TaxTMI 
TaxTMI 
1953 (10) TMI 36
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....igh Court. We accordingly draw up the following statement of case. 4. The respondent Sabha is a Sabha or an association of the followers of the Dayalbagh School of Satsangis. In order to properly appreciate the character of the Sabha, it is necessary to give a brief history of the Radhaswami faith. The history is as follows:- The Radhaswami faith was founded in the year 1861 by Shiv Dayal Singh, a Khatri resident of Agra. Radhaswami Dayal, after whom the faith is named, is the name given to the deity by the followers of this faith. The deity, according to the tenets of this faith, is represented on this earth by a human being who is called the Sant Satguru. Human spirit, according to this faith, is tied up to the material world by chains of mind and matter and it cannot secure emancipation and unity with God which is the object of all human endeavour, without the assistance of God's representative on earth, namely Sant Satguru. In order to attain this unity the service and devotions of human beings to Sant Satguru is essential and this devotion is enjoined by this faith to be "absolute in body, mind and riches." A follower of this faith has to be initiated into certain pr....
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.... two sections, one came to be known as Swami Bagh Satsangis and the other as Dayalbagh Satsangis. The difference in their creed was that the Swami Bagh party believed that the Divine Current after the departure of Maharaj Sahab the third guru, came to the sister of Maharaj Sahab, a lady called Buaji, who took the place of Sant Satguru from 1907 to 1913 and that she could act through an agent to perform all her duties as Sant Satguru, in spite of the disability of her sex. On the other hand, the Dayalbagh people believed that the Divine Current after the third Guru came to one Kamta Prasad Singh. They therefore recognised him as the fourth Guru and conferred upon him the title of Sarkar Sahab. The fifth Guru of the Swamibagh section of Satsangis was B. Madho Prasad, the agent who acted during the term of the office of Buaji while according to Dayalbagh section, it was Sir Anand Swarup popularly known as Sahibji Maharaj. According to Swamibagh school of Satsangis offerings were made by the devotees to the Sant Satguru himself while according to Dayalbagh school of thought the offerings were made to deity and not to the Sant Satguru personally. Sahibji Maharaj, the fifth Sant Satguru ....
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....subject matter of the trust deed of 1904 remained in possession of the Swamibagh section. It may be noted that the Dayalbagh section of the Satsangis did not get possession of any iota of property which was the subject matter of the litigation before their Lordships of the Privy Council and no part of the property income which is the subject matter of the present income-tax proceedings was involved in that litigation. 8. The independent history of the Dayalbagh section with which we are directly concerned in this case begins after the death of the third guru in 1907 when it started with a clean slate so far as any offerings and properties were concerned under the spiritual headship of the fourth Sant Satguru Sarkar Sahab who was a lawyer by profession. During his tenure of Guruship which lasted from 1907 to 1913 the respondent Sabha was founded in 1910 with the express purpose of collecting, preserving and administering the properties moveable and immoveable that may thereafter be dedicated to Radhaswami Dayal or that may be acquired for or presented to Radhaswami Satsang and to deal with and apply the same for the furtherance of the religious and charitable objects of Satsangis....
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....ajority of votes and if regarding any matter, the votes on both sides were equal in number then the said matter would be decided by the casting vote of the president. In pursuance of the terms of the aforementioned constitution and bye-laws the Sabha collected Bhents or offerings and received other gifts and donations. This naturally resulted in expansion of its assets. In 1915 the first real beginning was made by establishing a religious colony at Agra at Dayalbagh; extensive land was acquired and constructions of model houses began. In 1917 an educational institute was established, in 1919 Model Industries were started, in 1926 a hospital was established. In the same year a dairy and agricultural farm was established. In 1927 a technical college was started. In 1930 a girls' college was founded and in the same year a provident fund called Jivanudhar fund was established for the benefit of Satsangis which holds now a capital of 10 lacs. At present the following institutions are run under the auspices of the Sabha by separate managing committees:- 1. Intermediate College for boys. 2. Intermediate College for girls. 3. Technical College. 4. Meternity Department. 5. Hospita....
