TMI Blog1980 (7) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pandit Brahma Sankar Misra, popularly known as Maharaj Sahib ". These first three gurus are regarded as the true exponents of the creed by all the followers of this faith, The Satsang which was started in the said manner grew in numbers and from the offerings made by the devotees to the Sant Satguru for the time being, the funds accumulated, which were partly utilised for the construction and maintenance of the shrines of the deceased Sant Satguru and for places of worship and residence of this community and partly for the other objects of this faith. During the time of the third Sant Satguru somewhere in 1902, the members of the faith met together and established a central administrative council defining its constitution and bye-laws and vesting all the movable and immovable properties therein. All this was done under the direction of Maharaj Sahib, the third Sant Satguru. A document declaring the constitutional powers of the central council seems to have come into being in June, 1904. The said body was designated as the Radhaswami Trust.: Some of its material provisions were as follows: " 1. The constitutional powers of the central council Radhaswami Satsang which was establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary, alienate the properties, movable or immovable, that have been or may hereafter be dedicated to the supreme being, Radhaswami Dayal, or that may be acquired for or presented to the Radhaswami Satsang and its branches, in accordance with such directions as may, from time to time, be issued in this behalf by the said council or the Sant Satguru for the time being, if any, who is recognised as the representative of the supreme being, Radhaswami Dayal, and as such is the sole master of all movable and immovable properties of the aforesaid Satsang, provided that Samadhis and places of public worship of the Radhaswami Satsang shall at no time be alienated. By clause relating to bye-laws it was provided as follows : " 1. Irrespective of what is prescribed by the following rules, all mandates of the Sant Satguru of the time regarding the disposal of the movable and immovable properties of the Satsang and its branches or other matters connected with the trust, shall be carried out by the trustees. 2. The trust shall be revocable at the direction of the council and the trustees shall hold their office at its pleasure. 3. All immovable properties, as soon as acquired by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. .. The question of assessing the income arose for the first time in the assessment year 1937-38. The ITO, on the basis of the observations of the Privy Council, made assessments for the assessment years 1937-38 and 1938-39 on Madho Prasad Sinha, the Sant Satguru, who succeeded Babuji. The assessment was made in his individual capacity. He was retired Assistant Accounts Officer who derived income by way of pension and from other sources, and in addition thereto he was in receipt of offerings from the followers of the faith. The ITO assessed him on the aggregate of all the income from the above sources. The assessment order made by the ITO was confirmed by the AAC. The assessee then filed applications under s. 66(2) of the Indian I.T. Act, 1922, as it stood at the relevant time, before the Commissioner of Income-tax, U.P. These applications were held in abeyance pending the decision of the suit filed by Radhaswami Satsang known as Dayalbagh Satsangis. The civil suit was disposed of by the Allahabad High Court on August 13, 1943, and thereafter the applications were taken up for consideration by the Commissioner. The Commissioner took the view that the offerings were made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 9th March, 1972, which was supplemented by a detailed reply on 17th March, 1972. An, affidavit of the joint secretary of the central administrative council stating, inter alia, that no amount had been spent or utilised for the use of the central administrative council, that the offerings, bhents, donations and contributions had been received voluntarily and utilised only for the furtherance of the, religious objects of the faith. The ITO did not accept the contention of the assessee, and made assessment in the status of an association of persons styled M/s. Radhaswami Satsang. He took the view that there was no legal compulsion or obligation for the assessee to maintain or hold properties for the purposes of the Satsang, and there was no valid trust for religious purposes within the meaning of s. 11 of the Act. The assessee appealed, but the order of the ITO regarding the question as to whether a valid trust existed; or not was upheld. A direction for granting a relief under s. 80 was, however, issued by the AAC. The assessee then appealed to the Tribunal. It was urged that inasmuch as the ITO had held that the assessee was a religious institution, the property held by it must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us institution or not cannot be examined in this reference, for the ITO has proceeded on the basis that the Satsang is a religious institution. The assessment orders for the relevant years show that the ITO proceeded on the footing that the assessee was a religious institution. From a perusal of the order of the Tribunal it does not appear that the department at any stage took the stand that the assessee was not a religious institution. The application made for reference also does not raise any issue