TMI Blog1980 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... lkar to be his successor. It was in 1949 for the first time that a Constitution of RSS was placed in black and white. In the said constitution the preamble just preceding the adoption of the constitution read as under: "Whereas in the disintegrated conditions of the country it was considered necessary to have an Organisation: (a) To eradicate the fissiparous tendencies arising from diversities of sect, faith, caste and creed and from political, economic, linguistic and provincial differences, amongst Hindus; (b) To make them realise the greatness of their past; (c) To inculcate in them a spirit of service, sacrifice and selfless devotion to the Hindu Samraj, as a whole; (d) To build up an organised and well disciplined corporate life; and (e) To bring about an all-round regeneration of Hindu Samaj. After the above quoted preamble, the organisation was named as Rashtriya Swayamsevak Sangh, the head office of which was at Nagpur and the aims and objects of the Sangh as shown in the first written above referred constitution were to weld together the diverse groups within the Hindu Samraj and to revitalize and rejuvenate the same on the basis of its Dharma and Sans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j, Swayamsevak, etc., but indicated a change in Art. 2, according to which in the old constitution the head office of the Sangh was at Nagpur, according to the amended constitution the Head Quarters of Akhil Bharatiya Karyakari Mandal was at Nagpur. There are also certain other changes pertaining to Sarsangh Chalak, finance and control etc., which shall be referred to and discussed with at the time when the same shall be of any relevance to the issues before us. 5. It will not be out of place to mention that when the assessee was required to file its return under s. 139(2) for asst. yr. 1970-71, a Writ Petition in the High Court of Bombay at Nagpur was filed by the assessee challenging the validity of notice under s. 139(2) and in the said Writ Petition the High Court, after hearing both the parties, the assessee and the ITO, had passed a consent order dt. 15th Feb., 1972 which provided as under: "1. The ITO, Nagpur will proceed with the assessment in regard to the asst. yrs. 1970-71 and 1962-63 under the impugned notices including the decision on the question of the status of the petitioners. 2. If the decision of the ITO, Nagpur is that the petitioners are a taxable enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answer to question No.3 is in the affirmative, whether the said income is exempt from inclusion in the taxable income, if any, of the RSS on the ground that (a) it is of a casual and non-recurring nature; (b) the source thereof being held under a legal obligation to utilise it for the purpose of the Sangh, which are educational/"charitable purpose" as defined in s. 2(15) of the Act? (6) If the answer(s) to question No. 1 and/or 4 is are in the negative and/or the answer to question No. 5 is in the affirmative, whether on the facts and in the circumstances of the case and the material on record, there is any other taxable income of the RSS? (7) Whether on the facts and in the circumstances of the case and the material on record, the ITO was justified in taxing the RSS in the status of a "BOI"? 7. For the sake of convenience now we first take up the assessee's appeal for asst. yr. 1971-72, because out of all the 3 years under consideration before us the order of the AAC which can be termed as a speaking order is passed for this year and it is on the basis of this order that the matter pertaining to 1972-73 and 1962-63 are disposed of. ITA No. 202 for asst. yr. 1971-72: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various Shakhas in the hands of the assessee and that Gurudakshina was received from Swayamsevaks only. The assessee relied on the record of the earlier year and written statements filed in course of earlier year and this year under consideration before the AAC. The assessee also attached the observations of the ITO made in para 5 of his order to the effect that RSS organisation throughout the country was controlled by Kendriya Artha Vibhag and there was hierarchy, etc. and submitted that the said observations of the ITO are far from true. The assessee also denied the observation made by the ITO in para 8 of the assessment order that the Central Office could call funds from branches, etc. It was also pointed out by the assessee that since different ITOs all over the country had already made assessments on Prants and Zilla Shakhas, etc., this by itself spoke that the Revenue had accepted the contention of the assessee that these are all different units. The assessee also submitted that as there is neither any list of Shakhas nor any statement sent by the different Shakhas to the assessee, it was not possible to give any details of receipts and expenditure of Shakhas all over India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icits. This is just like any business organisations having several branches. However, the fact remains that the branches have to incur expenditure has to be allowed as deductions against receipts of the branches. The very fact that the ITO was able to collect information from several branches showing such income and expenditure account establishes that such is the system which is being followed in this organisation. Therefore, I am of the opinion that the balances, whether on the credit or debit side of the branches are part and parcel of the income of the appellant. The ITO cannot take only gross receipts of all the branches and cannot ignore the debit side of such branches." 