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....e Radhaswami faith for the conduct of religious service, i.e., the Central Satsang and Branch Satsangs. N.B.-The word 'business' is not obviously used in the sense of business activities but in the sense of affairs. (b) To collect preserve and administer the properties moveable and immoveable that have been or hereafter be dedicated to Radhaswami Dayal, or that may be acquired for or presented to Radhaswami Satsang and to deal with and apply the same to the religious and charitable object of that Satsang. Note-applications, regarding dedication of properties of all description to Radhaswami Dayal may be presented in form 'A'." Form 'A' runs as follows: "To The Secretary, Radhaswami Satsang Sabha. I...................am a Satsang of Radhaswami Religion. I dedicate...............(name and description of things dedicated) to Radhaswami Dayal through the Radhaswami Satsang Sabha. I declare that from this date forward neither I nor anyone else claiming through me shall have any right or claim of any description over the aforesaid.................(name of things dedicated) that I have dedicated. The same may be kindly accepted. Date............
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....lowing effect:- "To remove unemployment." Clause (c) was left substantially as clause (b) stood in 1937 constitution and clause (d) was reproduced as clause (e) in the new constitution; but the proviso in it about the paramountcy of the orders of Sant Satguru in matters relating to the furtherance of the religious and charitable objects specified above was omitted therefrom. These amendments came after the starting of income-tax proceedings mentioned hereafter. 11. In 1935, the Income-tax Officer, Agra, for the first time treating the offerings and the properties of the plaintiff Sabha as belonging to the Sahibji Maharaj Anand Sarup, proposed to assess him personally for the income therefrom in spite of his denial that the income was not his and actually assessed him on that income on 20th January, 1936. The Appellate Assistant Commissioner, however, set aside the order of the Income-tax Officer, Agra, in appeal on the ground that notice was not properly served. The Income-tax Officer, Agra, again started proceedings against Sahibji Maharaj treating him to be the owner of the properties and its income which....
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....ndustrial and commercial activities of the Sabha was held for religious or charitable purposes to be determined by the Income-tax authorities. The High Court's observations on the point were: "It is not necessary for the purpose of this case to determine whether all the properties which are now vested in the Sabha are held by it for the purposes of public trust of a charitable and religious nature nor is it necessary to find out whether all its activities are of a charitable or religious nature." 13. It was in the above state of circumstances that the income of the Sabha from its various institutions and activities came to be assessed during the years under consideration starting from the assessment year 1936-37 and ending with the assessment year 1941-42. During the course of these assessment proceedings, the respondent Sabha claimed exemption from assessment in respect of its income under Section 4(3)(i), 4(3)(ii) and 4(3)(ia)(a) of the Income-tax Act. The exemption was not allowed by the Income-tax authorities and the income of the respondent Sabha from its commercial and industrial co....
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....s order for the years in question, it was contended on behalf of the Department before the Tribunal that although a minor portion of the income was being applied by the Sabha to certain religious and charitable objects, yet as the major part of the income was left unapplied and was accumulated with a view to extend the business activities of the Sabha, such income should not be held to be an income exempt under Section 4(3)(ii) of the Income-tax Act as being wholly held for religious and charitable purposes. A further argument of the Department was that initially the income was made from bhents but there was no income from bhents as such in respect of which exemption could be claimed, because these bhents were converted into huge industrial and commercial units and were augmented by other voluntary subscriptions and as the exemption was claimed in respect of such industrial and commercial units, it was not permissible under Section 4(3)(i) of the Act nor under Section 4(3)(ii) of the Act, as the income was not solely applied to religious and charitable purposes. 15. The Tribunal affirmed the finding of the High Court in the civil litigation mentioned above between the parties an....
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....30 in order to determine whether the real purpose of the Sabha was charitable and religious and whether the properties acquired or activities taken by it were acquired and taken for the furtherance of the primary purpose of the Sabha and then examined the activities of the Sabha not with a view to determine their ostensible character but with a view to determine whether they were taken in pursuance of the primary objects of the Sabha or for the purpose of the private gain or for the purpose of commercial profit, though all the same it would subserve general public utility and recorded its finding in the following terms:- "The objects of the Radhaswami Satsang clearly included both the propagation of the faith as well as the welfare of the followers of that faith including their spiritual, moral, educational, intellectual and economic welfare. Some of the objects are enumerated by Mr. GauriShankar Varma a judicial officer of Oudh in his affidavit. Clause (e) says that the Satsang community is enjoined to be self-supporting and is not to depend on contributions from persons outside its....
