C.I.T. WEST BENGAL III, CALCUTTA v. SRI JAGANNATH JEE (THROUGH SHEBAITS)

Citation: [1977] 2 S.C.R. 483; 1976 INSC 341

Court: Supreme Court of India

Bench: HANS RAJ KHANNA, V.R. KRISHNA IYER

Judgment date: 1976-12-17

Case summary

1976 INSC 341. Supreme Court of India judgment dated 1976-12-17. C.I.T. WEST BENGAL III, CALCUTTA v. SRI JAGANNATH JEE (THROUGH SHEBAITS). Read the judgment...

Judgment text

/ 483 C. I. T. WEST BENGAL III, CALCUTTA \\ SRI JAGANNATII JEE (THROUGH SHEBAITS) December 17, 1976 [H. R. KHANNA AND V. R. KRISHNA IYER, JJ. ] Income Tax A. ct 1922-Sec. 4\3) (I), 22(2)-Trust for religious and charit- able purposes-Whether d~duction to deity or vesting in. trustees-If income of deity-Charge and diversion of income at source. A B , Indian Succes. 1ion Act, 1925-Sec. 87-Will-Construction of a Will of a C religious Hindu drafted by English solicitor-Whether court must look into the real intention. Raja Rajendra Mullick Bahadur of Calcutta executed his last will on 21-2-1887. The author of the Will was a religious minded Indian, the drafts- man of the document was John Hart, an English Solicitor. The Will open with the words 'I hereby dedicate and make debutter my Thakurbaree'. The Income Tax Officer issued notices requiring filing of the returns against the Deity Thakurbaree. . On behalf of Deity, a nil income return was filed under D s.

22 (2) of the Indian Income Tax Act, 1922 for the assessment years 1956-57 and 1957-58. In connection with the writ petition filed in the High Court for the proceedings in respect of assessment years 19~5-56 it was conceded by the Revenue that a part of the income of the assessee which would be proved before the Income Tax authorities to have been applied in 'connection with feeding of ·the poor, subscription to other charities enuring for the benefit of the public would b' exempted under s. 4(3)(i) of the Income Tax Act, 1922. The Revenue contended that on a true construction of the said will there E was a complete dedication ot the property to the Deity and, therefore, the income arising from the said property was taxable in the hands of Deity.

It was, however, contended by th~ assessee that the remuneration of the trustees and the allowances to the widows of the deceased trustees as provided in the Will created a charge on the income of the trust estate and should therefore be treat- ed as diversion of the income of the trust before it accrued in the hand of the trustees. The Income Tax Officer taxed the income of the Deity deducting therefrom such amounts as were conceded before the High Court in respect of F the prior year. The appeal preferred by the assessee was dismissed bv the Appellate Assistant Commissioner. Before the Tribunal, the Revenue substan- ,~ tially succeeded. Thereafter, the Tribunal referred 4 questions of law to the High Court, two at the instance of the assessee and two at the instance of the Revenue.

, The High Court on a meticulous consideration of the entire Will decided against the Revenue and took the view that reading the Will as a whole the entire beneficial interest in the properties did not vest in the assessee Deity. G Assessee Deity was not the owner of the properties and, therefore, the only income which could be subiected to income tax in the hands of the assessee would be the beneficial interest of the said Deitv under the' Will which would be the expenses incurred for Seva Puia of the Deity and for the various religious ceremonies connected with the said Deity and the value of the residence of the Deity in the temple. Allowing the appeal, B HELD : 1. The Will represents oious Bengali Wishes and disposition but drafted in the hands of an English Solicitor. The court's function in such an A B c D 484 SUPREME COURT REPORTS [1977] 2 S. C. R. ambiguous situation is to steer clear of the confusion imparted by the diction and to read the real intention of the testator.

The courts discerning loyalty is. not to the formalitistic language used in drawing up the deeds but to the intentions which the dispon~r desired should take effect in the manner he designed. The real question is whether the testator created an ab>o. ute or partial debutter or was there no dedication to the idol but a vesting of the legal estate in the trustees. The use of the words like trust, trustees and Shebaits can lend support to the contention that the legal estate vested in ttlle tru,tees. However, the court has to push aside the English hand to reach at the Indian heart. We are construing the Will of a pious Hindu aristocrat whose faith in . ritual performances was more than matched by his ecumenical perspective. Secondly, the sacred sentiment writ large in the Will is his total devotion and surrender to the family Deity Shri Jagannathjee. It looks like doing violence to the heart of the Will if one side-steps the Deity to the status of but one of the beneficiaries.

