43G

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\ " 1'1AHANT 'SHIU SRINIV ASA RAl\IANUJ nAs

SURAJr<ARAYAN DASS &.ANR.

May 6, 1966

[A. K; SARKAR, C.J., M. HIDAYATULLAH, R. S. BACHAWAT,

. J.M. SHELAT AND RAGHUBAR D,1.YAL, JJ.) ·

Orissa Hindu Religious Endowments Act, 1939 (Orjssa 4 of ~939), -1\fath Characteristics of-Distinction between public and pnvate

trust-Math if governed by Act-Onus of proof of showing t'iat Math is outside Act-Gazetteer-Statements in-If evidence; c

The Commissioner of Hindu Religious Endowments. Orissa, demanded contribution under s. 49 of the Hindu Religinus Endowments Act and took steps to enforce . certain other provisions of the Act against the appellants and certain properties; These properties, the appellant~ claimed, were not math as defined in the _Act and the public had no free access to its J>i'emises and had no right of entry or worship of the deity installed therein: The Commissioner held that the properties were math as defined in the Act. and that the proi; er- D ties constituted a 'religious endowment' to wh1ch the Act applied.

Thereafter, the appellants instituted a suit and prayed for setting .

aside of the decision of the Commissioner and for a declaration that the Act did not apply to the properties in suit. The trial Court dismissed the suit, which on appeal was confirmed by the High Court.

In appeal by special. leave. HELD: .The appeal must be dismissed.

(1) An institution comes within the definition of 'Math' if it satisfies three 'conditions (i) that the institution re for the promotion of the Hindu religion; (iH that it be presided over by a person whose duty is to erigage himself in spiritual service or who exercises or claims to exercise spiritual headship over a body of disciples; and (iii) that the office of such person .devolves in accordance with the directions of the founder of the institution or is regulated by usage. f 441El ' There was ample evidence on the recordto show that the property was presided over by the Mahant, that the Mahant exercised spiritual headship over the disciples, and that the successfon to the office of the Mahant was regulated by the usage of the institution. There could be no question that such an institution must have been for the promotion of the Hindu religion. [ 441Fl Religious endowment includes the premises of the Math. If the premises of the property had been used both for secular purposes and for religious purposes, it according to the explanation to sub-s. (12) of s. 6, shall be deemed to be a religious endowment and its adminisration shall be governed by the provisions of the Act. This makes 1t clear that the premises of the math is not only deemed to be a religious endowment, but is deemed to be a Hindu Public religious endowmet to which the Act applies, as the provisions of the Act govern 1ts administration. It follows that an institution which comes within the efu; ition of math un9'.er the Act, ipso facto, comes within the expression Hmdu public religious endowment' and therefore become subject to the provisions of the Act. [441H-442Bl

MARANT P, AMANUJ v. STJP.AJNARAY~.N (Dayal, J.) 437

A The definition of 'temple' requires that the place would be a temple if it be used as a place of public religious worship. There is no requirement that an institution to be a math must be a public institution for the promotion of the Hindu religion. The use of the word

; public' was not necessary in connection with an institution for such promotion of the Hindu religion as. any institution for such Promotion of the Hindu religion must be of a public nature. the object being to B promote Hindu religion, there would be no point in shutting the benefit 01f the institution to anyone among the Hindus. [442C-D]

The distinction between a public trust and a private trust is, broadly speaking, that in a public trust the beneficiaries of the trust are the people in general or some section of the people, while in the case of a private trust the beneficiaries are an ascertained body of persons. The beneficiaries of a math are the members of the fraternity to which the math belongs and the persons of the faith to which the spiritual head of the math belongs, and constitute, therefore, at least a section of the public. Maths, in general, consequently, are public maths. [ 442E-Fl

[QUAERE: Whether there can be a private math or not?]

(2) The onus was initially on the appellant-plaintiff to show that the order of the Commissioner was wrong and this he could only show by estatlishing pri.ma facie that the Math was not a math as defined in the Act and that the various properties were not endowed properties. [ 443Hl

(3) The gazetteer could re consulted on matters of public history. r447Bl ( 4) The documentary evidence on the record did not support the case of the appellant, but showed that the properties were those of the math.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 205 of 1964.

Appeal by special leave from the judgment and decree dated November 30, 1961 of the Orissa High Court in First Appeal No. 63 of 1957.

A. K. Sen and P. K. Chatterjee, for the appellant.

Niren de, Addi. Solicitor-General, Dipak Datta Chaudhuri F and R. N. Sachthey, for respondent No. 2.

The Judgment of the Court was delivered by Raghuhar Dayal, J. This appeal, by special leave, is against the judgment and decree of the Orissa High Court, confirming the judgment and decree of the Additional Subordinate Judge, Puri, dismissing the suit instituted by Mahan! Gadadhar Ramanuj Das, represented after his death by Mahant Srinivas Ramanuj Das, for the setting aside of the decision of the Commissioner of Endowments dated July 20, 1946, under s. 64(]) of the Orissa Hindu Religious Endowments Act, 1939 (Act 4 of 1939), hereinafter called the Act, and for a declaration that the Act did not apply to the properties described in Schedules Ka, Kha and Ga of the plaint.