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.... industrial activities that have come into existence have not been undertaken with a view to earn individual profit or with a primary purpose of making commercial profit." Quoting the following remarks of the Appellate Assistant Commissioner, the Tribunal observed as follows:- Appellate Assistant Commissioner's order.-"All the business activities of the Sabha are carried on strictly on business principles with the constant endeavour to enlarge those activities in numerous directions from year to year. The members of the community are again not benefited materially from any of these business. On the other hand, to Satsangis are expected to make huge sacrifices. They are further expected to work on wages lower than allowed to outsiders and are further expected to make offerings or bhents so that there is no charitable sphere of activities or expenditure or the application of the profits for the benefit of the community in the course of the carrying on of their business activities." Tribunal's order.-"The Appellate Assistant Commissioner is, however, eloquently silent as to make profit for whom the industrial and commercial concerns are run and what is the object for ....
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....provided all such activities are for the purpose of earning income to be applied in furtherance of the primary objects, would not be derogatory to the primary purposes of the Sabha. The Appellate Assistant Commissioner has himself admitted in his judgment that no part of the income of such activity is utilised for any private gain. This is clear from the following observation in his order:- "It is true again that both under law as also in practice private gains are eliminated altogether." If private gain is eliminated altogether then the gain through such trading and commercial concerns is a gain for the Sabha as a corporate body and as the Sabha stands under a legal obligation to apply such gains for the furtherance of the objects of the Sabha which were primarily religious and charitable, the gain or profit from such business must necessarily be held to have been made in furtherance of the primary purpose. This would be clear from the following observations of their Lordships of the Privy Council in In re Trustees of the Tribune reported in [1939] 7 I.T.R. page 415 at page 423:- &n....
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....gious and charitable purposes of the association. The whole history of the Sabha as evidenced by the proceedings, since it was founded, goes to show that the Sabha was acting independently in terms of it constitution and not following any arbitrary mandates of the Sant Satguru. Between 1910 to 1921, no meeting was ever presided by the Sant Satguru. It is to be noted that the Sabha mainly started industrial activities during this period but none of them were started at the initiative of the Sant Satguru. All the offerings were taken possession of by Sabha and not Sant Satguru. The resolutions of the Sabha were carried out by majority at the proposal of an individual member of the Sabha and were never vetoed by the Sant Satguru, after they were once passed. Moreover, rule No. 18 of the bye-laws in the present case clearly vests the property in the Sabha thereby placing it to a fiduciary position. Further there is an essential difference in conception of the spiritual position of the Guru between the two schools. In this connection, the statement of Sahibji Maharaj in the previous case dated 27th October, 1926, to be found at pages 153-162 of Paper Book may be usefully read. In fact i....
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....te and even if dissolution takes place any property left after the satisfaction of the Sabha's debts and liabilities is not to be distributed amongst the members of the Sabha but is to be given to some other society to be determined by votes of not less than 3/5th of the members present personally or by proxy at the time of the dissolution or in default thereof by such courts as are constituted under the Act." 18. During the course of the argument before the Tribunal a contention was raised that the industrial and commercial activities the income from which was the subject matter of the income-tax proceedings were not started with funds which were held under a legal obligation and that the fact that they were started with funds which were held under a legal obligation for religious or charitable purposes would not make them property held under legal obligation and exempt their income from taxation under Section 4(3)(i) of the Act and reliance was placed on Commissioner of Income-tax, Madras v. Thevara Patasala*. But the Tribunal distinguished the Madras case and did not agree to the above contention. It is on that basis that question No. IV has been raised in the present cas....
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....ct with the statement of the case:- "(1) Whether the bhents (offerings) made by the followers of the Radhaswami faith of the Dayalbagh school to the deity (Radha Swami Dayal) in pursuance of the dictates of their faith and in accordance with the constitution of the Sabha vest in the Sabha under a legal obligation wholly for religious and charitable purposes within the meaning of Section 4(3)(i) of the Income-tax Act? (2) Whether in the circumstances of the case set forth in the statement of case, the income derived by the respondent Sabha from bhents and received by the Sabha under the circumstances mentioned in question No. (1) is also exempt from taxation under Section 4(3)(ii) as being solely applicable to charitable and religious purposes? (3) Whether in the circumstances stated in the statement of case, the starting of industrial and commercial concerns by the Radha Swami Satsang Sabha of Dayalbagh, Agra, out of the funds can in view of its constitution and bye-laws and their origin and character and the conduct and creed of the followers of the Radhaswami faith be held to be in furtherance of its objects of a religious and charitable nature as contemplated by the def....