The Will in the forefront declares the dedication to ! he Deity. The expression. trust, trustees and shebaits were indiscriminately used. The ex- pressions are uncertain of the precise import of these English legal terms in the . Indian context. The idol was, therefore, the legal owner of the whole and liable to be assessed as such. [485A, B, C, 490F, 491B, C-D, 497D, 499E] 2. The court negatived the contention that even if the property vested in the Deity, all the amounts to be spent on the Shebaits and the members of their family on the upkeep of horses and carriages and repair of buildings etc. were charge on the income and, therefore, the same did not and could not come into the hands of the Deity as his income and could not be taxed as such. If the Shebaits received rent and interest to the extent of these other disburse- ments they received the amounts merely as collectors of rents etc. and not as receivers of income.

''rhe terms in which the directio'IIS are couched do not divest the income at the source but merely direct a Shebait to apply the income received from 1'he debutter properties for specified purposes. [499E-H, 501F-0] CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1682-1683/ 71. E (From the Judgment and Order dated the 14th May 1969 of the F G H Calcutta High Court in I. T. Ref. No. 60 of 1968) G. C. Sharma and R. N. Sachthey, for the appellant B. Sen, S. K. Banerjee and P. K. Mukherjee, for respondent. The Judgment of the Court was delivered by KRISHNA IYER, J .

-The fiscal-not the philosophical-implications of Jesus' pragmatic injunction 'Render to Ceasar the things that are Caesar's, and to God the things that are God's-fall for jural explora- tion in these appeals by special leave, the appellant being the Union of India represented by the Commissioner of Income-tax, West Bengal, and the Respondent, Sree Jagannathji and the subject-matter the taxability of the deity Jagannathji by the State under the Income-tax Act, 1922, beyond the admitted point. To appreciate the exigibility issue, we have to flash back to 19th Century Bengal and the then prevailing societal ethos of affluent Hindu Piety, and we find ourselves in the spiritual-legal company of Raja Rajendra Mullick, at once holy and wealthy, who, in advancing years, executed a comprehen- sive will to promote his cherished godly wishes and to provide for his secularly dear cause and near relatives.

The construction of this testamentary complex of dispositions and the location of its destina- tion are the principal exercises in these appeals. .. ,. c. I. T. w. BENGAL v. SRI JAGANNATH JEE (Krishna Iyer, !. ) 485 Raja Rajendra Mullick Bahadur of Calcutta executed his last will and testament on 21 February 1887. While the author of the will was a Bengali brahmin of the last century, the draftsman of the docu- ment was John Hart, an English solicitor. While the author's wishes are usually transmitted into the deed by the draftsman, the diction and accent are flavoured by the draftsman's ink. So it happens that this will represents pious Bengali wishes and dispositions-but drap- ed in an English Solicitor's legalese. The Court's function in such · an ambiguous situation is to steer clear of the confusion imparted by the diction and to reach the real intendment (of the testator) .

Such an essay in ascertaining the true intent of Raja Rajendra Mullick if fraught with difficulties and our guideline has to be to pick it up from the conspectus of clauses-rather than from particular expres- sions or isolated features. Only the totality tells the story of the author's mind as he unburdened himself of his properties for causes and purposes dear to his heart. The Court's discerning loyalty is not to the formalistic language used in drawing up the deed but to the intentions which the disponer desired should take effect in the manner he designed. This back-drop of observations made, we pro- ceed to a broad delineation of the actual provisions. The munificent testator had enormous estates, lavish charity, piety aplenty and a large family. So he trifurcated his assets as it were, previded for religious objects, eleemosynary purposes and members of his family. The last was distinctly and separately dealt with and we are not concerned with the bequests so made.

But the first two were more or less lugged together and ample properties earmarked therefore. How did he engineer into legal effect these twin purposes ? Did he create an absolute debutter of these properties, totally dedicat- ing them to the deity whose devotees he and his father were, coupled with several directions, addressed to the shebaits, for application of the income for performance of stated pujas, execution of public charitable projects and payment of remuneration for sheba plus liberal grants and facilities to the sons and widows of sons who were objects of his bounty? Or did he really create a trust in the sense of the English law vesting the whole estate in trustees saddled with obligations to expend the income for enumerated items, godly and philantrophic, cr~ati! lg ! mt a partial debu! ter? This is the key question calling for ~d1ud1cat10n but an alternative but interlaced issue also arises.