13. The third question which pertains to the issue whether Gurudakshina from persons other than Swayamsevaks could be estimated and what had to be its estimate. The AAC dealt with it in para 27 of his order and held that "all receipts whether received from Swayamsevaks or not are the receipts in the nature of Gurudakshina" and also observed that the very fact that existence of non-Swayamsevaks contributions is not denied by the assessee shows that there is expectancy of receipts from non-Swayamsevaks regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Shakhas at Head Office itself. The only other income that this appellant can expect to receive at the Head Office is on account of interest, dividends and some other small items." 19. It is these findings of the AAC which are contested by the assessee on as many as 25 grounds. The learned authorised representative for the assessee Shri N.A. Palkhivala at the very outset, after stating the facts which are detailed above, submitted that the issue pertaining to Gurudakshina received from members of the organisation which are Swayamsevaks has been declared exempt on the ground of mutuality by the Central Board of Direct Taxes and to that effect he placed a letter F. No. 290/26/70 IT (INV) from Shri V.B. Srinivasan, O.S.D. (IT) to Dr. Subramaniam Swamy and placed the same in addition to the assessee's compilation with 126 pages earlier. Shri Palkhival submitted that he does not press the very first ground of his appeal that the assessee is not a taxable entity, but he submitted that the only source of income of the assessee which would survive shall be property income and interest income. He submitted that in response to notice under s. 131 of the IT Act, 1961 dt. 19th Mar., 1972 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee in a sum of Rs. 61,055 under s. 143(3) and income was computed by including rent and interest income of the head office and rent and interest of other branches with other receipts which were detailed at page 106 of the assessee's compilation. He also drew our attention to duly audited Balance-sheets and Profit and Loss Account by the chartered accountants which were placed at pages 125 and 126 of the compilation. He drew our attention to the amount of "Prachar Vyay" and submitted that if there is no head office the autonomy is not on grass roots. He went to the extent of calling the assessment of the assessee the way it had been made full of inequity and atrocious. He drew our attention to the affidavit of Shri Pandurang, son of Shri Baliram Kshirsagar placed at pages 69 to 72 of the assessee's compilation and submitted vehemently that the same had not been controverted or found as unverifiable or false by the Revenue. He repeated over and again the instances those of Pope of Rome, Pope of Bombay, Rotary International and Lions International, where the branches spread all over the world cannot be treated as branches of head office for purposes of tax. He drew our att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of public and charitable objects, but he pressed the same on the basis of mutuality. 22. The ld. special counsel for the Department, on the other hand, submitted that nothing can be added more to the submissions made by the Standing Counsel for the Revenue Shri K.H. Deshpande before the Tribunal in course of earlier appeal for asst. yr. 1970-71 and he placed his complete reliance on para 14 of the Tribunal's order placed at page 86 of the assessee's compilation. According to him, the assessee was just a political organisation of Hindu Samaj. He submitted that it was after the RSS was banned in 1948 that constitution was made and the constitution of RSS is one man's word without any indication where and when adopted and it is more than fluid, its objects are vague. As per the so called constitution anyone of 18 years of age who is a Hindu male can be a Swayamsevak. As per Art. 14(6) Kendriya Karyakari Mandal is highest authority of RSS. According to him, central organisation is Sangh and each Shakha is just a branch of the said Sangh, as the very name Shakha suggests and cannot be an independent unit which could make them autonomous. In case the same are autonomous, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, would it make such banks and institutions as the branches of the Reserve Bank of India. He said that the control is only for common object and member of every Shakha is not a member of RSS, Nagpur, the assessee, and as such the status of BOI when taken, only income in respect of interest and property and that too in respect of Nagpur should be subjected to tax and no income to be clubbed up in respect of any Shakha either out of contributions or out of Kendraunsh. 