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.... be served by extracting certain portions of the order and including them in the statement of the case, divorced of the context and the setting in which they occur. The order of the Tribunal being before the High Court, it will be open to the parties to utilise such extracts from it for the purposes of arguments as suits them. We have however on hearing the Department's counsel thought fit to incorporate some further statements in the statement of the case. These additions in the draft statement are shown by a star mark. We have also decided to expunge a few words from questions Nos. 2 and 3 and to formulate another question as question No. 6 to which both the parties have agreed. The draft statement of the case as finalised, is submitted to the High Court through proper channel. *See Secretary of State for India in Council v. Radhaswami Sat Sang [1945] 13 I.T.R. 520. *[1909] 5 Tax Cas. 408, 414. *A.I.R. 1926 Mad. 949. G. S. Pathak, for the Commissioner. K. L. Misra, Gopal Bihari, Maheshwari Dayal, B. N. Katju, Kripa Narain G. Kumar, for the assessee JUDGMENT The judgment of the Court was delivered by MALIK, C.J.--This is a reference under Section 66(1) of the In....
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....lue. After the decision of the Judicial Committee in Chhotabhai's case See Secretary of State for India in Council v. Radha Swami Sat Sang [1945] 13 I.T.R. 520 mentioned above, the Income-tax Department wanted to assess to income-tax the then Sant Satguru Sir Anand Sarup for the entire income of the properties whether vested in the Sabha or held by any other society or institution connected with Dayalbagh. The Radhaswami Satsang Sabha, as plaintiff, filed a suit in the Court of the Additional Civil Judge of Agra against the Secretary of State for India in Council and the Commissioner of Income-tax for a declaration that the properties held by the Sabha were held as religious and charitable trust and were not the properties belonging to the Sant Satguru, and the Commissioner could not, therefore, assess him to income-tax. The Sant Satguru, Sir Anand Sarup, was impleaded as a defendant to the suit and after his death his widow Lady Sohan Bai and his sons were impleaded as his legal representatives. This suit was decreed on the 12th of August, 1938. A first appeal was filed in this Court by the Secretary of State and the Commissioner of Income-tax which was dismissed and the de....
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....itable nature as contemplated by definition given in Explanation to Section 4(3) of the Income-tax Act? (4) Whether the income derived from concerns mentioned in (3) above is income derived from property held under a legal obligation for religious and charitable purposes and as such exempt from taxation under Section 4(3)(i) of the Act? (5) Whether the income derived from concerns mentioned in (3) above is income derived from business carried on by the Sabha as a charitable and religious body in the course of carrying out its primary purposes of a religious or charitable nature to be applied solely to those purposes and hence also exempt under Section 4(3)(ia) of the Income- tax Act? (6) Whether as held by the Tribunal the income which was the subject matter of the assessments relating to the years 1939-40, 1940-41, 1941-42 was already exempt under Section 4(3)(i) and the addition of Section 4(3)(ia) was only made by the Legislature by way of an amplification of the scope of the exemption under Section 4(3)(i) and as such Section 4(3)(ia) could retrospectively apply to the assessment relating to the aforesaid years?" It would appear from these questions, and the fact ha....
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....ious and charitable body. This finding, though the matter has not been referred to us in any of the questions mentioned above, has been strenuously challenged by learned counsel for the Commissioner. Learned counsel has urged that many of the objects of the Sabha do not come under the meaning of the word "charity", and the Satsangis are not a sect or community so that any charitable object for the benefit of the Satsangis cannot be deemed to be an object of general public utility. As a matter of fact greater part of the argument of learned counsel has centred round these two points. It would probably be convenient to deal with these two points before we pass to the other points that arise in the case, but it may be useful at this stage to say that the Tribunal has summarised its findings in paragraph 19 of the statement of the case, on the basis of which it wants our decision on the questions referred to us in paragraph 20. The first finding mentioned in paragraph 19 is- "That the respondent Sabha is a religious and charitable society", and the sixth finding is, "That the activities ....
