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PETITIONER:

RADHASOAMI SATSANG, SAOMI BAGH,AGRA

Vs.

RESPONDENT:

COMMISSIONER OF INCOME TAX

DATE OF JUDGMENT15/11/1991

BENCH:

MISRA, RANGNATH (CJ)

BENCH:

MISRA, RANGNATH (CJ)

KULDIP SINGH (J)

CITATION:

1992 AIR 377 1991 SCR Supl. (2) 312

1992 SCC (1) 659 JT 1991 (4) 313

1991 SCALE (2)1199

ACT:

Income Tax Act, 1961---Sections 11 and 12---Radhasoami

Satsang Property--Income of--Whether entitled to exemption.

HEADNOTE:

The then Satguru of the appellant-Creed was assessed for

the assessment years 1937-38, 1938-39 for the first time. He

was a retired Govt. servant. His pension as well as the

income from the institution were assessed together.

On appeal, the Assistant Commissioner of Income-tax

confirmed the assessments made by the Income-tax Officer.

The Income-tax Commissioner under reference made under

section 66(2) of the Income-tax Act, 1922 held that the

offerings made to the assessee-Satguru were offerings as

held in trust and same were exempted under section 4(3)(1)

of the Act.

When an application under Section 35 of the Act was made

for ratification, whether the offerings received by the

assessee consisted of interest income, property income, and

income derived from sale of books and photographs etc. to be

excluded, the Commissioner directed deletion thereof.

For the year 1939-40, though the Income-tax Officer did

not allow exemption u/s.4(3)(1) of the Act, the Appellate

Assistant Commissioner allowed exemption.

Till 1963-64 the appellant was not taxed and its refund

applications were accepted by the respondent-Revenue.

For the assessment years 1964-65, 1965-66, 1966-67,

1967-68, 1968-69, 1969-70, the assessee-appellant was as-

sessed, treating it to be an association of persons, and

held that the donations and contributions received volun-

tarily had limited religious use.

When the appellant-assesses appealed, the appellate

authority upheld the assessments.

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Against the orders of the Appellate authority the asses-

see appealed before the Income-tax Tribunal. The Tribunal

allowing the appeals of the assessee, held that the assessee

was entitled to the exemption claimed under Section 11 of

the Income-tax Act, 1961.

On the question, referred to the High Court by the

Tribunal, "Whether on the facts and in the circumstances of

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the case the Tribunal was justified in holding that the

income derived by the Radha Swami Satsang, a religious

institution, was entitled to exemption under Sections 11 and

12 of the Income Tax Act, 1961?", the High Court answered

the question in favour of the Revenuerespondent, holding

that the trust deed was revocable and the conditions for

exemption under Sections 11 and 12 of the Act were not

satisfied.

Allowing the appeals of the assessee, this Court,

HELD: 1.01. Assessments are quasi judicial. Each assess-

ment year being a unit, what is decided in one year may not

apply in the following year but where a fundamental aspect

permeating through the different assessment years has been

found as a fact one way or the other and parties have al-

lowed that position to be sustained by not challenging the

order, it would not be at all appropriate to allow the

position to be changed in a subsequent year. [320H, 321 A-B]

1.02. No formal document is necessary to create a

trust. The conditions which have to be satisfied to entitled

one for exemption are: (a) the property from which the

income is derived should be held under trust or legal obli-

gation, (b) the property should be so held for charitable or

religious purposes which enure for the benefit of the pub-

lic. [317 E-G]

1.03. The property was given to the Satguru for the

common purpose of furthering the objects of the Sat Guru.

The property was therefore subject to a legal liability of

being used for the religious or charitable purpose of the

Satsang. [319 E, F]

1.04. The Tribunal was justified in holding that the

income derived by the Radhasoami Satsang was entitled to

exemption under Sections 11 and 12 of the Income Tax Act,

1961. [321 D]

Patel Chhotahhai and Ors. v.Janan Chandra Bask and Ors., AIR

314

1935 Privy Council 97; Acharya Jagdish-Waranand Avadhuta &

Ors. v. Commissioner of Police, Calcutta & Ant., [1983] 4

Sec 522, The Secretary of State for India in Council v.

