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Income Tax Appellate Tribunal, KOLKATA BENCH, “SMC” AT KOLKATA
Before: Shri A. T. Varkey, JM]
ORDER These appeals have been preferred by the assessee against the orders of the Ld. Commissioner of Income-tax (Appeals)-14, Kolkata [‘Ld. CIT(A)] dated 27.07.2018 for the Assessment Years 2015-16 & 2016-17.
Briefly stated the facts of the case that the appellant is a private benefit trust created in the year 1932 under an ArpanNama and for the benefit of nine deities specified therein. For the AYs 2015-16 & 2016-17 the appellant filed the return of income declaring total income of Rs.2,83,370/- & Rs.4,22,505/- respectively and the tax payable thereon was calculated at the rates applicable to individuals. In the intimations issued u/s 143(1), the CPC Bengaluru accepted the income returned but levied the tax at the maximum marginal rate on the entire total income. Aggrieved by these intimations, the appellant preferred appeals before the Ld. CIT(A). On appeal the Ld. CIT(A) noted that the AOP was not registered nor approved as religious trust qualifying for exemption u/s 11 under the Income- tax Act, 1961. He further observed that the nine deities mentioned in the Trust Deed were not the only beneficiaries of the Trust but in his opinion the shebaits were also entitled to receive the income of the Trust. On this understanding of the facts, the Ld. CIT(A) held that the share of the beneficiaries was in-determinate and therefore in terms of Section 164(2) the CPC, Bengaluru was right in law in assessing the income at the maximum marginal rate. Aggrieved by this order of the Ld. CIT(A) the appellant is now in appeal before us.
2 & 1982/Kol/2018 Bangiya Nimbark Ashram AYs- 2015-16 & 2016-17 3. We have heard the rival submissions and perused the material placed on record. From the material before us, I find that the assessee trust was created by a Deed of Dedication (ArpanNama) executed in the year 1932 by the followers of ShriNimbarkVaishnav Sect. The nine deities specified in the Deed of Dedication were declared to be the beneficiaries of the Trust and it was specified that the properties settled on Trust would be used for performing pooja and other rituals at the Mandir to be established and the prayers and the worships to be offered at the said temple. The said Deed of Dedication also provided for appointment of shebaiths or mahants as also members of the Managing Committee. The said Managing Committee was entrusted with the management of the affairs of the Trust / Ashram and apply the income for performing the pooja& other rituals for the deities. A bare perusal of the Deed of Dedication indicated that neither the Chief Shebaithnor any of the Committee Members had any right over any of the assets of the Ashram or income derived from the properties held in trust. From the examination of the Deed of Dedication it was evident that the assets were settled on the Committee with specific directions that the assests and income derived therefrom would be utilized for performing seva, pooja etc. according to the methods observed in NimbarkVaishnav Sect and propagate the worship & prayers instructed by the NimbarkVaishnav Sect in Ashram, cater to the guests and propagate religious steps preached by NimbarkBhagwan and do all public welfare as possible. Other than the foregoing specified purposes, the shebaiths of the Mandir& Ashram as well as members of the committee were not permitted to apply the assets and the income of the Trust for their own benefit or for any other purpose or object. I therefore find merit in the Ld. AR’s submissions that the Ld. CIT(A) proceeded on erroneous assumption that besides nine deities mentioned in the Deed of Dedication, the shebaiths of the Trust were also beneficiaries of the assets & income settled on Trust and therefore it was a case where the shares of the beneficiaries in the assets & income of the Trust were indeterminate. On the contrary I find that on plain reading of the Deed of Dedication, it was clear that the assets & income of the Trust were for the sole benefit of the nine specified deities and none else. Even from the bare perusal of the audited accounts for the relevant years, it is noted that the income of the Trust was applied and/or used solely for the purposes specified in the Deed of Dedication and there was no material in the audited accounts on the basis of which it could be inferred that any part of the income earned by the Ashram during the relevant two years was utilized for the benefit of the shebaiths or 3 & 1982/Kol/2018 Bangiya Nimbark Ashram AYs- 2015-16 & 2016-17 members of the managing committee. Having regard to these facts therefore I have no hesitation in holding that the appellant was Trust created for the benefit of nine specified deities who alone were the beneficiaries.
The issue as to whether such trusts are liable to be taxed the maximum marginal rate as prescribed in Section 164 was considered by the Hon’ble Calcutta High Court in the case of CIT Vs Sri Sri Sridhar Jew (184 ITR 323) involving facts which are analogous to the facts of the present case. In the case decided by the Hon’ble Calcutta High Court the AYs involved were 1958-59 to 1972-73 and the dispute related to the method of assessment of the income derived from properties, which were dedicated to a number of deities. The income derived from the properties were assessed in hands of the shebaiths and on consideration of the ArpanNama it was held that though the assessee as a shebaith might have had the custody of the property and enjoyed the right to manage it, he was not the owner of the property and therefore he was not liable to be assessed to tax under the Act. The Hon’ble High Court held that under the Hindu Law the property settled through ArpanNama vested in the idol, which was a separate jurisdic person, and therefore under the Income-tax Act, 1961 the income had to be assessed as the income of the deity. In the later years the dispute arose as to whether the Tribunal was right in holding that although the share of the deities were not defined in the Deed of Endowment, their shares could be considered as defined in law and therefore tax was not chargeable at the maximum marginal rate. In this regard High Court took note of its earlier judgment of the Division Bench in the case of PulinBehariDey (20 ITR 314) wherein it was held that where the grant & devise to the deities were made without specification of shares, then it would be presumed that they took it in equal shares and therefore when the shares of the deities were certain and it was known that the properties were given to the deities in equal shares, then the proviso to Section 41 was not applicable. Applying the ratio laid down in the case of PulinBehariDey (supra), the Hon’ble Calcutta High Court held that where there was no specification of the shares of deities then they took in equal shares and therefore the assessment should be made separately in the hands of the deities.
I find that the decision of the Hon’ble Calcutta High Court is fully applicable to the facts of the present case. Even though in the Deed of Dedication, the individual shares of each of the nine deities has not been specified yet it is apparent that they took their share in 4 & 1982/Kol/2018 Bangiya Nimbark Ashram AYs- 2015-16 & 2016-17 equal measure and there was no intention expressed or otherwise discernible from the Deed of Dedication that the deities were to take the assets settled in an unequal manner. In the circumstances applying the decisions of jurisdictional High Court (supra), it has to be held that the share of each deity was equal and therefore determinate. Accordingly I hold that provisions of Section 164(2) requiring application of maximum marginal rate were not applicable in the given facts of the case. The AO is therefore directed to re-compute the tax liability of the assessee without applying maximum marginal rate.
In the result, the appeals of the assessee are allowed. Order is pronounced in the open court on 10th April, 2019