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.... part of the general public was still on the assessee, in spite of the concession made before the Income-tax Officer which made it unnecessary for the assessee to prove any facts to establish that it was a body which could be called a cross-section of the public. It would be enough to reject this contention on the ground that the point does not arise out of the appellate order but we may briefly indicate that in our view the point has no substance. The whole basis of the argument is the remark in Chhotabhai's case* mentioned above at page 151 that- "All persons, whether Hindus, Mahomedans, Parsis or Christians, can be initiated into this religion provided they are found to be fit and suitable by the spiritual head or 'Guru', and when initiated, they are called 'Satsangis'." Learned counsel failed to see that these observations were made by their Lordships of the Judicial Committee only as regards fresh converts to the Satsangi faith. This faith or religion has now existed since 1861 and since its foundation there are many Satsangis who are not converts to this faith but they are Satsangis by birth. Their Lordships of the Judicial Committee did not say t....
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....hers* Lord Simonds has laid down the test as follows:- "Then the question is whether that class of persons can be regarded as such a 'section of the community' as to satisfy the test of public benefit. These words 'section of the community' have no special sanctity, but they conveniently indicate first, that the possible (I emphasise the word ' possible ') beneficiaries must not be numerically negligible, and secondly, that the quality which distinguishes them from other members of the community, so that they form by themselves a section of it, must be a quality which does not depend on their relationship to a particular individual........ A group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propositus or to several propositi, they are neither the community nor a section of the community for charitable purposes." In the same judgment Lord MacDermott has laid down the test as follows:- "The test thus propounded focuses upon the common quality which unites those within the class concerned and asks whether that quality is essentia....
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.... cloistered nuns who devoted their time to prayer, contemplation, penance and self-sanctification within their Convent with the object of gaining salvation for themselves. It was held that the trust created for their benefit could not be deemed to be a trust for charitable purposes in the sense that it was not for the benefit of the public. The members of the Radhaswami faith cannot fairly be compared with the nuns of a priory and they may more appropriately be compared with the members of the Roman Catholic faith, though they may be much less numerically than the Roman Catholics, inasmuch as Roman Catholics recognise as their religious head the Pope and owe allegiance to him just as Satsangis owe their allegiance to the Sant Satguru and recognise him as their religious head. The other cases cited by Mr. Pathak are the following: Cocks v. Manners , in which there was a trust created for the benefit of Dominican convent at C and it was held that it was a voluntary association of individuals and the trust was not for public benefit. The case is similar to the case of the nuns of Carmelite Priory. In the Trustees of Wernher's Charitable Trust v. Commissioners of Inland Reven....
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....not have meant that the trust must be for the benefit of the general public and not a section of the public. Section 4(3)(ia) (b) of this Act provides that any income derived from business carried on behalf of a religious or charitable institution when the income is applied solely to the purposes of the institution and the work in connection with the business is mainly carried on by the beneficiaries of the institution shall be excluded from the total income of the assessee. It the words "general public" excluded a section of the public, then the words "carried on by the beneficiaries of the institution" would be meaningless as the general public would be the beneficiaries of the institution and whoever carries it on would be a part of the general public. Trusts are generally created for the benefit of a section of community in which the creator of the trust feels interested and which he intends to benefit and the meaning given by learned counsel would mean that the income of no trust can be exempt from taxation unless it is a trust which is meant for the humanity as a whole and not for any section of that humanity howsoever numerous and by whatever classification it may be disting....
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....ly for the private convenience and support of individuals or families while a public trust may be for the benefit of the public at large or some portion of it answering a particular description, the object being to benefit an uncertain and fluctuating body and the trust being of a permanent and indefinite character." Judged by the test laid down in the last case or the test laid down in English cases it must be held that the Satsangis are a cross- section of the public, being followers of one religion, and a charitable trust for the benefit of Satsangis as such must be deemed to be a trust for an object of a general public utility. The next question on which arguments have been advanced at some length is whether the properties held by the Sabha can be said to be held for a religious and charitable object. Again, as we have pointed out already, the finding on the point is against the Commissioner and one fact has not been doubted or disputed, and which has clearly been found by the Tribunal, that neither the income from bhent nor the income derived from business is divisible among the Satsangis and no part of such income is payable either to them or to Sant Satgurus. Even if a....