Assum- mg that a total debutter had been created, did the will contain direc- tions for expenditure which siphoned off the income, as it accrued for specifi~d objects and entities in such manner that by such over-riding d1vers1on at the source, such income did not get into the hands of Lord Jagannath qua His income but reached Him merely as collector of those receipts to be disbursed for meeting those paramount claims ai. 1d charged for those destined uses ? Or could it be the true meaning of the clauses that the whole income was to be derived bv the deity but later to be applied by the human agencies representing Him for ful- filing objects, secular and sacred? A skeletal picrure of the complex of provisions of the will has to be projected now for a better understanding of the pros and cons of A. B. C: E. F· G. B c D F G 486 SUPREME COURT REPORTS [1977] 2 S. C. R. the controversy.

The will opens with the words : 'I hereby dedicate and make debutter my Thakoorbaree' and mentions a mansion which is to be the abode of his God. 'I hereby give, dedicate and make dabutl'ar all the jewels. .. . hereto-fore used, for the worship of the Thakoors. . . is another racital whereby valuables are dedicated. These are for direct use and both the Lord's mansion and the Lord's adornments yield great spiritual bliss but no secular income. Prima facie, the language is unmistakable and a full dedication and, argues Shri Sharma for the Revenue, the creation of absolute debutter is an unchallengeable inference. Equally indisputable is the character of the last of bequests to his sons (save one who has been disinherited) and widows of deceased sons and these are admittedly out of the area of dispute before us.

But in between lies the estate (including securities) which yields high income and is disposed of in terms which lend themselves to contrary constructions, marginal obscurity and conceptual mix-up of ideas borrowed from English and Hindu law. 'I do hereby give, dedicate and make debutter in the name and for the worship of my Thakoor Sn~ Sree Jagannath Jee the following proper- ties'-so run the words which are followed by a list of properties and a string of directions addressed to 'shebaits and trustees' or 'shebaits or trustees' or these two indifferently and indiscriminately mentioned singly. He even directed a board of trustees to be constituted: in the event of male heirs failing, to take' over shebaitship and execution of the trusts-and here and there referred to trusts under the deed. Nor .. were all the incomes to be devoted to pooja. His cultivated and com- passionate m:ind had many kindly concerns and finer pursuits.

The enlightened donor appears to have had an aristocratic and aesthetic flair for promoting the joy of life and a philanthropic passion to share it, even posthumously, with the public at large. His chari- table disposition seems to have overpowered his love of castemen and his kindness for living creatures claimed a share of his generosity. These noble and multiple instincts persuaded him to make an art collection which could be reckoned as among the best an individual could be proud of anywhere in the world and these i:;ain- tings and sculptures, he directed, shall be kept open for public delight, free of charge. He maintained a glorious garden which he wished should be kept in fine trim and be hospitable for any member oif the public who liked to relax in beautiful surrounds. His compassionate soul had, in lofty sentiment of fellow-feeling, collected birds and non-carnivorous animals.

But, after him, the aviary and meanagerisa were to be taken care of and lovers of birds and animals were, according to his testamentary direction,, permitted to seek retreat and pleasure among there natural environs. Of course, he rewarded his sons and widows sumptuously, the lay-out on the rituals of worship consuming but a portion' of the total income. At this stage, the litigative journey may be sketched to indicate how H the dispute originated, developed and gained access to this Cou! t, The story of this tax entanglement began nearly two decades ago with the I. T. 0. issuing notices and the assessee deity responding with 'nil' returns under s. 22(2) of the Indian Income-tax Act, 1922 for the _j ' • c. L T. w. BENGAL v. SRI JAGANNATH JEE (Krishna Iyer, 1. )-~481 -. a~w-:nent y= 1956-57 ·and 1957-58. A portion however was, by l~th. uAte concession of the Income Ta. ; Department_, carved out of the total income as non-taxable. Accordmg to the High Court.

· "When the proceedings for the assessment year . 1955-56 were pending before the Income Tax Officer, the assei;see had filed an application under Art. 226 of the Constitu- tion of India and had obtained an interim stay against the said proceedings. It appears that on the 9th October 1961 in t=s of the settlement arrived at between the Income Tax Department and the assessee the interim stay of pro- ceedings was vacated. It was recorded in the said . order that part of the income of tho assessee which would be proved before the Income Tax Authorities to have been applied in connection with (a) feeding of the poor, (b) subscription to other charities enuring for the benefit of the public would be exempted under s. 4(3) (il of Indian Income-tax Act, 1922. " We regard this stand of the Revenue. as CoIT".. Ct in the light of the provisions of s.