Radha Swami Sat Sang, 13 ITR 520; All India Spinners'Associ-

ation v. Commissioner of Income Tax, Bombay, 12 ITR 482;

TM.M. Sankaralinga Nadar & Bros. & Ors. v. Commissioner of

Income-tax, Madras, 4 ITC 226; Hoystead & Ors. v. Commis-

sioner of Taxation, 1926 A.C. 155 and Parashuram Pottery

Works Co. Ltd. v. Income-tax Officer, Circle 1, Ward A

Rajkot, 106 ITR 1 at p.10, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10574-

10583 of 1983.

From the Judgment and Order dated 7.7.1980 of the Alla-

habad High Court in I.T.R. No. 948 of 1975.

V.Gourishanker, B.V. Desai, S.K. Aggarwal and Ms. Vinita

Gharpade for the Appellants.

S.C. Manchanda, B.B.Ahuja, Manoj Arora and Ms. A. Subha-

shini (N.P.) for the Respondent.

The Judgment of the Court was delivered by

RANGANATH MISRA, CJ. Radhasoami Satsang, an assessee

under the Income Tax Act in these appeals by special leave

assails the decision of the Allahabad High Court on refer-

ence under Section 256 of the Income tax Act. 1961. The

following question had been referred by the Tribunal to the

High Court:

"Whether on the facts and in the circumstances

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of the case Tribunal is justified in holding

that the income derived by the Radha Swami

Satsang, a religious institution, is entitled

to exemption under sections 11 and 12 of the

income Tax Act, 1961'."'

The ambit and purport of the question would not be

properly appreciated unless the background is indicated. The

assessee is the Radhasoami Satsang, Agra. This sect was

founded by Swami Shiv Dayal Singh in 1861. The tenets of

this faith, inter alia, accept the position that God is

represented on earth by a human being who is called the Sant

Satguru. The first of such gurus .was the thunder himself

and he was popularly known as 'Soamiji Madharaj' The second

Satguru (1889-1898) was Rai

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Bahadur Salig Ram and he was known as 'Bazoor Maharaj'. The

third sant Satguru was Pandit Brahma Shanker Misra (1898-

1907) and was widely known as 'Maharaj Sahib'. These three

Satgurus have been regarded as the real exponents of the

creed. Out of donations and offerings made to the Satgurus,

large funds were built up and properties were acquired over

the years. During the time of the third Satguru, in 1902,

the members of the creed at a largely attended convention

established a Central Council and the right, title and

interest of all the properties - movable and

immovable---which had by then been collected were vested in

the Council under the directions of Maharaj Sahib. In June,

1904 the constitution and bye-laws of the Central Council of

Radhasoami Satsang were drawn up in a formal way and a body

by the name 'Radhasoami Satsang Trust' was set up. A trust

deed was executed by some members of the Central Council in

October, 1904.. A set of bye-laws were also framed.

On the death of third Satguru which took place in Octo-

ber 1907, the oread split into two and came to be known as

Swami Bagh Sect and the Dayal Bagh Satsangis respectively.

Disputes arose as to the management of the shrines and the

administration of the properties which had vested in the

trustees under the Trust Deed of 1904. The Dayal Bagh Sat-

sangis claimed that all the properties were held in a trust

for a public purpose of a charitable and religious nature

and prayed for a decree by going to the Civil Court The

litigation had started in the form of an application under

section 3 of the Charitable and Religious Trusts Act, 1920

but was converted into a regular suit and eventually ended

with the decision of the Privy Council in the case of Patel

Chhotahhai and Ors. v. Jnan Chandra Basic and Ors., AIR 1935

Privy Council 97. The Judicial committee reversed the deci-

sion of the High Court and held that even if the trust came

into existence it was difficult to hold that it was of a

public, charitable or religious character as contemplated by

the Charitable and Religious Trust Act, 1920.