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....and has clearly been found. At one stage Mr. Pathak, learned counsel for the Commissioner, urged that the properties neither belong to the Sabha nor are vested in it and are all vested in the Guru as his personal property and he relied upon the decision of the Privy Council in Chhotabhai's case but when faced with the finding of the Tribunal and the fact that if the entire income is of the Sant Satguru then the Sabha could not be made taxable, learned counsel dropped the point and conceded that for the purposes of this case it may be treated that the properties vested in the Sabha. The argument, however, was that the objects for which the properties are held by the Sabha under an obligation are not all charitable and religious objects and in that connection learned counsel cited a large number of English cases to show what charity means is England. The first case cited by him is Morice v. Bishop of Durham**. That case is not very helpful. The point decided in that case was that a bequest for such objects of benevolence and liberality as the trustee in his own discretion shall most approve is not valid as the objects are uncertain but an exception is made in cases of a trust ....
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....n England more historical and empirical than logical. In Gilmour v. Coats and Others, when discussing the various decisions as to what is charitable and what is not, Lord Simonds was forced to remark that "it is, I think, conspicuously true of the law of charity that it has been built up not logically but empirically." And in Oppenheim v. Tobacco Securities Trust Co. Ltd., cited above, Lord Normand said:- "I remind your Lordships of the observations of Lord Simonds in Gilmour v. Coats that the law of charity has been built up not logically but empirically. It is this empirical development which has so often baffled efforts to reduce the law to systematized definitions." The other cases cited by learned counsel are: Bowman and Others v. Secular Society Limited* in which Lord Parker of Waddington observed that benevolent purposes were not charitable purposes and a trust for charitable or benevolent purpose was vague for uncertainty. In In re Town and County Planning Act, 1947, Crystal Palace Trustees v. Minister of Town and County Planning** the claim of the soc....
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.... the Chancery Courts. The Act of 43 Elizabeth (1601) contained in a preamble a list of charitable objects which fell within the Act, and this was taken as a sort of chart or scheme which the court adopted as a groundwork for developing the law. In doing so they made liberal use of analogies, so that the modern English law can only be ascertained by considering a mass of particular decisions, often difficult to reconcile. It is true that Section 4, sub-section (3), of the Act has largely been influenced by Lord Macnaghten's definition of charity in Commissioners for Special Purposes of Income Tax v. Pemsel but that definition has no statutory authority and is not precisely followed in the most material particular; the words of the section are for 'the advancement of any other object of general public utility,' whereas Lord Macnaghten's words were 'other purposes beneficial to the community.' The difference in language, particularly the inclusion in the Indian Act of the word 'public' is of importance. The Indian Act gives a clear and succinct definition which must be construed according to its actual language and meaning. English decisions have no bin....
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....gh sect treated as trust properties, and not for their personal use, and ultimately it became necessary to have a body constituted in whom all these properties should vest and who should be in charge of the management of the properties. Thus the Sabha was founded in 1910 and came to be registered under the Charitable Societies Registration Act (No. XXI of 1860). The rules relating to the Sabha originally passed at the meeting of the 29th of December, 1910, are quoted in paragraph 15 of the appellate order of the Tribunal Clause (b) of the Rules is important and is to the following effect:- "To take possession of all the movable and immovable properties which have up to this time been received as offerings made to Radhaswami Dayal or which may be received as offerings in future or which may be acquired for Radhaswami Satsang or which may be given to Satsangis aforesaid by way of offerings for the purposes of advancement of the objects of Radhaswami Satsang and to protect and manage the same." These rules were amended from time to time and the rules on which the Tribunal relied are of 1930 and are in the s....
