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

CIVIL APPEAL No. 1682/1971Supreme Court[1977] 2 S.C.R. 48317 December 1976Bench: 2 JudgesAuthor: HANS RAJ KHANNA, V.R. KRISHNA IYER20 pages
AI SummaryAllowed

What were the facts?

The case involves the taxability of income of the deity, Sri Jagannathjee, for assessment years 1956-57 and 1957-58. The deity's income arose from properties dedicated by a will executed in 1887 by Raja Rajendra Mullick. The Income Tax Officer issued notices for returns to the deity. A nil income return was filed. The Revenue conceded that income applied for feeding the poor and other public charities would be exempt under Section 4(3)(i) of the Indian Income Tax Act, 1922. The Income Tax Officer taxed the deity's income, deducting only amounts conceded by the Revenue for the prior year. The Appellate Assistant Commissioner dismissed the assessee's appeal. The Tribunal referred four questions of law to the High Court. The High Court ruled against the Revenue, holding that the entire beneficial interest did not vest in the deity, and only the deity's beneficial interest (expenses for Seva Puja, religious ceremonies, and residence) was taxable.

What did the Supreme Court hold?

The Supreme Court held that the will, though drafted by an English solicitor, represented the real intention of the pious Hindu testator. The Court emphasized looking beyond the formalistic language to ascertain the testator's intent. It found that the testator created an absolute debutter, and the idol was the legal owner of the whole property, liable to be assessed as such. The Court rejected the contention that payments for Shebaits' remuneration and allowances to widows of deceased trustees constituted a diversion of income at source. It reasoned that the terms of the will did not divest the income at the source but merely directed the Shebaits to apply the income received from the debutter properties for specified purposes. The Court cited Commissioner of Income-tax v. Sitaldas Tirathdas to explain the distinction between income diverted at source and income applied after receipt. Therefore, the appeals were allowed, and the reference was answered in favour of the Revenue. However, the Court clarified that all income earmarked for religious and charitable purposes conforming to Section 4(3)(i) of the 1922 Act, and any income agreed to be excluded by the Revenue's concession in the High Court, would remain excluded from the total income. The issue of whether the entire beneficial interest vested in the deity was decided in favour of the Revenue, meaning it did vest.

What were the issues?

1. Whether, on a true construction of the will, there was a complete dedication of property to the deity, making its income taxable in the deity's hands? (Question of law, turning on the interpretation of the will and Section 4(3)(i) of the Indian Income Tax Act, 1922). 2. Whether remuneration to trustees and allowances to widows of deceased trustees, as provided in the will, constituted a charge on the income of the trust estate, amounting to a diversion of income at source, and thus not taxable in the hands of the deity? (Question of mixed law and fact, turning on the nature of the payments and Section 4(3)(i) of the Indian Income Tax Act, 1922). Assessee's Contentions: The assessee contended that the remuneration of the trustees and allowances to the widows of deceased trustees created a charge on the income of the trust estate, which should be treated as a diversion of income at source before it accrued to the trustees. The assessee relied on the principle that if income is diverted at source, it is not taxable in the hands of the recipient. Revenue's Contentions: The Revenue contended that on a true construction of the will, there was a complete dedication of the property to the deity, and therefore, the income arising from the property was taxable in the hands of the deity. The Revenue argued that the payments for trustees' remuneration and allowances to widows were merely directions to apply income after it was received, not a diversion at source. The Revenue's arguments were not explicitly detailed with specific authorities in the provided text, beyond the general contention regarding the construction of the will.

Which sections of the Income-tax Act were involved?

Section 4(3)(i),Section 22(2)

AI-generated summary — verify with the full judgment below

/ 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 w

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 22(2)

All 31 judgments and leading authorities on Section 22(2) →

Recent GST High Court judgments

Search GST case law →