TMI Blog1953 (10) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 practices by the Sant Satguru and is enjoined to keep his company as much as possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 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 of the Dayalbagh section, who held office from 1913 to 1937 preached and acted up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 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. Under clause 18 of the bye-laws of the Sabha, all properties moveable and immoveab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hospital. 6. Maternity Ward. 7. Saran Ashram. 8. Orphanage and Poor House. 9. Leather Working School. 10. Classes for instructions in manufacture of electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viously 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...................... The....................193. Signature. (c) To do the above and all such things as are incidental or conducive to the attainment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uru 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 according to the Sabha vested in the Sabha and not in Sahibji Maharaj. This led to the filing of a suit by the respondent Sabha in 1937. The suit was for a declaration that all the offerings, all the properties moveable and immoveable and Government securities standing in the name of the plaintiff Sabha and all the business ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 concerns was held liable to tax. The respondent thereupon filed appeals before the Tribunal. The case of the respondent as presented before the Tribunal was briefly as follows:- The appellant Sabha is a religious and charitable body of which the primary purpose and objects should be determined from its constitution. Under its constitution, the properties acquired by the Sabha and the institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 and held that the respondent was a charitable and religious body and that all the properties held by the respondent vested in the Sabha. The Tribunal after deciding these preliminary points, proceeded to decide whether the income which was sought to be exempted from income-tax liability was derived from properties held under legal obligations wholly for religious or charitable purposes under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fold. This purpose of this Sabha runs through all the latter constitutions though it is more clarified and elucidated in latter ones. The properties held by the Sabha and major part of its activities have been acquired or started or undertaken from 1915 onwards out of the offerings made by the followers of the faith who had full knowledge of what the constitution of the Sabha was and who while making the dedication of offerings knew it fully what the objects or Radhaswami Satsang were. They made the dedications or presented the offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munity 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 which they were run. The industrial and commercial concerns run by the Sabha are, as is admitted by him, not run for individual profit nor are these profits divided among the members. It follows, therefore, that they are run with a view to make profit for carrying out the objects of the Sabha. If so the mere fact that they are run on strictly business principles with the constant endeavour to enlarge those activities in numerous directions would not convert the primary purpose of the Sabha from a charitable and religious one into a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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:- By the terms of the trust, it is not to be carried on for profit to any individual. It cannot in their Lordships' opinion be regarded as an element necessarily present in any purpose of general public utility, that it should provide something for nothing or for less than it costs or for less than the ordinary price. An eleemosynary element is not essential even in the strict English view of charitable uses (Commissioners v. University College of North Wales*). There seems to be no solid distinction to be taken under the phrase 'general public utility' between a school founded by a testa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it appears to be the main ground for dissension between them. The whole conduct of the Sant Satgurus of the Dayalbagh school since the Sabha came into existence goes to show that they claimed no interest in the Sabha's properties or in the offerings made to the Sabha and never exercised any power of disposal or appropriation in respect of them. We have seen that Sahibji Maharaj expressly disclaimed all interest in the properties held by the Sabha in the Civil Suit No. 4 of 1937. His statement also goes to show that he never derived any monetary gain from any of the activities of the Sabha. On the other hand, we find that at the meetings of the 29th December, 1926, by resolution No. 14 the Sabha of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 case for reference. 19. The findings of the Tribunal may for the sake of brevity be summarised as below:- I. That the respondent Sabha is a religious and charitable society. II. That it is the respondent Sabha in which all the properties including the industrial, commercial and other institutions of the Sabha vest and that they do not vest in the Sant Satguru of the time being. III. That the offerings or the bhents were made to the deity Radhaswami Dayal through the Sabha on terms and circumstances which impressed them with the legal obligation to be held in trust for charitable and religious purposes. IV. That the real purpose of the Sabha as disclosed by its original character and const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 Indian Income-tax Act made on behalf of the Commissioner of Income-tax against an order made by the Tribunal that the assessee was entitled to exemption under certain provisions of Section 4(3) of the Indian Income-tax Act. The assessee is the Dayalbagh Satsang Sabha (hereafter called the Sabha in this judgment). This Sabha is a body registered under the Charitable Societies Registration Act (Act No. XXI of 1860). It may be necessary here to mention that in the year 1861 a new faith or religion was founded by Swami Shiv Dayal Singh, the followers of which were known as Satsangis to which Hindus, Mohammedans, Parsis or Christians could be initiated provided they were found to be fit and suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 decree of the lower Court was affirmed.