State
of Kerala Vs. M.P. Shanti Verma Jain [1998] INSC
289 (8 May 1998)
Sujata
V. Manohar. D.P. Wadhwa D.P. Wadhwa, J.
ACT:
HEAD NOTE:
State
of Kerala in this appeal is challenging the judgment dated February 6, 1986 of
the Division Bench of the Kerala High Court holding that MSP Family Jain Trust
('Trust' for short), of which the respondent is the President, is exempt from
payment of tax on its agricultural income under Section 4 of the kerala
Agricultural Income Tax Act, 1950 ('Act' for short) as amended by Kerala Act 9
off 1974. High Court in its impugned judgment reversed the findings of the
authorities under the Act that Trust was a private family trust and the
dominant object of the Trust was to propagate a particular religion and to
render service to the followers of that religion and it could not be treated as
a public trust. The authorities had also found that most of the income of the
Trust was spent outside the State of Kerala.
For
the assessment year 1974-75 (Accounting Year 1973- 74) the Trust filed its
return of agricultural income under the Act showing net profit of Rs. 53,191,39
and claimed exemption for the entire income. The Assessing Officer by his order
dated March 24, 1980 assessed the income of the Trust at
Rs. 63,099.00. He declined the claim of exemption made by the Trust stating
that under Section 4 of the Act as amended the benefit was applicable only to
the extent to which the income of the Trust was applied to charitable purposes
within the State. Trust filed appeal against the assessment order before the
Appellate Assistant Commissioner of Agricultural Income Tax and Sales Tax, who,
by order dated September
9, 1980, dismissed the
same. Further appeal was filed by the Trust before the kerala Agricultural
Income Tax Appellate Tribunal. It was also dismissed by judgment dated August 6, 1981. At the instance of the Trust
following questions of law were referred to the Kerala High Court under Section
60 of the Act for the opinion of the High Court :- " 1. Whether on the
facts and in the circumstances of the case, this Tribunal is right in holding
that section 4 of Act 22 of 1950 as amended by Act 9/74 is applicable for the
assessment of the tax for the accounting year 1973-74?
2.
Whether on the facts and in the circumstances of the case, this Tribunal is
right in holding that since the object of the Trust being propagation of Jain
Religion and the service of its followers, the trust is not entitled for the
claim of exemption from tax under section 4 as it stands after the amendment of
the Act by Act 9/74.
3.
Whether on the facts and in the circumstances of the case, this Tribunal is
right in holding that even the amount spent in this State in furtherance of the
objects of the Trust cannot be treated as allowable items of expenses and
4. Whether
on the facts and in the circumstances of the case, this Tribunal has any
material in inferring and is it justified in entering into a finding that the
object of the trust is only to spend money for the propagation of a particular
type of religion and for the services of its followers." High Court
answered the first question in favour of the revenue in view of decision of
this Court in ts262). High Court held that Trust was both religious and
charitable and even if it construed as private religious trust the benefit to
the public provided for in the trust Deed took it out of the exclusion of
clause (a) of Sub- section (3) of Section 4 of the Act. High Court said that
taken as charitable Trust the benefits of the Trust were not confined to any
particular religious community or caste and for the reason it did not fall
under the exclusion in clause (b) of Sub-section 3 of Section 4 of the Act as
well. High Court was , thus, of the view that the income of the Trust was
entitled to exemption under Section 4 of the Act except to the extent to which
its income was not applied for charitable or religious purposes within the
State. High Court answered questions 2,3 and 4 in favour of the Trust and
against the revenue.
Relevant
part of Section 4 of the Act, on the basis of which Trust claimed exemption, is
as under:
"
4. Total agricultural income (1) subject to the provisions of this Act, the
total agricultural income of any previous year of any person comprises all
agricultural income derived from land situated within the State and received by
him within or without the State , but does not include- (a)
....................
(b) any
agriculture income derived from property held under trust wholly for charitable
or religious purposes, to the extent to which such income is applied to such
purposes in the State.
(c) any
agricultural income derived from property held under trust in part only for
such purposes, to the extent to which such income is applied to such purposes
in the State.
(2)
....................
(3)
Nothing contained in clause (b) or clause (c) of sub-section (1) shall operate
so as to exclude from the total agricultural income of the previous year of the
persons in receipt thereof-
(a) any
part of the agricultural income from the property held under trust for private
religious purposes which does not enure for the benefit of the public;
(b) in
the case of a trust for charitable purposes or a charitable institution, any
agricultural income thereof, if the trust or institution is created or
established for the benefit of any particular religious community or case;
.........................."
It is not disputed that the Trust derived agricultural income from the property
held under the Trust. The question is if the Trust is wholly for charitable or
religious purposed to seek exemption from payment of tax on such income and
further if such income is applied to such charitable and religious purposes in
the State of Kerala.
Exemption
provided under Section 4(1) (b) can be denied under 4(3) (a) if any part of the
agricultural income from property held under the Trust for private religious
purposes is not meant for the benefit of the public and (b) in the case of
agricultural income of Trust for charitable purposes if it is established only
for the benefit of particular religious community or caste. As noted above the
tribunal found that the Trust was a private family trust. That was not the
subject matter of reference in any of the questions referred to the High Court.
But the High Court's finding was that the Trust was a public Trust. High Court
fell in error in going into the question if the assessee was a public trust or
a private trust. That being so Section 4(1) (b) and Section 4(1) (c) were not
applicable to the assessee Trust.
The
authority under the Act including the Appellate Tribunal minutely examined
various terms of the Trust Deed and found that for all intents and purposed the
object of the Trust was to propagate particular religion and to render service
to the followers of that religion, particularly, with reference to the
families, who created the Trust, Assessee, therefore, could not be considered
for exemption, being a private trust, set up to promote a particular religion
whose agricultural income does not enure for the benefit of general public . It
was also found that most part of the agricultural income was spent for several
purposes outside the State of kerala. The exemption is allowed to the extent to
which such agricultural income is applied to such purposes within the State of Kerala, if it is a public trust. High
Court decided the questions referred to it only in abstract without considering
as to how much agricultural income of the Trust was spent in Kerala. We have
also examined the Trust Deed which was produced at the time of arguments. The
Deed of Trust and the rules run into more than thirty pages out of which six
pages of the Trust Deed narrate philosophy of Jain Dharma. Objects of the Trust
clearly show that Trust is meant for propagation of Jain religion and rendering
help to the followers of Jain religion. Even the medical aid and similar
facilities are to be rendered to persons devoted to Jain religion and to non- Jains
if suffering from ailments but the medical aid could be given to them only if
any member of the families, managing the Trust, shows sympathy and is
interested in their treatment. Tribunal, in our opinion, was right in its
conclusion that the dominant purpose of the trust in the present case was
propagation of Jain religion and to serve its followers and any part of
agricultural income of the Trust spent in the State of Kerala also could not be treated as
allowable item of he expenses.
Accordingly
we will set aside the impugned judgment of the High Court and the answer the
questions 2 to 4 in favour of the revenue and against the assessee Trust. There
will be no order as to costs.
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