4(3) (i) and hold, in /imine, that whatever tho outcome of the contest, the amounts spent on poor feeding and oiher public charitable purposes are outside the reach of the tax net and are totally exempt. We may, in fairness, stato here that counsel for the Revenue, Shri Sharma, rightly agreed that the correct legal position, o~ a sound · understanding of s. 4(3) (i) of the Act, was that tl1eso charitable expen- ditures were totally deductible from the computation for fixing the tax. Let us continue the later developments. For assessment for the year 1956-57 the Income-tax Officer was of the opinion, on tha con- •truction of the said will, that besides directions for spending amounts on charitable objects, thewill had also provided for payment of certain fixed allowances to the acting shebaits as well as.

the widows of the deceased shebaits, maintenance of horse-drawn carriages and motor cars for the use of the shebaits, medical aids to the •hebaits, and the members of their families, expenses on account of Srardh caremony of the ancestors of the shebaits and other private charities. On be- half of the a ur of the herrs or specified relatives of the testator for therr upkeep, or that, .. on the other hand these heirs shall be considered the true beneficiaries of the' property, subject to a. charge f<? r the ~p- "' keep, worship and expenses of the idol, 1s a q~estlon ~~ch can only be settled by a conspectus of the entire provmons of the will. " (p.

137, Mukherjea) ~ If on a consideration of the totality of terms, on sifting the more e~iential from the less essential purposes, on sounding the depth of ~ ~ the donor's wishes to find whether his family or his deity were the primary beneficiaries and on taking note of the language used, if the vesting is in the idol an absolute debutter can be spell 0';1t. So considered, if the grant is to the heirs with a charge on the mcome for the performance of pujas, the opposite inference is inevitable. Before us, there is no dispute between the heirs and the idol. The point mooted is about the creation of an English trust, an uncon- ventional legal step where the dedication is to a deity. On a full ,11tudy of the will as a whole, we think that this benignant Bengalee's testament, draped though in Victorian verbal haberdashory, bacl, on legal auscultation, the Indian heart-beats of Hindu religious culture, llll_d so 11canned, his will intended vasting the properties in absolute degutter.

The idol was, therefore, the legfil owner of the whole and liable to be assessed as such. The respondent, however, has a second string to his bow. Assum- ing an absolute debutter, there is still many a slip between the lip and the cup, between the income and exigibility to tax. For, while, -~ ordinarily, income accrues in the hands of the owner of property and is taxable as such, it is quite on the cards that in view of the special provisions in the deed of grant certain portions of the income may be tied up for other purposes or persons and may not reach the '-t grantee as his income. By an over-riding charge, sums of money the balance of income may legally be received by the donee as his income.

The argument of the respondent is that even if the estate vested in the deity, an assessable entity in our secular system as held in logendra Nath( 1 ) still all the amounts meant to be spent on tho shebaits and the members of the family, on the upkeep of horses and carriages and repair of buildings etc. , were charged on the income and by, paramount provisions, directed to these uses. These sums did not and could not come into the hands of the deity as its income and could not be taxed as such. If the 'shebaits and trustees' collect- ed the income by way of rents and interests, to the extent of these other disbursements they received the amounts merely as collectors of rents etc; not as receivers of income. Such amounts were free from income-tax in the hands of the idol. (I) 74 I. T. R. 33. B c D E F G H A B D F G H 500 SUPREME COURT REPORTS [1977] 2 s. c. R. The principle we have set out above has been blessed by a uniform catena. of cases.

The leacling ruling on the subject is by the Judicial Conumttee in Bejoy Singh Dudhuria(I). Lord Macmillan there observed as follows : "When the Act by s. 3 subjects to charge 'all income' of an individual it is what reaches the individual an income which it is intended to charge. In the present case the decree of the court by charging the appellant's whole re- sources with a specific payment to his stepmother has to that extent diverted his income from him and has directed it to his step-mother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands. " (p. 138-139) A case in contrast is P. C. Mullick v. Commissioner of Income- tax (2). There "The testator died in October, 1931. By his will he · appointed the appellants (and another) his executors.