* After the decision of the suit by the lower Court, the Income-tax Officer of Agra started proceedings against the Sabha for assessment for the year 1936-37 which was followed by assessment for the years 1937-38, 1938-39, 1939-40, 1940-41 and 1941-42. The assessee filed appeals against the assessments before the Appellate Assistant Commissioner who held that the assessee was not entitled to the exemption claimed under Section 4(3) of the Income-tax Act, though he made certain modifications in the amount assessed. There were appeals filed before the Income-tax Appellate Tribunal, which were dealt with by a common order dated the 28th of February, 1948. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether 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 has been admitted by Mr. Pathak, learned counsel for the Commissioner, and learned counsel for the assessee, that the questions relate only to the bhent income and the income from certain industrial and commercial concerns and do not relate to income from any other properties that the Sabha might possess. The first two questions relate to bhent income. We shall deal with the question as to what this income is later in this judgment. Questions 3 to 5 relate to income from industrial and commercial concerns. The sixth question is the general question as to the effect of the amendment made in the year 1939 and the addition of the provision (ia) (a) and (b) by the Amending Act of 1939 to sub- section (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 were intended to ultimately ameliorate the conditions and the walfare of the Satsangis a section of the public and to improve their mental, educational and economic conditions and as such were charitable purposes within the meaning of that term as defined at the end of Section 4 of the Income-tax Act. Taking up the first question, whether a trust created for the benefit of the Satsangis can be deemed to be a trust for charitable objects in the sense that it is for the public benefit, the whole argument of learned counsel, though addressed at great length, centres round only on one submission that no one can be a Satsangi who is not initiated by the Sant Satguru and he is, therefore, the nexus connecting the Satsangis with one another and the Satsangis must, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled '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 that that was the only way in which one could become a Satsangi and the passage occurs in the paragraph dealing with the foundation or the starting of the society in the year 1861. Had there been no concession it might have been possible for the assessee to give evidence on the point, and we are not in a position, therefore, to say that it is a pure question of law and give a decision in favour of the Commissioner. The fact that people belonging to religious sects or communities have been treated as a cross-section of the public is not disputed. Cases of this kind are given in Halsbury's Laws of England, Second Edition, Vol. 4, page 113, paragraph 148. In England the question whether a trust created for the benefit of a group of people can be treated as beneficial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either 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 essentially impersonal or essentially personal. If the former, the class will rank as a section of the public and the trust will have the element common to and necessary for all legal charities; but, if the latter, the trust will be private and not charitable. In the same case Lord Normand pointed out at page 309 the difficulty of defining the attribute or qualification which differentiates a section of the public and has observed that by reason of the difficulty all attempts to define the public element in charitable trusts have foundered. He has pointed out that the definition depends entirely on the attribute by which the selection of the class is determined. It is not necessary to multiply authorities on the point. On the observations made in this judgment the argument is based that all members of the Radhaswami faith must be deemed to be connected with the Sant Satguru and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Revenue [1938] 6 I.T.R. 701 a trust was created to provide a playground for the employees of Electrolux Company, Limited, and it was held that it was not a trust for a public benefit but only for the benefit of the employees of a particular company. In In re the Mercantile Bank of India (Agency) Ltd. [1942] 10 I.T.R. 512 a trust for the benefit of persons who had been and were connected with Andrew Yule and Co., Ltd. was held by a Bench of the Calcutta High Court not to be for public purposes. The Bench followed certain English decisions relating to the cases of trust for the benefit of past or present employees of a company. In Scottish Flying Club Ltd. v. Commissioners of Inland Revenue a trust was created for the benefit of the members of a flying club and it was not held to be a trust for public purposes. None of these cases can be held to be applicable to the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distinguished. Such a meaning, to our minds, was never intended by the words and the legislature probably intended, after having made provision for relief of the poor, education and medical relief, to provide a general head under which all charities, which are considered in this country to be of general utility to the public, including a cross-section of the public, may also get the exemption. That this submission of learned counsel has no force may also be deduced from the two latest decisions of the