about this. In these circumstances, on the question framed, we do not think that it is open for the department to contend that the assessee is not a religious institution. Even on merits the stand taken by the department cannot be sustained. The word " religious institution " has not been defined in the Act. The Privy Council, however, in the case of Minister of National Revenue v. Trusts and Guarantee Co. Ltd. [1940] AC 138; [1939] 4 All ER 149, 155 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Chhotabhai v. Jnan Chandra Basak, AIR 1935 PC 97, which held that up to the time of the first three Satgurus the property belonged to the Satguru in their individual capacity, and they were sole owners and masters of the properties. It distinguished the Privy Council decision on the ground that the question involved before the Privy Council was whether a public trust existed, while under s. 4(3)(i) of the Indian I.T. Act, 1922, even a legal obligation for applying the income derived from property for religious purposes was sufficient. It also took into account the decisions of this court in the cases of Secretary Of State for India in Council v. Radhaswami Satsang [1945] 13 ITR 520 and CIT v. Radhaswami Satsang [1954] 25 ITR 472, cases relating to the Dayalbagh sect, and held that these two decisions helped the assessee's case. It then went into the question as to whether there was a legal obligation to apply the income from properties held by the assessee for religious purpose, and held that it was so. The reasons given for taking this view are these. To begin with it has held that inasmuch as the assessee was the Radhaswami Satsang and not the Sant Satguru or the central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trongly relied on them. We are of the view that these decisions do not help in answering the question. We have noticed that a schism occurred amongst the followers of the Radhaswami Satsang after the death of the third Sant Satguru. The faith broke up into two groups, (1) Swami Bagh group with which we are concerned, and the other Dayal Bagh group to which the two decisions relate. Now, a vital change occurred in the constitution of the Dayal Bagh group, and that was the registration of the Dayal Bagh group as a charitable society under the Societies Registration Act, 1860. Nothing; of the kind was done by the Swami Bagh group. Once the members of the faith associated themselves to form a charitable society which was registered under the Societies Registration Act, 1860, a charitable trust came into existence. The Dayal Bagh group, framed and passed, its constitution and rules and bye-laws for maintaining several institutions established by it. The result of the registration of the society and the framing of its constitution and bye-laws and rules resulted in the vesting of the property in the registered Sabha, and the Sant Satguru had no beneficial interest left in those propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships' opinion, are wholly inconsistent with any intention on the part of the Sant Satguru, for the time being, to alter his position as Sant Satguru or to divest himself of the control of the property and to create a trust for a public purpose of a charitable or religious nature such as is contemplated by Act 14 of 1920. On the other hand, the regulations relating to the central council and the provisions of the so called 'trust' deed are, in their Lordships' opinion, consistent with desire on the part of the Sant Satguru to obtain the assistance of some of his followers in the management of the property, which, no doubt, was increasing as the years passed." We have extracted this passage in order to show that under the deed creating the trust, the alleged trust or legal obligation created by the central council was revocable and, secondly, the deed, creating the council and the alleged trust deed, did not create any legal obligation on the Sant Satguru to utilise the properties for religious purposes only. Now, the Tribunal has tried to bypass this difficulty by taking into account the fact that in, the relevant assessment year there was no Sant Satguru, and as such the centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deed constituting the central council, had no intention to alter his position as Sant Satguru or to divest, himself of the control of the property. It has been seen that it was also held that the regulations relating to the central council and the provisions of the so-called trust deed were consistent with the desire on the part of the Sant Satguru to obtain the assistance of some of his followers. Thus, the real transferor was the Sant Satguru. Now, the Sant Satguru, as has been held by the Privy Council, was not bound to apply the properties of the Satsang for religious purposes only. We shall demonstrate hereunder that the position is the same taking the council to be the transferor. Counsel for the assessee urged that as the Sant Satguru was not there, the central council had to apply the properties only for the religious purposes as is apparent from the deed of June, 1904. We think that this is not so. The mere fact that there is no Sant Satguru at the present moment does not absolve the central council for holding the properties for each and every one of the purposes set out in the deed constituting it. Their position, even in the absence of Sant Satguru, is only as manag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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