fact recognized by both the learned judges. N.J. Wadia J. pointed out that when Sahajanand Swami wrote the Deshvibhag Lekh and the Shiksha Patrika, two of the authoritative documents of the Sampradaya, the Nam Vero and Bhets, were not in existence and he must, therefore, have intended that the Acharya should be maintained out of the income of the institution and added: "The fact that in clause 23 and 25 of the Lekh he provides that the....
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....part of this clause, the Acharya shall from time to time and for such period or periods as he thinks fit be at liberty: (a) to keep to himself for his personal use the "Nam" and the "Bhets" presented to him, (b) to draw the expenses of and incidental to his household including travelling expenses, from the funds of the institution. If the household expenditure for residence, food, medicine, clothing, servants and vehicles exceeds Rs. 1,500 in any such month additional expenditure shall be subject to the sanction of the committee. The term "Personal Expenditure" shall not include either: (a) the expenses of his household (including expenses upon residence, food, clothing, servants, horses, carriages and elephant) as hitherto met out of the funds of the institution. (b) any customary expenditure on official tours or on other official occasions." Clause 31 provided for the giving of certain benefits to Tyagis, i.e., Sadhus, and that provision was in the following terms: "31. Food, ghee, clothing, medical and travelling allowances shall be given to the Tyagi....
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....00 per year were Rs. 22,059, Rs. 23,538 and Rs. 20,552 and these amounts were added in the assessment of the assessee for the assessment years 1958-59, 1959-60 and 1960-61 respectively. The assessee being aggrieved by this decision of the Tribunal made an application for a reference and the Tribunal accordingly made the present reference to this court. The first question that is referred to us for our opinion raises the point whether the sum of Rs. 2,000 per month set apart by the assessee for the personal use under clause 16, sub-clause (i), of the scheme constitutes income of the assessee. Now every receipt that a man receives is either a revenue receipt or a capital receipt and in this case there can be no doubt that the sum of Rs. 2,000 per month received by the assessee for his personal use is a revenue receipt. The assessee holds the high and august office of Acharya of the Sampradaya and it is in virtue of that office that he receives the sum of Rs. 2,000 per month. The amount is given to him as Acharya and is a monthly payment accruing to him by reason of his office. If for any reason he ceases to be the Acharya he would also cease to be entitled to the amount. By the ve....
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....in his hands and it does not matter whether the payment is voluntary or compulsory on the part of the person making it: vide Blakiston v. Cooper [1909] A.C. 104 and P. Krishna Menon v. Commissioner of Incometax [1959] 35 I.T.R. 48; [1959] Supp. 1 S.C.R. 133 If a voluntary payment made to an assessee in respect of his office (and not to him as an individual independently of his office) is income chargeable to income-tax, ex hypothesi it should be so where the payment is made to an assessee in respect of his office by virtue of a legal obligation. Here the sum of Rs. 2,000 per month received by the assessee was paid to him under clause 16, sub-clause (i), and since that amount was received by the assessee as an incident of the office of Acharya, in virtue of the office of Acharya held by him, and came in periodically every month, it was clearly income liable to be taxed as such in the hands of the assessee. To escape this conclusion, Mr. P.D. Desai on behalf of the assessee contended that the payment of the sum of Rs. 2,000 per month to the Acharya was by way of compensation or solatium for the assignment or relinquishment of the right to Nam Vero and Bhets by the Acharya an....
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....e sum of Rs. 2,000 per month was paid to the Acharya not in substitution of the source of the income which still continued to exist but in substitution of the income derived from that source. It is undoubtedly true that by reason of the scheme the income from Nam Vero and Bhets when received by the Acharya was no longer the income of the Acharya but was the income of the institution but instead of that fluctuating income which he would have received, he had substituted for it a definite income of Rs. 2,000 per month. The sum of Rs. 2,000 per month thus represented merely income in a new form and was, therefore, chargeable to tax as income. We were referred to a decision of the Chief Court of Sind in Commissioner of Income-tax v. Mills Stores Co. [1941] 9 I.T.R. 642, and reliance was placed on it on behalf of the assessee. But we do not see how that decision can have any application to the facts of the present case. In that case an annual payment spread over a period of ten years was stipulated to be paid to the assessee in consideration of the assessee agreeing not to import petroleum for a period of ten years and to act on behalf of anyone else as importers of oil for sale for ....
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....kes us to the next question relating to the household expenses defrayed out of the funds of the institution. The contention on behalf of the assessee in regard to this question was that when the trust defrayed the household expenses out of its funds, no benefit in the shape of money or money's worth was received by the assessee and no income could, therefore, be said to have accrued to the assessee which would be liable to be taxed in his hands. This contention involves a consideration of the question as to what is income and when can a benefit or advantage received by an assessee be said to be income. What is the natural connotation of income is, however, nowhere to be found in the Income-tax Act. The Income-tax Act merely describes sources of income and prescribes the methods of computing income, but what constitutes income, it discreetly refrains from saying. The decided cases of course declare that "income" is a term of formidably wide and vague import and it is a word difficult and perhaps impossible to define in any precise general formula. But, howsoever broad may be the connotation of the word "income", one thing is clear that income for tax purposes must be money or mo....
