1969 (2) TMI 9 - SC - Income Tax

Claim for exemption under the proviso to section 4(3)(i) of the Income-tax Act - Whether a Hindu deity can be treated as a unit of assessment under sections 3 and 4 of the Income-tax Act 1922 - Meaning of word individual - HELD THAT - The true legal view is that in that capacity alone the dedicated property vests in it. There is no principle why a deity as such a legal person should not be taxed if such a legal person is allowed in law to own property even though in the ideal sense and to sue for the property to realise rent and to defend such property in a court of law again in the ideal sense. Our conclusion is that the Hindu idol is a juristic entity capable of holding property and of being taxed through its shebaits who are entrusted with the possession and management of its property. It was argued on behalf of the appellant that the word individual in section 3 of the Act should not be construed as including a Hindu deity because it was not a real but a juristic person. We are unable to accept this argument as correct. We see no reason why the meaning of the word individual in section 3 of the Act should be restricted to human beings and not to juristic entities. In Commissioner of Income-tax v. Sodra Devi 1957 (5) TMI 9 - SUPREME COURT Mr. Justice Bhagwati pointed out as follows ...the word individual has not been defined in the Act and there is authority for the proposition that the word individual does not mean only a human being but is wide enough to include a group of persons forming a unit. It has been held that the word individual includes a corporation created by a statute e.g. a University or a Bar Council or the trustees of a baronetcy trust incorporated by a Baronetcy Act. We are accordingly of opinion that a Hindu deity falls within the meaning of the word individual under section 3 of the Act and can be treated as a unit of assessment under that section. It is clear that the word individual in section 3 of the 1922 Act includes within its connotation all artificial juridical persons and this legal position is made explicit and beyond challenge in the 1961 Act. Thus we hold that the question of law referred by the Income-tax Appellate Tribunal and as modified by us should be answered in the affirmative and in favour of the Commissioner of Income-tax.

Summary

The core legal question considered in this judgment is whether a Hindu deity can be treated as a unit of assessment under sections 3 and 4 of the Indian Income-tax Act, 1922. This central issue arises from the assessment of income derived from properties dedicated as debuttar (religious endowment) to Hindu deities, managed by appointed she baits (managers), and whether such income is taxable in the hands of the deity as a juristic person or otherwise.

Another related issue concerns the applicability of section 41 of the Income-tax Act, which deals with the assessment of trustees and managers, and whether the she baits, as managers of the deity's property, could be assessed under this provision given that they were not appointed by or under any court order.

Further, the judgment examines the legal nature and personality of Hindu idols and deities under Hindu law and jurisprudence, and the consequent implications for taxation, including the interpretation of the term "individual" under the Income-tax Act.

Regarding the first issue, the Court analyzed the legal framework recognizing Hindu idols as juristic persons capable of owning property. The Court relied on authoritative precedents including Manohar Ganesh v. Lakhmiram, where it was held that Hindu law recognizes juridical persons or subjects called foundations, and that a Hindu idol is such a juristic entity in whom dedicated property vests. The Court cited the reasoning of West and Birdwood JJ., who emphasized that Hindu law does not require a trust for such religious endowments, as gifts dedicated "on the altar of God" suffice to vest ownership in the juridical person symbolized by the idol.

Further, the Court referenced the Madras High Court's decision in Vidyapurna Tirtha Swami v. Vidyanidhi Tirtha Swami, which affirmed that consecrated idols are juridical persons with legal personality, capable of suing and being sued, and that human managers (shebaits) are appointed to manage the property akin to guardians of infants. Similarly, the Privy Council's observations in Prosanna Kumari Debya v. Golab Chand Baboo were cited, highlighting that the idol is treated as perpetually an infant, necessitating human guardianship.

The Court also discussed the spiritual versus legal aspects of Hindu idols, noting that while spiritually the idol symbolizes the Supreme Spirit and is not a separate divine entity, legally it is treated as a juristic person for the purposes of property ownership and management. The Court rejected the argument that the deity, as a juristic person, should be excluded from the definition of "individual" under the Income-tax Act.

In interpreting the term "individual" in section 3 of the 1922 Act, the Court relied on the principle that the word is not confined to natural persons but includes juridical persons. The Court referenced the decision in Commissioner of Income-tax v. Sodra Devi, which held that "individual" extends to corporations and other artificial entities. The Court further supported this interpretation by reference to the Income-tax Act, 1961, where the definition of "person" explicitly includes artificial juridical persons, thereby reinforcing that the earlier Act's language should be construed broadly.

The Court rejected the appellant's contention that the word "individual" should be narrowly construed to exclude Hindu deities, reasoning that the legal recognition of the deity as a juristic person entitled it to be assessed as an individual under the Act. The Court also invoked the principle that subsequent legislation may be used to clarify ambiguities in earlier statutes, relying on the 1961 Act's broader definition to interpret the 1922 Act.

Regarding the second issue, the Court examined the applicability of section 41, which allows assessment of trustees or managers appointed by or under court orders. The she baits, although managers of the deity's property, were not appointed by any court order. The Appellate Tribunal had held that since the she baits were not court-appointed managers, the conditions of section 41 were not fulfilled, and thus they could not be assessed under that section. The Court agreed with this interpretation and noted that the Income-tax department's attempt to assess the she baits under section 41 was misplaced, especially since the trustee case had been abandoned.

The Court emphasized that the assessment was rightly made on the deity as a juristic person through its she baits, not on the she baits personally under section 41. The she baits' role was to manage the property, but the legal owner and taxable entity was the deity itself, recognized as an individual under the Act.

In conclusion, the Court held that Hindu deities are juristic persons capable of owning property and being assessed for income tax as individuals under sections 3 and 4 of the Income-tax Act, 1922. The she baits, as managers, do not themselves attract assessment under section 41 unless appointed by a court, which was not the case here. The assessment of the deity's income through its she baits was therefore in accordance with law.

The significant holdings include the following verbatim excerpts encapsulating the Court's reasoning:

"The Hindu law, like the Roman law and those derived from it, recognises, not only corporate bodies with rights of property vested in the corporation apart from its individual members, but also the juridical persons or subjects called foundations... A Hindu idol is, according to long established authority, founded upon the religious customs of the Hindus, and the recognition thereof by courts of law, a 'juristic entity'. It has a juridical status with the power of suing and being sued."

"The true legal view is that in that capacity alone the dedicated property vests in it... There is no principle why a deity as such a legal person should not be taxed if such a legal person is allowed in law to own property, even though in the ideal sense, and to sue for the property, to realise rent and to defend such property in a court of law again in the ideal sense."

"We see no reason why the meaning of the word 'individual' in section 3 of the Act should be restricted to human beings and not to juristic entities."

"The she baits were the managers for the purpose of section 41, they were not so appointed by or under any order of the court, and, therefore, the second condition required by section 41 was not fulfilled, and the she baits could not be proceeded against."

"The question of law referred by the Income-tax Appellate Tribunal and as modified by us should be answered in the affirmative and in favour of the Commissioner of Income-tax."

The core principles established are that Hindu deities are juridical persons capable of owning property and being assessed for income tax; the term "individual" under the Income-tax Act includes such juristic entities; and that managers of deity property who are not court-appointed cannot be assessed under section 41. The final determination affirmed the validity of assessing the deity's income through its she baits and dismissed appeals challenging this position.