TaxTMI 
TaxTMI 
1975 (2) TMI 132
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....ief of Staff and various other officers. The accounting year of the Company is from 1st of October to the 30th of September of each year. In the years ending 30-9-1954, 30-9-1955 and 30-9-1956, the respondent received three sums from the international organisation, namely, Rs. 1,97,302/-, Rs. 2,50,228-14-0 and Rs. 2,67,732-15-0. Besides these amounts, the respondent had made collections in India. Upon all these amounts the respondent was called upon to pay a contribution Of 2 per cent as required by Section 58 of the Act read with Rule 32 of the Bombay Public Trust Rules. The respondent claimed exemption from liability to pay contribution upon the three donations. Appellant No. 3 disallowed the claim. The respondent's appeal against the order was dismissed by appellant No. 4. The respondent thereupon filed a writ partition in the High Court of Bombay for a declaration that the provision for levy of contribution contained in Section 58 of the Act and Rules 32 and 33 of the Rules as also the provisions of Sections 2 and 4 of the Maharashtra Act 29 of 1962 (hereinafter referred to as the "Amending Act of 1962") were beyond the powers of the State Legislature and that the levy of c....
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....ear excluding donation given or offering made with a specific direction that they shall form part of the corpus of the public trust. 7. Rule 32(1) of the Bombay Public Trust Rules, 1951, framed under Section 84, Clause (b), provided that every public trust other than a trust exclusively for the purpose of secular education imparted by a recognised institution or exclusively for the purpose of medical relief shall pay annually to the Public Trusts Administration Fund out of its property or funds a contribution at the rate of 2 per cent of its gross annual income or, where the public trust is a dharmada, its gross annual collection or receipts. In Sub-rule (3) of Rule 32, it was provided that in calculating the gross annual income or receipts for the purpose of assessing the contribution the following deduction shall be allowed : donations given with specific directions that they shall form part of the corpus (vide Explanation to Section 58). By a Government notification dated 3-12-1953, Rule 32 was amended. The provision for levy of contribution was substantially the same as in Sub-rule (I) of Rule 32 but the amended Sub-rule (3) of Rule 32 was as follows : ....
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.... The substitution of Section 58 in the principal Act by Section 2 of this Act shall be and shall always be deemed to have been made in the principal Act and the provisions of Clause (iii) of Sub-rule (3) of Rule 32 of the Bombay Public Trust Rules, 1951, shall be deemed to have been deleted from the date on which those rules came into force; and accordingly, Rule 32 of these rules as amended shall be deemed always to have been validly made and to have full effect, as if it had been duly made under the principal Act as amended by this Act and anything done or action taken under that Rule shall be deemed to have been validly done or taken. 10. An amendment was also effected by the Act itself in Rule 32 by deleting Clause (iii) of Sub-rule (3) of Rule 32. 11. The validity of these amendments was not challenged before this Court. 12. The two main questions which arise for consideration in this appeal are : (1) whether the levy of contribution under Section 58 read with Rule 32(3) was a tax from the inception of the levy or whether, although the levy was a fee in its inception, it assumed the character of tax in any subsequent year by reason of the accumulation of the surplus....
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....like a local authority or statutory corporation. The amount of fee levied is supposed to be based on the expenses incurred by the Government or the agency in rendering the service though in many cases the costs are arbitrarily assessed. Fees are ordinarily uniform but absence of uniformity is not a criterion on which alone at can be said that a levy is in the nature of tax. In the case of a fee, no account is taken of the varying abilities of different recipients of the service to pay. As a fee is regarded as a sort of return or consideration for services rendered, it is necessary that the levy of fees should be correlated to the expenses incurred by the agency in Tendering the services. "If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area the fact that in benefiting the specified class or area the state as a whole may ultimately and indirectly be benefited would not detract from the character of the levy as a fee." Hingir-Ramour Coal Co. Lt. v. The State of Orissa [1961]2SCR537 - It is also generally necessary that the payments demanded for rendering of such services must be set apart or specifically appropriated for that ....
