TMI Blog1981 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... are not allowable as expenditure ?" These questions arise in the following circumstances: The assessment years with which we are concerned in this reference are 1962-63 and 1963-64, the previous years being S.Ys. 2017 and 2018 ending on November 8, 1961, and October 28, 1962, respectively. The assessee is a public religious and charitable trust and is registered under the provisions of the Bombay Public Trusts Act, 1950. A scheme for the said trust was originally framed by the District judge, Ahmedabad, by his judgment and order of July 23, 1900. The scheme was amended by the District Court by its subsequent order of February 4, 1916. A new scheme was framed by the District Judge by his judgment and order of August 23, 1960, in Civil Suit No. 2 of 1959, under the provisions of the Bombay Public Trusts Act, 1950. Under the relevant cls. 12, 13 and 14 of the present scheme, the trustees, after meeting with all the necessary outgoings on account of rates, taxes, assessment and expenses incidental to the administration of the trust and worship of the deity of the temple known as "KARNA MUKTESHWAR MAHADEV TRUST" of Ahmedabad and also on account of the current repairs' and upkeep c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the liability of tax. The trust, therefore, carried the matter in further appeal before the Tribunal, which rejected the same having regard to the provisions of the scheme of the trust. It held that what was paid to the hereditary trustees or pujaris was not the remuneration for the services rendered by them because the true effect of the payments was the application of the income and it had no direct or indirect relation with the services, if any, rendered by the two hereditary trustees. The Tribunal confirmed the view of both the lower authorities that the case fell under s. 11(1)(b) and not under s. 11(1)(a) of the said Act. At the instance of the assessee-trust, therefore, the questions set out hereinabove have been referred to us for our opinion. We have heard the, learned Advocate-General for the assessee and the learned counsel for the revenue who have taken us through the original scheme as framed by the District Court, Ahmedabad, by its judgment and order of July 23, 1900, as well as the present scheme framed by the District Court on August 23, 1960, under the provisions of the Bombay Public Trusts Act, 1950. Our attention has been invited to the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d having regard to the provisions of the Bombay Public Trusts Act, 1950, more particularly because even the hereditary pujaris were liable to be removed if found unfit in performing the puja or in the larger interest of the trust. The factor of appreciable increase in the income also weighed with the learned district judge for deciding to reframe the scheme. He, therefore, framed a fresh scheme for the management of the trust after considering the rival contentions of the parties. We need not refer to all the clauses of the scheme since it is not necessary for the purposes of the determination of the questions in this reference. The material clauses relevant for our purposes are cls. 2, 3, 4, 10, 11, 12 and 13. Clause 2 reads as follows: " 2. The properties of the trust at present shall consist of the immovable and movable properties mentioned in Schedules A and B. The said Schedules shall be submitted by the Receiver, Defendant No. 3. All these properties and acquisitions and donations received by the trust estate as provided hereunder shall be called the trust properties. " By cl. 3, the trust properties were to vest in the trustees for the time being under the scheme and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the temple of KARNA MUKTESHWAR MAHADEV the plaintiffs claiming a, right to worship in the temple and after obtaining a certificate from the Collector, filed a suit in the Court of the District judge, Ahmedabad, being Civil Suit No. 3 of 1897 praying, inter alia, for removal of the aforesaid two pujaris who were arrayed as defendants in the suit and for a decree for the amount that might be found due and payable by them on taking accounts. The said pujaris in their written statement, inter alia, claimed the ownership of the temple in them. An issue was, therefore, raised by the court as to whether the properties in the suit formed part of the public religious trust and whether the defendant pujaris were in possession as manager-trustees or owners. The learned district judge found that the properties in the suit were part of the public religious trust and the defendants were in possession as trustees for and on behalf of the general worshippers of the temple. As regards what remuneration should be paid to the pujari-trustees, the learned district judge was of the opinion that clear directions should be given about the disbursement of the annual income lest the pujaris may appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the second appeal, it was urged that the decree was executable against the joint family property which had passed to the son of the deceased by survivorship and also under the pious obligation of the sons to pay the debts. A Division Bench of the Bombay High Court consisting of Kania, Actg. C.J., and Gajendrakadkar J. (as they then were) while confirming the conclusion of the lower courts considered the nature of the income of the deceased. The Division Bench in this behalf observed: "........ The character of the receipts must be determined according to all the circumstances of the case. The first thing to be noticed in this connection is that under the scheme the defendants and their heir's during their good conduct are to be trustees and managers. They could therefore be removed if the appointing authorities considered that they were guilty of misconduct. Secondly, the express words do not show that the office is hereditary. Again, under clause 6, the two-thirds share is not given to the trustees and managers for their own use. It is provided that out of the remaining income ............ the temple expenses had to be defrayed and the managers had to maintain themselves. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come out of which they had to meet all the expenses necessary for puja of the deity and also to maintain themselves. In the present scheme, since all the necessary expenses for the worship are to be defrayed as one of the outgoings, the pujaris were allotted 1/2 of the net income arrived at after meeting all the necessary outgoings as specified in cl. 12. The net income of the property as computed in the assessment year 1962-63 was in the vicinity of about Rs. 26,000 and, therefore, the trustee-cum-pujaris would be entitled to about Rs. 13,000, being half of the said net income. Each of the trustee-cum-pujaris, therefore, would be entitled to Rs.6,500per annum which will work out to about Rs.500 per month. We are, therefore, of the opinion that the Tribunal was not right in reaching the conclusion that the payment was not in the nature of remuneration for the services rendered. In our opinion, the order is a very cryptic one without assigning any reasons in support of the conclusion which has been reached. Though this material was before the Tribunal, the Tribunal failed to consider the same in proper perspective and draw a correct inference therefrom. More particularly, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent. of the income from the property or rupees ten thousand, whichever is higher; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India ; and where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty-five per cent. of the income from the property held under trust in part ;......." In order to support the claim for exemption of income under s. 11(1), the following conditions must be satisfied: (1) The property from which the income is derived must be held upon trust. (2) Such trust should be for charitable or religious purposes enuring for the benefit of the public. (3) The, exemption is available only to such portion of the trust's income as is in fact applied to the charitable or religious purposes; if it is wholly applied for the charitable or religious purposes, the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be dedicated entirely to a religious or charitable institution or to deity. This is an instance of complete dedication. A property may be dedicated to a deity, subject to a charge that a part of the income shall be given to the grantor's heirs. A property may be given to an individual subject to, or burdened with, a charge in favour of an idol or a religious institution or for charitable purposes. An owner of property may retain the property for himself but carve out a beneficial interest therefrom in favour of the public by way of easement or otherwise. There may be many other instances where though there is a trust, it involves only partial dedication of the property held under trust in the sense that only part of the income of that Property is utilised for religious or charitable purposes. The dichotomy between the two expressions 'wholly' and 'in part' is not based upon the dedication of the whole or a fractional part of the property, but between the dedication of the said property wholly for religious or charitable purposes or in part for such purposes. " (emphasis supplied) It cannot be gain said that the properties here are wholly set apart for charitable and religious pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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