The question of assessing the income for the first time

arose in the assessment year 1937-38. The Income Tax Officer

relied upon the observations of the Privy Council and com-

pleted assessments for two years being 1937-38 and 1938-39

treating the then Satguru, Sri Madho Prasad Sinha as the

assessee. He was a retired Assistant Accounts Officer and

was earning a pension. His pension as also the income from

the institution were tagged together for assessment. The

Appellate Assistant Commissioner confirmed the assessments.

Assessee then filed applications under section 66(2) of the

Income-tax Act of 1922 for reference. The Commissioner took

the view that the offerings though made to the Satgurus were

not used for their personal benefit and held that even

though no formal

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316

trust had been created by the donors in respect of offer-

ings, the guru impressed the offerings with trust character

at the time of receipt, and treated the offerings as held in

trust. He was, therefore, of the view that such offerings

were exempt under section 4(3)(1) of the Income-tax Act,

1922 and directed that the offerings be deleted from the

assessment for the two years. He accordingly held that no

reference under Section 66(2) was necessary to be made. an

application under section 35 of the Act was later filed for

ratification by pointing out that offerings received by the

Satgurus consisted of interest income, property income, and

income derived from sale of books and photographs etc. and

the same should also be excluded. On 8.12.1945 the Commis-

sioner directed deletion thereof.

For the year 1939-40, the income-tax Officer did not

grant exemption under section 4(3)(1) of the Act but the

appeal challenging the assessment was accepted by the Appel-

late Assistant Commissioner in September, 1947 upholding the

assessee's claim of exemption.

Nothing substantial happened until the assessment year

1963-64. During this period refund applications of the

Satsang were accepted by the department on the basis that

the income was exempt and as tax had been deducted at source

the same was refundable. For the first time claim for refund

in the years 1964-65, 1965-66 and 1966-67 was not allowed

and the assessee was treated as an association of persons

and taxed; subsequentiy for the assessment years 1966-67,

1967-68 and 1968-69 and 196970 assessments were also com-

pleted. The Income-tax Officer did not accept the assessee's

claim of exemption and proceeded to hold that the donations

and contributions had been received voluntarily and had been

limited to religious use but there was no obligation to do

so. The assessee appealed but the appellate authority upheld

the assessments for the years referred to above. The asses-

see then appealed to the Tribunal. The Tribunal examined the

matter from various aspects and held:

"So far as the Radhasoami sect is concerned

its properties were held only for the further-

ance of the object of the Satsang and this

object was to propagate the religion known by

the name of Radhasaomi. This was a purely

religious purpose as held by the Privy Council

and therefore the objects of the assessee are

clearly religious objects."

While the Tribunal did not accept that the words 'held

under trust' merely meant a consideration of the factual

position and that if the income had been applied for reli-

gious purpose it was unnecessary to find out whether in law

a trust had been created or not. But the Tribunal was of

317

the opinion that the words legal obligation were much wider

and the activities of the Satsang could be brought within

the purview of that expression. It finally held that the

assessee was entitled to the exemption claimed under s. 11.

The High Court did not accept the conclusions of the

Tribunal by heavily relying upon the revocability of the

trust as clearly specified in the document and accepting the

stand of the Revenue that exemption under s. 11 was subject

to the provisions of ss.60 to 63 of the Act and on the

finding that the trust was revocable it upheld liability,

Section 11(1) of the Act, as far as relevant, provides:

"Subject to the provisions of sections 60-63,

the following income shall not be included in

the total income of the previous year of the

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person in receipt of the income:

(a) 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 India; and

Co) where any such income is accumulated

or set apart for application to such purposes

in India, to the extent to which the income so

accumulated or set apart is not in excess of

25% of the income from such property;.."

The conditions which have to be satisfied to

entitle one for exemption, therefore, are:

(a) the property from which the income is

derived should be held under trust or other

legal obligation.

(b) the property should be so held for

charitable or religious purposes which enure

for the benefit of the public.

It is well-settled that no formal document is necessary to

create a

trust.