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....par took the character of a fee. In the course of the judgment the Court said : The High Court was of the opinion that the amount of Rs. 68,000 spent for paying the bye-lanes and Rs. 20,000 for lighting of streets and lanes cannot be considered to have been spent in rendering services to the rickshaw owners and rickshaw drivers. The reason was that under Section 7(a) of the Act it was the statutory duty of the Municipal Board to light public streets and places and under Clause (h) of the same section to construct and maintain public streets, culverts etc. The expenditure under these two items was incurred by the Municipal board in the discharge of its statutory duty and it is manifest that the licence fee cannot be imposed for reimbursing the cost of ordinary municipal services which the Municipal Board was bound under the statute to provide to the general public (see the decision of the Madras High Court in India Sugar and Refineries Ltd. v. The Municipal Council, Hospet I.L.R. 1943 Mad 521. 17. In Delhi Cloth and General Mills Co. Ltd. v. Chief Commissioner, Delhi [1970]2SCR348 the point for consideration was whether the amount payable for renewal of licence to run th....
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....e percentage will come to about 62. On the basis of the decision of this Court in the Delhi Cloth and General Mills case (supra) the levy was in the nature of fee as the expenditure was 62 per cent of the contributions levied and as there was approximate correlation. 20. It was, however, argued on behalf of the respondent on the basis of the decisions in Corporation of Calcutta v. Liberty Cinema [1965]2SCR477 and Nagar Mahapalika, Varanasi v. Durga Das Bhattacharya (supra) that the exercise of the power of supervision and control of public trusts under the provisions of the Act would not be special services, that performance of the statutory functions and duties under the Act is owed to the public and cannot be regarded as special benefits to the public trusts in the state for which a fee can be exacted as consideration. 21. The object of the Act as seen from its preamble is to regulate and make better provisions for the administration of public religious and charitable trusts in the State of Bombay. Chapter IV of the Act provides for registration of public trusts. Chapter V deals with submission of the budgets by the trustees of certain trusts and maintenance of accounts. Ch....
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....nt with rough approximations. The services are mostly rendered by the officers of the Charity Organisation. With the proliferation of public trusts in the State it became necessary to expand the Charity Organisation and to increase the staff for supervision and control. It also became necessary to have more regional offices for the more effective and immediate supervision and control. The expenditure in constructing buildings for locating the head office and regional offices and the increase in the allowances of other amenities to the staff have also to be included in the costs of the services. When there is surplus, it cannot immediately be said that the surplus must necessarily go in reduction of the rate of contribution to be levied thereafter. We think that it would neither be expedient nor prudent to lay down any abstract proposition that whenever there is surplus in a particular year or a number of years, that surplus must always be taken into consideration and the rate of the contribution should be reduced for the next year or subsequent years. An organisation like the one in question may have to incur capital expenditure for the better administration of the trusts and it mi....
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.... the end of March, 31, 1958 when the available surplus came to Rs. 30,44,541/-. The Division Bench was alive to the desirability of locating the head office and regional offices in buildings to be owned by the organisation and incurring of capital expenditure in that behalf. The Charity Organisation has purchased a building worth about Rs. 30 lakhs. Even according to the Division Bench, investment of the surplus in buildings for locating the head and regional offices cannot be said to be diversion of the surplus for purposes alien to the object of the organisation, namely, the better administration of the trusts. Therefore, we do not think that the contribution had assumed the character of a tax at the end of March, 1958. 25. The surplus in the account of the Public Trusts Administration Fund at the end of March, 1970, was Rs. 84,49,473/- after meeting/ the capital expenditure of Rs. 17,46,794/- incurred during the years 1953 to 1970. In the figure of Rs. 84,49,473/- is included the figure of Rs. 7,06,016/-, the accumulated balances under the repealed enactments transferred to the Public Trusts Administration Fund, plus interest of Rs. 7,13,004/- on the said figure vide....
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....t be regarded as donations coming within the purview of Section 58 of the Act and Rule 32. The Division Bench held that these amounts were donations made by the international organisation in London to the respondent. We think that the High Court was right. 28. As already stated, the Amending Act came into force on 17-8-1962. The Division Bench was of the view that the levy of contribution on these amounts was ultra vires for the reason that at the time the levy was made it had ceased to be a fee and become a tax. We do not think that the High Court was right. No doubt, the demand for contribution was made only after the Amending Act came into force. But by virtue of the retrospective operation of the amended Section 58 as provided in Section 4 of the Amending Act, the respondent became liable to pay contribution in respect of the three donations in the years in which they were received. It may be recalled that these three amounts were received by the respondent in the years 1954, 1955 and 1956. By virtue of the deeming provision in Section 58 as amended, these donations became exigible to pay the contribution in the relevant years. We do not understand how these amounts which be....