Privy Council relating to trusts which can by no means be said to be for the benefit of the public at large, as opposed to a section of the public. In Trustees of the Tribune Press, Lahore v. Commissioner Income-tax, Punjab, Lahore*, their Lordships pointed out that the object of the paper may fairly be described as the object of supplying the Province with an organ of educated public opinion and it was held that that was an object or general public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at any time the Sabha happens to be dissolved the entire property must go under the Charitable and Religious Societies Act and under the constitution of the Sabha itself to similar charitable objects. The findings recorded by the Tribunal in its appellate order on the point are as follows:- The industrial and commercial concerns run by the Sabha are, as is admitted by him (Appellate Assistant Commissioner), not run for individual profit nor are these profits divided among the members. The whole conduct of Sant Satgurus of the Dayalbagh school since the Sabha came into existence goes to show that they claimed no interest in the Sabha's properties or in the offerings made to the Sabha and never exercised any power of disposal or appropriation in respect of them. At another place the Tribunal has found that, All these institutions were established in the interest of the Satsangis of the Dayalbagh section and for the advancement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular objects of charity are not specified the trust will not fail. It may, however, be pointed out that in that case it was held that the list given in the preamble has not been considered to be exhaustive and even from the time of Elizabeth onwards the Court of Chancery included objects analogous to those enumerated within the term charitable. (See also Keeton's Law of Trust, 4th edition, 133). Income Tax Commissioners v. Pemsel is the famous decision by Lord Macnaghten in which charity was divided into four distinct heads. He said:- 'Charity' in its legal sense comprises four principal divisions; trusts for the relief of poverty ; trusts for the advancement of education; trusts for the advancement of religion ; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. This classification has been followed in almost all the cases in England since Lord Macnaghten's judgment, though there has been some difference of opinion as to what purposes can be considered to be beneficial to the community. In another part of the judgment Lord Macnaghten pointed out that the Court of Chancery has alwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agriculture. The learned Judge Danckwerts, J., held as follows:- In those circumstances, it seems to me that the intention of the Act (Crystal Palace Act, 1914) in including in the objects the promotion of industry, commerce and art, is the benefit of the public, that is the community, and is not the furtherance of the interests of individuals engaging in trade or industry or commerce by the trustees. It appears to me that the promotion of industry or commerce in general in such circumstances is a public purpose of a charitable nature within the fourth class in the enumeration of charitable purposes contained in Pemsel's case. The only support which learned counsel wanted to derive from this case was that promotion of industry or commerce in general may be a public purpose but that promotion of trade or industry in the interest of individuals will not be a public purpose. It was argued that the object being to promote trade and industry in the interest of the Satsangis, who must be treated as individuals and not a cross- section of the public, the trust was not for a public purpose. It is not necessary for us to go into greater detail, as to what are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wallace and Company their Lordships said:- The Indian Act is not in pari materia; it is less elaborate in many ways, subject to fewer refinements, and in arrangement and language it differs greatly from the provisions with which the Courts in this country have had to deal. Under these conditions their Lordships think that little can be gained by attempting to reason from one to the other, at all events in the present case in which they think that the solution of the problem lies very near the surface of the Act, and depends mainly on general considerations. In Raja Bejoy Singh Dudhuria v. Commissioner of Income-tax, Bengal, their Lordships of the Judicial Committee agreed with the learned Chief Justice of the Calcutta High Court that a passage quoted from a judgment of Lord Davey in London County Council v. Attorney-General# dealing with the Imperial Income Tax Act of 1842 was inapplicable in the interpretation of Indian Act and pointed out- as they have had occasion to do more than once of late, that the invocation of the Imperial Income Tax Code and of decisions pronounced upon it is apt to be very misleading in the interpretation of Indian income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force in 1930. It does not seem to have been challenged before the Tribunal nor was it suggested to us that the amendments of 1937 and 1940 were not genuine and were not intended to be given effect to. The reason why the amendments of 1937 and 1940 were not relied on was that by that time the question whether the Sabha was liable to payment of income-tax had already arisen and those amendments were made in the constitution to clarify the position of the Sabha to escape assessment of income-tax (see paragraph 16 of the appellate order of the Tribunal). If the amendments were genuine and were actually made in the rules governing the Sabha, then to all assessments after the years of the amendment the rules as amended were clearly applicable. It is not, however, necessary for us to refer to the amendments of 1937 and 1940 as they were really not amendments to the rules but merely clarification of what the rules of 1930 already contained. One fact that is, however, important is that even in the rules in force in 1930 there was a clear provision that the