He directed them to pay his debts out of the income of his property, and to pay Rs. 10,000/- out of the income of his property on the occasion of his 'Addya Shradh' for ex- penses in connection therewith to the person entitled to perform the Shradh. He also directed his executors to pay out of the income of his property the costs of taking out probate of his will. After confenring out of income bene- fits on the second wife and his daughter and (out of the estate) benfits on the sons, if any, of his daughter, and after providing for the payment out of income 'gradually' of divers sums to some persons, and certain annuities to others, he bequeathed all his remaining property (in the events which happened) to a son taken in adoption after his death by his wife, viz. , one Ajit Kumar Ghosh who is still a minor. " The payment of the Shradh exv.

enses and the costs of probate were payments made out of the income of the estate coming to the hands of the appellants as executors, and in pursuance of an obligation imposed by their testator. Tt is not a case like the case of Raja Bejoy Singh Dudhuria v. Commissioner of Income Tax, Calcutta in which a portion income was by an overriding title diverted from the person who would otherwise have received it. It is simply a case in which the executors having received the whole income of the estate apply a portion in a particular way pursuant to· the dH:ections of their testator, in whose shoes they stand. " (l) (1933) I l. T. R. 135. (2) (1938) 61. T. R. 206. . "" \. ' .. y c. I. T. w. BENGAL v. SRI JAGANNATH JEE (Krishna Iyer, J. ) 50 I In Commissioner of Income-tax v. Sitaldas Tirathdas(')' this Court referred to many reported decisions some ~f which we have just mentioned. Mr. Justice Hidayatullah, speakmg for the Court, summed up the rule thus (at p.

374) "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the. assessee as his income. Obligations, no doubt, there are m every case but it is the nature of the obligation which is the deci- sive' fact. There is a difference between an amount which ·a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said ~o b. e a part of the income of the assessce. Where by the obligation income is diverted before it reaches the assessee, it is deduc- tible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence in law does not follow. It is the first kind of. payment which can truly be executed and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied.

The first is a case in which the income never reaches the assessee, who, even if he were to collect it, d~ so, not as part of his ineome, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income. " The High Court, in a laconic paragraph, dismissed this conten- tion but Shri Sen submitted that there was merit in it and bad to be accepted.

We agree with the High Court because the terms in which the directions are couched do not divert the income at the source but merely command the shebaits to apply the income receiv- ed from the debutter properties for specified purposes. We may quote to illustrate : "I direct that the shebaits and trustees shall out of the Debutter funds maintain and keep a sufficient number of carriages and horses for their use and comfort . and that of their families and after providing for the purposes afore- said out of the Debutter income I direct the she- baits and Trustees to pay to each of the shebaits for the time being who shall actually take part in the performance of the duties of the Shebaits and the execution of the Trusts of this fund as and by way of remuneration for their ser- vices the sum of Rupees Five hundred a month .... " (1) 41 I. T. R. 367. A B c D E F G H ·- ............ ~ ··•. -&:L... --=t=. A B c D 502 SUPREME COURT REPORTS [1977] 2 S. C. R.

"I direct that the widows of my three deceased sons Greendro, Sorrendro and Jogendra who assist in the work of preparing articles of offerings to the Thalrnors and for the feeding and distribution to the poor and all the widows of shebaits hereby appointed and future shebaits who shall in like manner assist in the said work shall receive. a re- muneration of the sum of Rupees fifty each a month from . the income of the debutter fund. " So the shebaits first got the income and then apply it in conformity with the directives given in the will. The rulings relied on by both sides do not shake the position we have taken and may not merit discussion. · These conclusions we have drawn mean that the appeals have to be allowed and the reference answered in favour of the Revenue and against the assessee. Accordingly, we answer Questions No~. 1 and 2, referred at the instance of the assessee, against him and the other two questions referred at the request of the Revenue, affir- matively.

While answering the above questions we may state that all income earmarked for religious and charitable purposes confor- ming to s. 4(3)(i) read with Explanation to s. 4(3) of the 1922 A,ct shall not be included in the total income. It is also clear that what- ever income was agreed to be excluded in terms of the concession made by the Revenue in the High Court shall remain excluded. The fluctuating fortunes of this litigation have been occasioned by the discordant notes struck by the different clauses of the will and the inevitable element of confusion injected by the religious,. chari- 1: table and secular wishes of the Hindu testator being translated into formal, legal terms by an English solicitor in the latter half of the last century. He, therefore, direct that tho parties do bear their own coBts throughout. P. H. P. Appeal allowed. r

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