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....(a) to be charitable, this is not the case of a gift for such charitable purposes as the Managing Committee may think fit. A gift of that sort would, no doubt, be good, because the Managing Committee would be bound to keep within the ambit of charity, and if they go beyond the legal boundary, they can be controlled by the Court." Kania, J., expressed his opinion in these words:- "when there is a general charitable intention, the Court will uphold it, and if within that limit discretion is given to the trustees to select an object the trust will not fail because of the discretion so given. If a trustee selects an object, which is not charitable according to law, the Court can intervene and rectify the error." In In re Vallabhdas Karsondas Natha [1947] 15 I.T.R. 32; A.I.R. 1947 Bom. 382 where the trust deed provided that the property was dedicated for religious and charitable objects, such as, and then eight objects were enumerated, some of which were neither religious nor charitable, Stone, C.J., dealing with the objection that the whole trust was invalid, said:- ....
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....the Sabha itself, for the purpose of being utilised for the religious and charitable objects of the Satsang. Bye-law 18, which refers to it (quoted in paragraph 6 of the Appellate Order of the Tribunal) is as follows:- "All offerings, movable and immovable, howsoever and through whomsoever presented to the Supreme Creator Radhaswami Dayal or to the Radhaswami Satsang Sabha, and all properties, movable and immovable, acquired or that may be handed over or placed in the charge of the Sant Satguru, the Executive Committee or any other Committee or any individual Member, Manager or Agent, or that may come in possession of any one of them in their official capacity as such, shall always remain vested in the Sabha." And to this property which remains vested in the Sabha is applicable the rule which requires the Sabha to utilise it for the religious and charitable objects of the Satsang. When Sir Anand Sarup became the Sant Satguru he started certain educational institutions, hospitals, dispensaries, etc., and also certain model industries, which have brought a lot of income to the Sabha. It is admitted, as ....
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....haritable body, and has said:- "It was religious inasmuch as it involved the propagation of the Radhaswami faith by maintaining institutions for the conduct of the religious services and for the regulation of the conduct of the Satsangis in consonance with the tenets of that faith. It was charitable inasmuch as it also intended to ameliorate the condition of the Satsangis in various phases of their life, moral, mental, educational, intellectual, industrial and economic......................................................................... The Sabha in furtherance of such objects provided support to the indigent and needy Satsangis. It started educational institutions for their children and opened industrial concerns and factories and thereby reduced unemployment among them to improve their economic life. It started league of youths for rendering humanitarian services to the Satsangis. All this is established from the mass of unrebutted evidence of a large number of respectable Satsangis on the record." A criticism is, however, levelled by the learned counsel on the word "economic" in the quotation given above and the argument is that economic amelioration of the condition o....
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....efore, agree with the Tribunal that all the properties were held for charitable and religious purposes. On this point the findings of the Tribunal are enumerated in paragraph 19 of the statement of the case. Before, however, we leave this point we may refer to a passage in the decision of their Lordships of the Judicial Committee in All India Spinners' Association of Mirzapur, Ahmedabad v. Commissioner of Income-tax, Bombay Presidency, Sind and Baluchistan [1944] 12 I.T.R. 482; 75 I.A. 159, where their Lordships referring to the scheme said: "Nor is there any ground for the court holding that the scheme is not one which "may be" (underlining is ours) for the public benefit. The court might in proper cases refuse to admit as charitable schemes purposes eccentric or impracticable. But though economists might differ about the wisdom of some aspect at least of the Association's purposes, the court could not hold that it was beyond the pale of legitimate charitable trusts." It is difficult for us, in view of the manner in which the activities have been carried on and the income utilised, to differ abo....
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....lighting, heating and attendance. The subject which is hired out is a complex one. The mere tenement as it stands, without furniture, etc., would be almost useless for entertainments. The business of the Governors in respect of these entertainments is to have the hall properly fitted and prepared for being hired out for such uses. The profits fall under Schedule D, and to such profits the allowance in question has no application, as they cannot be properly described as rents or profits of lands, tenements, hereditaments or heritages. They are the proceeds of a concern in the nature of a trade which is carried on by the Governors and consists in finding tenants and having the rooms so equipped as to be suitable for letting. The case does not in substance differ from the letting of furnished apartments." At page 13 of the judgment Lord Birkenhead, L.C., said:- "The seating and heating are not the only matters to be considered, and to treat the user of the premises in this way is not the proper method to adopt. The question is whether the utilisation of these rooms and the provision of facilitie....