entire income of the properties moveable and immoveable was to be utilised for the furtherance of the religious and charitable obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust income except to religious and charitable objects. If any of the eight objects which are specified as and by way of illustration do not fall within the category of religious and charitable objects, then the trustees must discard such objects and apply the trust income only to religious and charitable objects. Mr. Pathak's argument is that these two decisions are distinguishable as Satsangis considered all the objects of the Sabha to be religious and charitable and the rules, therefore, must be interpreted to enjoin on the Sabha the duty of administering the funds for the benefit of all the objects, whether religious and charitable or not. We do not think this argument has any substance. In our view, this case is a much stronger case than the Bombay decision, In re Vallabhdas*. In the case before us, even the objects are not enumerated and all that is said is that the property is to be utilised in furtherance of the religious and charitable objects of the Satsang and if any object does not come in the category of being religious and charitable then the Sabha cannot utilise the income for that purpose. We may here mention, as we have already done before, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aswami faith for the conduct of religious services, i.e., the Central Satsangis and Branch Satsangis. This clause was amended in 1937 to the following effect:- (a) To regulate the conduct of the followers of Radhaswami faith and to establish, run and subsidise religious, educational and industrial institutions with a view to advance the cause of religious, mental, moral and technical education amongst the followers of the Radhaswami faith solely with the object of doing public good and not for purposes of profit. In the year 1940 this clause was further amended and stood thereafter as follows:- To regulate the conduct of the followers of the Radhaswami faith and to establish, run and subsidise religious, educational, and industrial institutions solely with a view to advance the cause of religious, mental, moral and technical education with the object of doing public good. And a new clause (b) was added to the following effect:- To remove unemployment. Even though the amendments of 1937 and 1940 came later, the facts as dealt with by the Tribunal and the evidence of respectable witnesses which the Tribunal has believed made it conclude and find that from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical colleges were started as model industries. No objection is taken by Mr. Pathak to the first 10 heads which he admits are charitable objects even according to the English decisions. His main objections are to the textiles and hosieries and any similar industries that might have been started. Though the word model is not mentioned in the list, yet before giving the list the Tribunal clearly indicated that these were model industries and must, therefore, be deemed to have been intended for the education of the Satsangis who might have been interested in textile or hosiery business. Leather working school and classes for instructions in the manufacture of electrical goods have, it will be seen, been described at some places in the appellate order as leather factory and factory for manufacture of electrical goods, but that does not mean that they were started as business concerns with the object of making profit in the commercial sense for the benefit of those who were running the business. As a matter of fact the Tribunal pointed out that it was admitted that these various concerns were not run for individual profit, nor were these profits ever divided amongst the members. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose who might have been able to fulfil their needs by other means. The next point urged by the learned counsel is that income from business was not exempt from income-tax in England till the amendments made in 1921 and 1927 and our Indian Income-tax Act, which follows the English Income Tax Act, also did not exempt income from business till the amendments made in 1939 to Section 4(3) and income from business was not, therefore, exempt from income-tax till 1939. He has contended that business cannot be property under Section 4(3)(i) of the Income-tax Act and before the amendment of 1939, therefore, there was no exemption at all. As regards the law in England learned counsel has referred to a number of cases but it would be sufficient to give reference only to some of them. In Coman v. Governors of the Rotunda Hospital, Dublin, where the management of the Rotunda Hospital let out certain furnished rooms attached to the hospital for various purposes and made some income which was utilised in running the hospital and the question was whether such income was exempt from income-tax, Viscount Finlay in the course of his decision said:- Profits are undoubtedly recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes only. The rest of the section is not material. The House of Lords were, therefore, called upon to consider whether the income with respect to which the exemption was claimed could be deemed to be rents and profits of any lands, tenements, hereditaments or heritages and their Lordships pointed out that it could not be said that the income was derived as rents and profits of any lands, tenements, hereditaments or heritages, considering that besides the rooms themselves there were other services provided. The language of our Act, Section 4(3)(i), however, is much wider and it uses the word property and not the words lands, tenements, hereditaments or heritages . In 1921 certain amendment was made by the Finance Act of that year and a clause (c) was added which granted exemption from income tax under Schedule D in respect of the profits of a trade carried on by any charity, if-the work in connection with the trade is mainly carried on by beneficiaries of the charity. Then came the decision of the House of Lords in Brighton College