1997 (1) TMI 119 - AT - Income Tax

Summary

Issues Involved:
1. Validity of religious endowments without consecrated temples or images.
2. Status of the assessees for tax purposes.
3. Taxability of voluntary contributions towards the corpus of the endowments.

Summary:

1. Validity of Religious Endowments:
The primary question was whether the deities, Shree Ganeshji Maharaj and Shree Shankar Bhagwan, should have existed when the endowments were created. The Tribunal referred to the Full Bench decision of the Calcutta High Court in Bhupatinath Smriti Thirtha v. Ramlal Moitra, which held that a bequest for the establishment of an image and worship of a Hindu deity after the testator's death is valid under Hindu Law. The principle was extended to cases other than bequests made by will, as seen in Chatarbhuj v. Chaturjit. Therefore, the endowments made by Smt. Krishna Kejriwal were held valid despite the temples and images not being consecrated at the time of the endowment.

2. Status of the Assessees:
The Tribunal cited Supreme Court decisions in Jogendra Nath Naskar v. CIT and Official Trustee of West Bengal v. CIT, which held that a Hindu idol is a juristic entity capable of holding property and can be taxed through its Shebaits. The deity falls within the meaning of the word 'individual' and can be treated as a unit of assessment. Consequently, the assessees should be taxed as individuals, not as private religious trusts u/s 164 of the Income-tax Act.

3. Taxability of Voluntary Contributions:
Section 2(24)(iia) was read in conjunction with section 12, introduced by the Finance Act, 1972. Section 12 clarifies that contributions made with a specific direction to form part of the corpus of the trust are not considered income. The Tribunal referenced the Board's Circular No. 108 and the Bombay High Court's decision in R.B. Shreeram Religious & Charitable Trust v. CIT, which supported that voluntary contributions towards the corpus cannot be taxed. The Assessing Officer had accepted that all donations were received towards the corpus, thus they could not be assessed as income.

Conclusion:
1. The religious endowments are valid despite the temples and images not being consecrated at the time of creation.
2. The assessees should be assessed as 'individuals' since they are artificial juridical entities.
3. Voluntary contributions towards the corpus cannot be taxed.

Result:
The appeals were allowed.