25. After taking into consideration the rival submissions made by both the parties and perusing the facts on record, we confirm the action of the AAC that the assessee is a taxable entity and its status as BOI has correctly been confirmed by the AAC. We are, however, unable to confirm that all Shakhas all over the country are branches of the assessee and constitute one unit. We are also unable to confirm the action of the AAC that Gurudakshina paid by Swayamsevaks or non-Swayamsevaks can be subjected to tax or Kendraunsh received by the assessee at Nagpur from other Shakhas or net credit balance in the income and expenditure account of other Shakhas can be taxed in the hands of the assessee. According to us, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Office at Nagpur cannot direct any one to open a Shakha at any particular place nor can it direct to close any Shakha. All Shakhas are an autonomous body in itself and they arrange their own affairs keeping in view the objects of the Sangh. Number of Shakhas are being opened from time to time all over India and number of Shakhas are also closed. No detailed list of Shakhas is maintained at Nagpur and in fact the same is not necessary in view of the fact that each Shakha is an autonomous body. The function of the Central body is more supervisory and advisory and as such at annual meeting or such other meetings the general trend of opening or closing of Shakhas in particular region is observed. Under the above facts you will appreciate that it is almost impossible to supply the complete list of Shakhas all over India. As already submitted above, each Shakha is an autonomous body. They receive, use and manage the funds received by voluntary non-recurring contribution. Each Shakha maintains the account of receipt of such voluntary contribution as also of expenditure of the amounts on the objects of the Sangh. Generally whatever amount is received by each Shakha is expended by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amsevak Sangh, Mahal, Nagpur. I am conversant with the working of the Rashtriya Sayamsevak Sangh and I am aware of the income-tax proceedings started against the RSS. 2. The RSS is an organisation or an institution the object of which is to educate people on the basis of Dharma and Sanskriti with a view to achieve all sided development of the country. It believes in orderly evaluation of the society, has an abiding faith in the fundamental principles of tolerance towards all faith and is devoted purely to cultural work. The RSS is carrying on purely educational and cultural activities as stated above. It does not carry on any other activity than what is stated above and as detailed in constitution. 3. All males above the age of 18 years who believe in the ideals and object of the Sangh as stated above may combine together and form their own unit which may be called a Shakha or Branch. For organising and carrying on their ideals in an orderly manner, every town, city, tahsil, district, division or province form their own Karya Kari Mandal and elect their own office bearers. Each unit have their own Karyakari Mandal i.e., an executive body of members elected from among themselv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r city do maintain their accounts and that the funds received by way of Gurudakshina etc., are utilised by them for the object of the Sangh, which are purely educational and cultural. 6. The details of receipt and expenditure statement of every units of city or province can be obtained from respective units. I can request the Provincial Units to submit the statement of their accounts. However, this may take a very long time and further as far as the assessment of Nagpur Office is concerned the accounts of Provincial Units are not at all relevant and also not necessary. The Department itself has treated all the units as separate units and it was because of this basically accepted fact that the High Court had directed the respondents to instruct the Central Board of Direct Taxes to advice all the concerned ITOs all over India not to proceed with the assessment of different units till the assessment of the so called Nagpur Office was finalised. 7. The accounts of Nagpur Office are already submitted. Receipt and expenditure statement as well as balance sheet for the years are filed. On the receipt side the portion of Gurudakshina received from various Provincial Units are shown. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SS Shakhas in the proforma and this proforma is being also sent to many places all over the country. (Deponent) VERIFICATION I, Pandurang s/o. Baliram Kshirsagar, the deponent do hereby swear that the contents of paras 1 to 7 are true to my personal knowledge and those of 8 and 9 are true to the information received and believed to be true. Signed and verified on 24th April, 1972, at Nagpur. Sd/ (P.B. Kshirsagar)" Deponent, 28. We find it as a fact that the said two depositions placed above were neither controverted before the lower authorities nor Shri Deoras and Shri Kshirsagar were cross-examined by the ITO. In the instant case we find that the veracity or honesty of these tow persons Shri Deoras and Kshirsagar who respectively filed their letter and affidavit were not doubted by the Revenue as they were not put even to cross-examination in respect of their assertions made in the respective letter and the affidavit. The contention of the assessee is not without any force, when we look to the Bombay High Courts decision in the case of Dilipkumar Roy 94 ITR 1. In that case: "The assessee was a disciple of the late Shri Aurobindo and his main activities were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the Department has been on control of income of other Shakhas alleged to be in the hands of K.K.M., which is also extracted and placed below: "Kendriya Karyakari Mandal" Article 14: (a) The Sarkaryavaha shall form the Kendriya Karyakari Mandal. The Mandal shall consist of the following office-bearers: (i) Sarkaryavaha. (He will preside). (ii) One or more Sah-Sarkaryavahas. (iii) Akhil Bharatiya Sharirik Shikshan Pramukh. (iv) Akhil Bharatiya Bauddhik Shikshan Pramukh. (v) Akhil Bharatiya Prachar Pramukh. (vi) Akhil Bharatiya Nidhi Pramukh. (b) The Kendriya Karyakari Mandal shall have in addition not less than five members who shall be chosen from among the Karyakari Mandals of the Provinces. (c) Functions— The following will be the functions of the Kendriya Karyakari Mandal: (i) The K.K.M. is the highest executive authority of the Sangh and as such, will carry into effect the policy and programme laid down by the A.B.P. Sabha. The K.K.M shall supervise the working of the units. (ii) The K.K.M., shall control the finances of the Sangh. It may take from the several Provincial Units such amounts of the money, as may from time to time b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yakari Mandals severally or jointly. The ld., Departmental Rep., also while attacking above said Articles of the constitution himself submitted that the constitution is fluid and one man's creation in the same breath. 32. The ld. counsel for the assessee though drew our attention of Art. 9 of the new constitution, the head note of which reads as The Constitution of the Rashtriya Swayamsevak Sangh adopted on the 1st Aug, 1949 and amended upto 1st July, 1972 which reads that "voluntary offering made with devotion before the Bhagwa Dhwaj shall constitute exclusively the finances of Shakha and shall belong to and be solely managed and disbursed by the Shakha for the promotion of the aims and objects of the Sangh and general advancement of Sangh work to be done by the Shakha according to the rules framed by it for that purposes". The above clause is from second constitution which is amended upto 1st July, 1972. Though it is not clear as to actually when the article pertaining to finances Art. 9 in the second constitution came to replace Art. 22 pertaining to funds in the old constitution, but in the light of the statement of Shri Deoras and the affidavit of Shri Kshirsagar the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried any further that all the Shakhas are part and parcel of the assessee RSS and their net income should be taxed in the hands of the assessee RSS. The perusal of the assessment made by the ITO under s. 143(3) in respect of this very year consequential to AAC's order which is under appeal before us, the ITO himself reduced the total income assessed in course of s. 144 proceedings on Rs. 20,55,442 to Rs. 61,055 shows that addition on account of Gurudakshina seems to have been made by him, because on the basis of mutuality the same cannot be taxed in the hands of the assessee-RSS irrespective of the fact whether they are from Swayamsevaks or from non-Swayamsevaks. In case non- Swayamsevaks are equated with Swayamsevaks, this principle of mutuality is applicable equally and in case it is otherwise the said amount cannot be treated as anything more than donations. We are not dealiong with the issue of mutuality at greater legnth, because the same as per CBDT's letter No. F. 290/26/70. IT (I V) has been accepted through letter of Shri Srinivasan to Dr. Subramaniam Swami which reads as under: "Gurudakshina' received from members of the organisations viz. Swayamsevaks will be exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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