v. Marriott** in which Viscount Cave pointed out that- by the Finance Act, 1921 (Section 30), exemption is granted from income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous or charitable purposes. It is not necessary to quote the other clauses of this sub-section. In the year 1939, by the Income-tax (Amendment) Act (VII of 1939), two changes were made. The words this Act shall not apply to the following classes of income were replaced by the words any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them , and a clause (ia) was added as follows:- Clause (ia)-Any income derived from business carried on on behalf of a religious or charitable institution when the income is applied solely to the purposes of the institution and- (a) the business is carried on in the course of the carrying out of a primary purpose of the institution, or (b) the work in connection with the business is mainly carried on by the beneficiaries of the institution. Mr. Pathak's argument is that, before clause (ia) was added, income from business was taxable in all cases as it could not be said to be income derived from property. He has, therefore, urged that the assessee can, in no case, claim any exemption of income from business made before the amendment of the Indian inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the only question for decision is whether that property is held under trust wholly for the advancement of an object of general public utility. In Charitable Gadodia Swadeshi Stores v. Commissioner of Income- tax, Punjab [1944] 12 I.T.R. 385, the question arose whether income from business was income from property within the meaning of Section 4(3)(i) of the Indian Income-tax Act. Dealing with this question, the learned Judges observed:- In fact, there is every reason to think that the term as used here was being used in the popular sense. It could not possibly be intended by the Legislature that, if, for example, a sum of money endowed to charity was deposited in a bank, instead of being invested in buildings, the interest accruing therefrom should not be exempt from income-tax. Similarly, interest on securities, though a separate head of income chargeable to income-tax under Section 6 as distinct from property, cannot but be considered to be within this clause. Now, a person may invest a sum that he propose to endow to charity in business and provide that the income derived therefrom would be applied wholly and exclusively to charitable purposes. Will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of the Association. The High Court seems to have been of opinion that the property from which the profits were derived was the cloth which from time to time was sold. Their Lordships, however, prefer the view implied in the decision of the Board in Trustees of the Tribune Press, Lahore v. Commissioner of Income- tax, Punjab, Lahore [1939] 66 I.A. 241; 7 I.T.R. 415, to which fuller reference will be later made, where the 'property' in question was the stock and goodwill of the press and newspaper. Here the property consisted of the organization and the undertaking as well as in the fluctuating stock of yarn and cloth. This case also was decided under the Indian Income-tax as it stood before its amendment in the year 1939 and, according to their Lordships, the word property in Section 4(3)(i) of the Act included the stock and goodwill of the press and newspaper in the Tribune case, and, in the All India Spinners' Association case**, it included the organization and the undertaking as well as the fluctuating stock of yarn and cloth. 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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect, that the correct interpretation of the partnership deed was that only three-sixteenth share of the income was earmarked for charitable purposes as the deity installed in Mathura could not legally be a partner in the firm, nor was it liable for the losses of the partnership business. The learned Judges, in our view, on the facts of the case, rightly held that income derived from profits made by the trading concern was not income derived from property held under trust, but, unfortunately, by reason of certain observations made later, the case was misunderstood when it was followed by a special Bench of the Madras High Court in Commissioner of Income-tax, Madras v. Thevara, Patasala. In the Madras case, the learned Judges were guided by the English decisions, specially, the Rotunda Hospital case and, in view of what we have already said, it is rot necessary to go into that question further. This disposes of almost all the points that were discussed at the Bar. There were two other small points mentioned at the Bar which we may dispose of here before we come to the questions referred to us for our decision. It has been urged that the Sabha is not an institution and im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts (offerings) vest in the Sabha under a legal obligation wholly for religious or charitable purposes of the Sabha but the bhents cannot he said to be income derived from property under Section 4(3)(i) of the Indian Income-tax Act. They will properly come under clause (ii) of that sub-section meaning thereby that they are income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purpose. Our answer to the fourth and fifth questions is that the income derived from industrial and commercial concerns is the income from property held under trust wholly for religious or charitable purposes and is exempt from income-tax under Section 4(3)(i) of the Indian Income-tax Act and it is, therefore, not necessary to apply to such income Section 4(3)(ia) of the Act. Our answer to the third question is in the affirmative. Our answer to question No. 6 is that the income derived from industrial and commercial undertakings of the Sabha is exempt from income-tax under Section 4(3)(i) of the Act and the rest of the question, therefore, does not arise. Section 4(3)(ia), however, we may point out, gives exemption to a d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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