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.... on by beneficiaries of the charity and the profits are applied solely to the purposes of the charity." His Lordship then said that- "It has long been decided that, if a trade is in fact being carried on at a profit, it is immaterial that the profits must, under the constitution of the trading corporation, be devoted to public objects." Again that- "If a corporation established for charitable purposes and carrying on a subsidiary trade for the benefit of its main objects is chargeable with tax, the tax is equally chargeable where the very purpose and object of the charity is to carry on a trade. The surplus receipts in such a case, even if they were not profits, are certainly gains, and so fall under the burden of the tax." As a result of this decision a further amendment was made in the income tax law by the Finance Act of 1927 (see Section 24) and a further exemption was granted if the trade was exercised in the course of the actual carrying out of a primary purpose of the charity. Viscount Cave, in the course of his judgment in the Brighton ....
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.... on the English cases, as we have already said, is wholly unjustified in view of the fact that the language of the Indian Act is materially different from that of the English Act. In the English Act, the words "rents derived from lands, tenements, hereditaments" were much more restricted than the words "income derived from the property" in the Indian Act. There is no reason to limit the word "property" only to corporeal property and to exclude from its operation business which was itself held under trust or other legal obligation. The point now, to our minds, has been settled by two decisions of the Judicial Committee and by a decision of the Lahore High Court. In Trustees of the Tribune Press, Lahore v. Commissioner of Income-tax, Punjab, Lahore [1939] 7 I.T.R. 415; 66 I.A. 241, a trust was created of the Tribune Press of Lahore and the object mentioned in paragraph 21 of the trust deed was to the following effect:- "That it shall be the duty of the said Committee of Trustees to maintain the said press and newspaper in an efficient condition, keeping up the liberal policy of the said newspaper and devoting the surplus income of the sai....
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....from would be applied wholly and exclusively to charitable purposes. Will it be consistent with reason to urge that though cash or securities may be covered by the term 'property' as used in this clause, business is not? The Legislature was not so enamoured of buildings as to bring to bear a pressure on charitably disposed people to invest their money in them alone if they wanted to escape from the burden of income-tax." The learned Judges quoted from the Income-tax Manual, and our attention has also been drawn to that manual before the amendment of 1939, and pointed out that the instructions given in the manual to the Income-tax Officers were to the effect that they were to exclude the business income of a charitable or religious trust when the income was applied solely to the purposes of the institution and that the word "property" in clause (i) of sub-section (3) of Section 4 of the Indian Income-tax Act does not bear the restricted meaning that it bears in Section 9 of the Act but includes business, profits or share in a business. That the term "property" does not necessarily bear a restricted meaning was also held by their Lordships of the Judicial Committee in Comm....
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..... The word "property" used in Section 4(3)(i) was, therefore, used in its widest sense and there is no reason to give it the interpretation suggested by Mr. Pathak that it includes only corporeal property and does not include business which, according to learned counsel, includes not only the assets held by it but also the goodwill, and the profits are made by the utilisation of human efforts and the assets held by the business. The next point suggested is that if the word "property" is given the wide meaning as is suggested on behalf of the assessee, then there was no reason why the clause should have been amended in the year 1939; but a careful reading of the sub-section indicates that the two clauses deal with two different matters. Clause (i) of sub-section (3) of Section 4 deals with income derived from property held under trust or other legal obligation for religious or charitable purposes, while clause (ia) deals with income derived from business carried on behalf of a religious or charitable institution. The two clauses, therefore, do not necessarily overlap. Clause (i) of sub-section (3) of Section 4 of the Act, as we have already pointed nut, applies to cases where the....
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....efore we come to the questions referred to us for our decision. It has been urged that the Sabha is not an institution and importance has been placed on the words "religious or charitable institution" in clause (ia) of sub-section (3) of Section 4 of the Act. What is an institution has been discussed by the House of Lords in the case of Minister of National Revenue v. Trusts and Guarantee Company Limited. Their Lordships pointed out that- "It is by no means easy to give a definition of the word 'institution' that will cover every use of it. Its meaning must always depend upon the context in which it is found. It seems plain, for instance, from the context in which it is found in the sub-section in question that the word is intended to connote something more than a mere trust." In the case of Mayor, etc. of Manchester v. McAdam#, while dealing with the Income Tax Act of 1843, Lord Macnaghten observed:- "It is a little difficult to define the meaning of the term 'institution' in the ....