The reference itself accepts the position that the

assessee is a religious institution. There has been some

amount of debate in the forums below as to whether Radha-

soami Satsang is a religion. This Court in Acharya Jagdish-

waranand ,Avadhuta & Ors. v. Commissioner of Police, Calcut-

ta & Anr., [1983] 4 SCC 522 while examining the claim of

Anand Marg is to be treated as a separate religion indicat-

ed:

"The words 'religious denomination' in Article

25 of the Constitution must take their colour

from the word 'religions' and

318

this be so the expression religious denomina-

tion must also satisfy three conditions:

(i) it must be a collection of individu-

als who have a system of beliefs of doctrines

which they regard as conductive to their

spiritual well-being, that is, a common faith,

(ii) common organisation; and

(iii) designation by a distinctive name."

In that case Anand Marg was held to be a 'religious

denomination' within the Hindu religion. It is not necessary

for us to decide whether Radhasoami Satsang is a denomina-

tion of the Hindu religion or not as it is sufficient for

our purposes that the institution has been held to be reli-

gious and that aspect is no more in dispute in view of the

frame of the question.

The question of assessment to income-tax arose only

following the decision of the Privy Council in the dispute

between the two factions. The Judicial Committee found that

the properties which were the subjectmatter of the suit were

acquired with the moneys presented to the Sant Satguru in

the form of bhents or other contributions by the followers

of the Radhasoami faith. The Judicial Committee found that

it was almost inconceivable that the followers of the faith

when making their gifts to the Sant Satguru intended to

create a trust within the meaning of the Act 14 of 1920 of

which they, the donors and the worshippets, should be the

beneficiaries. The Privy Council further also found that it

could not be said that the donors of the gifts were the

authors of the alleged public trust. The question was exam-

ined keeping the provisions of the 1920 Act in view. The

requirements of s. 11 of the Income Tax Act are considerably

different from what the Judicial Committee of the Privy

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Council was required to consider.

We have already pointed out that after 1907 the denomi-

nation got divided. The claim of Dayalbagh group for exemp-

tion under the IncomeTax Act came for consideration before

the Allahabad High Court in the case of The Secretary of

State for India in Council v. Radha Swami ,Sat Sang, 13 ITR

520. There it was found that the offerings made by the

Dayalbagh Satsangis to Sahebji Maharaj and the property

which had grown out of them and which admittedly stood in

the name of the Sabha and the property which at all material

times had stood in the name of the Sabha vested in the Sabha

for the benefit of the Satsangis and Sahebji Maharaj had no

beneficial or personal interest in that. What has been found

for the Dayalbagh Satsangis on this score is fully applica-

ble so far as the assessee is concerned, There is no dispute

that the properties of the assessee are

319

also recorded in the name of the Sabha (Central Council) and

there is no personal interest claimed by the Sant Satguru in

such property. Ever the years the Satguru has never claimed

any title over, or beneficial interest in, the properties

and they have always been utilized for the purpose of the

religious community. The test applied by the Privy council

in the case of A 11 India Spinners' Association v. Commis-

sioner of Income - Tax. Bombay 12 ITR 482 is indeed applica-

ble to the facts of the present case and the result would

then be in favour of the assessee. We would like to point

out that even if the trust was revocable, the property was

not to go back to the Satguru on revocation. The constitu-

tion and the bye-laws on record indicate in clause 1(b):

"1. The constitutional powers of the Central

Council Radhasoami

Satsang ..................... are as below:

(b) to collect, preserve and administer the

properties movable and immovable that have

been or may hereafter be dedicated to Radha-

soami Dayal or that may be acquired for or

presented to the Radhasoami Satsang for the

furtherance of the objects of the Satsang."

This envisages that where the property was given to the Sant

Satguru, it was intended for the common purpose of further-

ing the objects of the Sant Satguru and the Central Council

had the authority to manage the property. Clause 9 of the

document stipulated that the properties would vest in the

trust and clause 25 provided that the trust shall be revoca-

ble at the discretion of the Council and the trustees shall

hold office at its pleasure. Upon revocation the property

was not to go back to the Satguru and at the most. in place

of the trust, the Central Council would exercise authority.