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....ilding as the servant of the bank and for the purpose of performing the duty which he owed to his employers. The question was whether the annual value of the portion of the premises, in which, as a servant of the bank, the agent was required to reside, formed part of his income liable to tax. The Crown sought to tax the annual value of the portion of the bank premises in which the agent resided either under Schedule D or Schedule E. The House of Lords held that the annual value of the residence was not taxable either under Schedule D or Schedule E and was not liable to be included in the total amount of the agent's income. Lord Halsbury L.C. made certain general observations in regard to what he conceived to be income in the true sense of the word and said that "it is certainly true that the occupation of a house rent-free is not income." The Lord Chancellor then considered the question whether the case fell within Schedule D or Schedule E and in his view the case could come only under Schedule E. He then proceeded to construe the words occurring in Schedule E and came to the conclusion that the annual value of the residence was not covered by the words of Schedule E. It is, th....
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....rds in Lady Miller's case. The learned Law Lord, therefore, pointed out that no observations in Tennant v. Smith could be relied upon for the purpose of negativing the claim of the Crown to tax in respect of annual value under Schedule A or Schedule B. This observation was prompted because the Court of Session in Lady Miller's case had, on an erroneous view that what was decided in Tennant v. Smith was that in order to be taxable as income, the annual value must be such as could be realised by letting or otherwise, held that since the annual value in the case of Lady Miller was not realisable by her by letting or otherwise, it was not liable to be taxed as income under Schedule A or Schedule B. It will, therefore, be seen that there is nothing in the speech of the learned Law Lord which casts any doubt on the observations of the various Law Lords in Tennant v. Smith in regard to the question as to what is income or profit for the purpose of Schedule D or Schedule E nor is there anything which in any manner detracts from the validity of the general observations made in that case as regards what would constitute income or profit in the ordinary acceptation of that word. The s....
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....money nor was it capable of being converted into money and was, therefore, not chargeable to tax. Finlay J. held that the amounts spent by the company were income of the assessee and were profits of the office of managing director of the company assessable as such under Schedule E. Strong reliance was placed on this decision by the learned Advocate-General and it is, therefore, necessary to see what was the basis on which this decision was reached by the learned judge. The learned judge accepted the principle that income must be either money or money's worth. But he held on the facts of the case before him that the amounts expended by the company were money's worth and were, therefore, income of the assessee. Now we do not know as to who had actually incurred the obligation in connection with the various items for which payment was made by the company. If obligation in respect of these items qua third parties was incurred by the assessee, then obviously the benefit received by the assessee by satisfaction of that obligation would represent money's worth and would, therefore, be assessable as income and that seems to have been the case before the learned judge. As a matt....
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....ourse the learned Advocate-General is right that we should not allow ourselves to be guided blindly by what is stated in the English decisions because the scheme of the English Act is different from the scheme of the Indian Act, but where we find observations made which are of a general nature and which do not depend for their validity on the particular provisions of the English statute, we do not see why we should not receive light from them. As a matter of fact we find that the principle laid down in these decisions that income must be money or money's worth has also been accepted by the Privy Council in Raja Raghunandan Prasad's case. That leaves only one decision before we go to the facts of the case and that decision is the one reported as Daly v. Commissioners of Inland Revenue. This is rather an important decision for it bears a fairly close analogy to the facts of the present case. The assessee in this case was the priest-in-charge of a Roman Catholic Mission in the Archdiocese of Glasgow. The income of the mission was mainly derived from offertories and other contributions by Church members which the Ordinances of the Roman Catholic Church in Scotland deem to be....
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....sessee, therefore, got the benefit of these expenses being met by the institution and this benefit constituted money's worth as in the case of Nicoll v. Austin*. This contention is in our opinion not well founded and stands answered by the observations of Lord Hannen and Lord Macnaghten in Tennant v. Smith**. It is no doubt true that the assessee got the benefit of these expenses being met out of the funds of the institution in the sense that if these expenses had not been defrayed out of the funds of the institution, the assessee would have had to incur them but, to use the words of the learned Law Lords, the assessee is chargeable "not on what saves his pocket but on what goes into his pocket." Clause 16, sub-clause (i), does not show that the obligation in respect of these expenses would be first incurred by the Acharya in his individual capacity and then that obligation would be discharged from the funds of the institution. If that were so, the ratio of the decision in Nicoll v. Austin* would have certainly applied. But what clause 16, sub- clause (i), provides is that the expenses of the household of the Acharya, that is, the expenses necessary for providing food, clothing....