1969 (5) TMI 17 - HC - Income Tax

Assessee-deity - only income which could be assessed in the hands of the assessee would be the beneficial interest of the said deity under the will, which would be the expenses incurred for seva puja of the deity and for the various religious ceremonies conducted with the said deity

Summary

Issues Involved:

1. Effect of the will dated 21st February 1887 executed by Raja Rajendra Mullick.
2. Taxability of the income in the hands of the deity, Sri Sri Jagannath Jew.
3. Whether the deity, being an artificial person, is assessable.
4. Applicability of section 4(3)(i) of the Indian Income-tax Act, 1922.
5. Whether certain expenses should be treated as diversion of income before it accrued to the trust.

Issue-wise Detailed Analysis:

1. Effect of the Will Dated 21st February 1887:

The main question was the effect of the will executed by Raja Rajendra Mullick. The will dedicated and made debutter several properties for the worship of Sri Sri Jagannath Jew. The will directed the trustees to perform various religious ceremonies and charitable activities, including feeding the poor. The testator appointed his sons and grandson as shebaits and trustees, and provided for their remuneration and maintenance. The will also contained provisions for maintaining an art gallery, a garden, and other charitable activities, indicating that the properties were vested in the trustees for the purposes of different trusts, one of which was the worship of the deity.

2. Taxability of Income in the Hands of the Deity:

The Income-tax Officer determined that the remuneration to the shebaits and allowances to the widows were merely applications of the trust income and not deductible. The Tribunal held that the surplus income after defraying all expenses was to be appropriated for charitable purposes and was exempt from taxation under section 4(3)(i) of the Indian Income-tax Act, 1922. The Tribunal also held that the expenses for sradh and other ceremonies for the spiritual benefit of the testator and his ancestors were obligations created by the testator and should be excluded from the assessment.

3. Assessability of the Deity as an Artificial Person:

The Tribunal rejected the preliminary objection that a deity being an artificial person was not assessable at all. The Tribunal held that the deity was assessable for the income derived from the properties vested in it.

4. Applicability of Section 4(3)(i) of the Indian Income-tax Act, 1922:

The Tribunal held that the surplus income held for charitable purposes like feeding the poor was exempt from taxation under section 4(3)(i) of the Indian Income-tax Act, 1922. The Tribunal also held that the amounts spent on sradh and other ceremonies for the spiritual benefit of the testator and his ancestors were diverted by an overriding title and were to be excluded from the total income of the deity.

5. Diversion of Income Before it Accrued to the Trust:

The Tribunal held that the expenses for remuneration to shebaits, pension to widows, and maintenance of horses, carriages, and motor cars were merely applications of the income arising in the hands of the deity and not a diversion by an overriding title. The Tribunal confirmed the order of the Appellate Assistant Commissioner on this aspect.

Conclusion:

The court, upon examining the will as a whole, concluded that the properties were vested in the trustees for the purposes of different trusts, including the worship of the deity. The court held that the only income which could be subjected to income-tax in the hands of the deity would be the beneficial interest of the deity under the will, which included the expenses incurred for seva puja and other religious ceremonies connected with the deity, and the value of the residence of the deity in the temple. The court answered the questions referred at the instance of the assessee and the Commissioner of Income-tax accordingly, emphasizing the need to consider the will as a whole to determine the intention of the testator.