It is on record that there has been no Satguru long before

the period of assessment under consideration. As a fact,

therefore, the Tribunal was justified in holding that the

property was subject to a legal liability of being used for

the religious or charitable purpose of the Satsang. This

aspect had not been properly highlighted before the High

Court.

One of the contentions which the learned senior counsel

for the assessee-appellant raised at the hearing was that in

the absence of any change in the circumstances, the Revenue

should have felt bound by the previous decisions and no

attempt should have been made to reopen the question. He

relied upon some authorities in support of his stand. A full

Bench of the Madras High Court considered this question in

T.M.M Sankaralinga Nadar & Bros. & Ors, v. Commissioner of

Income-Tax, Madras, 4 ITC 226. After dealing with the con-

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cession the Full Bench expressed the following opinion:

320

"The principle to be deducted from these two

cases is that where the question relating to

assessment does not vary with the income every

year but depends on the nature of the property

or any other question on which the rights of

the parties to be taxed are based, e.g.,

whether a certain property is trust property

or not, it has nothing to do with the fluctua-

tions in the income; such questions if decided

by a Court on a reference made to it would be

res judicata in that the same question cannot

be subsequentiy agitated."

One of the decisions referred to by the Full Bench was

the case of Hoystead &Ors. v. Commissioner of Taxation 1926

AC 155. Speaking for the Judicial Committee Lord Shaw stat-

ed:

"Parties are not permitted to begin fresh

litigations because of new views they may

entertain of the law of the case, or new

versions which they present as to what should

be proper apprehension by the Court of the

legal result either of the construction of the

document or the weight of certain circum-

stances. If this were permitted litigation

would have no end, except when legal ingenuity

is exhausted. It is a principal of law that

this cannot be permitted, and there is abun-

dant authority reiterating that principle.

Thirdly, the same principle - namely, that of

setting to rest rights of litigants, applies

to the case where a point, fundamental to the

decision, taken or assumed by the plaintiff

and traversable by the defendant, has not been

traversed. In that case also a defendant is

bound by the judgment, although it may be true

enough that subsequent light or ingenuity

might suggest some traverse which had not been

taken."

These observation were made in a case where taxation was in

issue.

This Court in Parashuram Pottery Works Co. Ltd. v.

Income-Tax Officer, Circle 1, Ward A, Rajkot, 106 ITR 1 at

p. 10 stated:

"At the same time, we have to bear in mind

that the policy of law is that there must be a

point of finality in all legal proceedings,

that stale issues should not be reactivated

beyond a particular stage and that lapse of

time must induce repose in and set at rest

judicial and quasi-judicial controversite as

it must in other spheres of human activity."

Assessments are certainly quasi-judicial and

these observations equally apply.

321

We are aware of the fact that strictly speaking resjudi-

cata does not apply to income-tax proceedings. Again, each

assessment year being a unit, what is decided in one year

may not apply in the following year but where a fundamental

aspect permeating through the different assessment years has

been found as a fact one way or the other and parties have

allowed that position to be sustained by not challenging the

order, it would not be at all appropriate to allow the

position to be changed in a subsequent year.

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On these reasonings in the absence of any material

change justifying the Revenue to take a different view of

the matter- and if there was not change it was in support of

the assessee- we do not think the question should have been

reopened and contrary to what had been decided by the Com-

missioner of Income-Tax in the earlier proceedings, a dif-

ferent and contradictory stand should have been taken. We

are, therefore, of the view that these appeals should be

allowed and the question should be answered in the affirma-

tive, namely, that the Tribunal was justified in holding

that the income derived by the Radhasoami Satsang was enti-

tled to exemption under ss. 11 and 12 of the Income Tax Act

of 1961.

Counsel for the Revenue had told us that the facts of

this case being very special nothinng should be said in a

manner which would have general application. We are inclined

to accept this submission and would like to state in clear

terms that the decision is confined to the facts of the case

and may not be treated as an authority on aspects which have

been decided for general application.

We direct the parties to bear their respective costs.

V.P.R. Appeals

allowed.

322