TMI Blog1964 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... istance 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 ₹ 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 travelling expenses, from the funds of the institution. If the household expenditure for residence, food, medicine, clothing, servants and vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad rightly been brought to tax. In regard to household expenses, the Tribunal in the said appeals held that an amount of ₹ 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 ₹ 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) ₹ 2,000 per month for both the years and (ii) of the household expenses in the relevant year less ₹ 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 ₹ 2,000 per month received by him is a compensation or solatium in place of certain presents by devotees called Nam Vero and Bhets to which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant? (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 in the framing of the scheme by the High Court in Appeal No. 430 of 1927. The entire history is set out in the judgment of the High Court in that appeal and that judgment having been referred to and relied upon in the order of the Tribunal, a copy of it has been taken on record by us by consent of parties. The who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 of the trust which remained after defraying the established charges of the institution. These established charges of the institution included defraying of expenses for the household of the Acharya, that is, providing residence, food, clothing, servants, horses, carriages and elephant for the Acharya and the members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Acharya shall, after consultation with the more religious amongst the Sadhus and followers, provide suitable amounts to his brothers and sons for their maintenance out of the public funds, clearly suggests that he intended that the maintenance of the Acharya should also come from the public funds. Macklin J. also recognized this obligation of the trust in the following words: It is however recognised in the sacred books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure 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 Tyagis in accordance with the practice prevailing in the institution before this scheme came into operation. Any additional expenses which may be necessary for books and other purposes up to a maximum of ₹ 5 in any month per Tyagi shall be met by the Mahant. The committee shall frame rules for the guidance of the Mahant in this matter. Any expenditure in excess of the above shall be notified by the Mahant to the Acharya for his directions and orders. Lastly, clause 35 declared by way of a residuary provision that subject to the provisions of the scheme the power of management of the Acharya and his duties shall be in accordance with the Lekh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt 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 ₹ 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 ₹ 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 very language of clause 16, sub-clause (i), of the scheme, the sum of ₹ 2,000 per month to be received by the Acharya is in his capacity as Acharya. It is the person holding the office of Acharya who is entrusted with the management of the properties of the institution under clause 1 and when he is authorized by clause 16, sub-clause (i), to set apart a sum of ₹ 2,000 per month for his personal use, it is evident that this amount is received by him virtue officii. Moreover this amount is provided for him in lieu of Nam Vero and Bhets. The Nam Vero and Bhets which until the decision of the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth 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 ₹ 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 and was, therefore, in the nature of a capital receipt. Now, even by the farthest stretch of imagination, it is difficult to see how there could be said to be any assignment or relinquishment by the Acharya of his alleged right to Nam Vero and Bhets at the time of the framing of the scheme. In the first instance it is not correct to say that the Acharya had any right to collect Nam Vero or Bhets. Nam Vero and Bhets are by their very nature voluntary payments and there is no obligation on the followers to pay these amounts to the Acharya. When this was pointed out, Mr. P.D. Desai ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a period of five years. The question which was debated before the court was whether this annual payment was a capital receipt or a revenue receipt. The court held that it was a capital receipt inasmuch as it was neither salary, profits and gains of business, profession or vocation, nor income from other sources. The payment was obviously by way of consideration for the assessee agreeing not to carry on business for a particular period of time. It was, therefore, in substitution of the source of income itself and not in substitution of income and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 money's worth. It is not necessary that income must be received in cash. It may also be received in kind but that must represent money's worth, that is, something which is capable of being converted in terms of money. As observed by Lord Halsbury L.C. in Tennant v. Smith*, income includes anything capable of being turned into money from its own nature. Of course there are certain things which are not capable of being turned into money from their own nature and yet they have by statute been artificially deemed to be income , but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule 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, therefore, undoubtedly true that what the Lord Chancellor construed in that case was the language of Schedule E but he did observe what would be income within the accepted connotation of that word and he said that the thing sought to be taxed is not income unless it can be turned into money. Lord Watson considered what would come within the category of profits in the ordinary acceptation of that word and he said that that word in its ordinary meaning appeared to denote something acquired which the acquirer becomes possessed of, and can d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 speech of Lord Warrington of Clyffe also does no more than point out that the only question in Tennant v. Smith** was whether anything in respect of the annual value of the portion occupied by the agent could be treated as income under Schedule E and the learned Law Lord emphasized that the case had nothing to do with Schedule A which was the Schedule with which the House of Lords was concerned in Lady Miller's case. Our attention was also invited by the learned Advocate-General to the decision of the Court of Appeal in Mrs. D.M. Shan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 matter of fact that is the basis on which this case has been explained by the Court of Appeal in Wilkins v. Rogerson*. Lord Evershed M.R. said in that case: If I have incurred a debt--for example, my debt due for income tax comparable to that in Hartland v. Diggines--and my employer chooses to discharge that debt for me, then it is no doubt true that what I have received in money or money's worth is the equivalent of the debt; and the sum of money is, therefore, properly brought within the scope of the charge...so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 the property of the church and not gifts to the priest, but out of which the priest will receive what is needed for his seemly maintenance . The income of the mission was paid into a bank account in the names of the assessee and his Archbishop and normally all the expenses of the mission were met by cheques drawn on this account by the assessee. Included amongst these disbursements was a salary of 50 to the assessee, which was admittedly chargeable to income-tax, and household expenses, viz., food, drink, fuel, wages, etc., incurred at the presbytery house where the assessee, in accordance with the regulations of the Archdiocese, lived communally with three curates. The question which was raised was whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, servants, horses, carriages and elephant for the Acharya and the members of his household, shall be incurred and met by the institution. The institution is to incur the expenses in connection with the various matters relating to the household of the Acharya such as providing food, clothing, servants, horses, carriages, elephant, etc. This obligation is founded on the basic principle of the faith that the Acharya is a fundamental part of the institution and the obligation to maintain the Acharya is, therefore, a duty laid upon the institution as much as the duty to provide food, ghee, clothing, etc., to Tyagis, i.e., Sadhus, who form another important part of the institution. Just as under clause 31 the funds o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