The allegations in the plaint are as follows. The premises on which the residential quarters of the plaintiff existed was said to

SUPP.EYE OOURT REPORTS fiii66)

SUPP.

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be popularly known as (i) Srinivas Kote; (ii) Rajagopal Math; and A

(iii) Emar Math, according to the names of the different ancestors of the plaintiff, Srinivasachari, Rajagopalachari and Embarachari.

It was alleged that these premises, though known as Emar Math, was not a 'math' as defined in the Act. The public had no free access to its premises and had no right of entry or worship of the deity installed therein. Embaracrari and his ancestors were alleged to be grahasts. His successors to the Emar Math were celibate. Srinivasachari was the grand-father of Embarachari. It is alleged that he acquired a portion of the present site of the plaintiff's residential quarters and built his residence there and installed therein his family deity Sri Raghunathji for his own spiritual benefit and the spiritual benefit of his family members and that Embarachari acquired a large plot of land adjacent to Srinivas Math as an absolute gift and constructed buildings thereon. The buildings therefore became popularly known as Emar Math, although Embarachari was a married man and was living there with his wife and children with the private deity Sri Raghunathji.

The plaintiff alleged that the properties described in Schedule

Ka of the plaint were his personal properties, those in Schedule D Ka-I as acquired through absolute gifts to the plaintiff or his ancestors and those in Ka-2 as gifted to or purchased by the plaintiff or his predecessors and that they were wrongly recorded in the settlement papers in the name of the plaintiff as marfatdar of Lord Jagannath. The properties in Schedule Kha are alleged to be Amrit Manohi properties of Lord Jagannath held by the plaintiff as marfatdar and to have been acquired either by purchase or 'kraya- E dan' or by way of gift subject to the charge of some offering to Lord Jagannath. The properties in Schedule Ga were alleged to be owned and possessed by the plaintiff as marfatdar of various private deities. It was alleged that none of the properties in these schedules was however dedicated to the public and that the public had no interest in or right to any of the properties. The properties therefore did not constitute 'public religious endowments' within F the meaning of the Act which, accordingly, could not apply to them.

The Commissioner of Hindu Religious Endowments, Orissa, hereinafter called the Commissioner, demanded contribution under s. 49 of the Act and took steps to enforce certain other provisions of the Act against the plaintiff and the properties in suit. This led G the plaintiff to formally ask for a decision under s. 64(1) of the Act. The Commissioner decided against him on July 20, 1946 and held that the Emar Math was a 'math' as defined in the Act and that the properties constituted a 'religious endo\\Tnent' to which the Act applied. Thereafter the plaintiff instituted this suit and prayed for the setting aside of the decision of the Commissioner H and for a declaration that the Act did not apply to the properties in suit.

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MAl!AN'r RAMANUJ v. SURAJNARAYAN (Dayal, J.) 439

The Commissioner, defendant No. 2, contested the suit asserting that the properties in suit were public debottar properties and were public endowments to which the Act applied. It was further contended that the premises of Emar Math was a 'math' as defined in the Act and the public had a right to go there and had been actually going there from time immemorial.

The trial Court accepted the contentions of the defendant Commissioner and dismissed the suit. The High Court, on appeal by the plaintiff, agreed with the findings of the trial Court and accordingly dismissed the appeal.

Two main contentions have been raised before us. One is that the Emar Math in suit is not a public math and that therefore the Act does not apply to it. The other is that the properties in Schedule Ka were the personal property of the appellant-plaintiff and that the properties in schedules Kha and Ga were private debottar properties of the plaintiff. Before dealing with the contentions, we may refer to the object and the relevant provisions of the Act.

The Act was enacted for the better administration and governance of certain Hindu Religious Endowments. Section 2, sub-s. (a), states that the Act applies, save as !hereinafter provided, to all Hindu public religious endowments which, according to the Explanation to that sub-section, do not include Jain religious endowments. 'Math' is defined in subs. (7) of s. 6 as:

"'math' means an institution for the promotion of the Hindu religion presided over by a person whose duty is to engage himself in spiritual service or who exercises or claims to exercise spiritual headships over a body of disciples and succession to whose office devolves in accordance with the directions of the founder of the institution or is regulated by usage; and includes places of religious worship other than a temple and also places of instruction or places for the maintenance of vidyarthies or places for rendering charitable or religious services in general which are or may be appurtenant to such institution."

Sub-s. (10) of s. 6 defines the expression 'person having interest' to mean, in the case of a math, a disciple of the math or a person of the religious persuasion to which the math belongs. Sub-s. (12) of s. 6 defines 'religious endowment' or 'endowment' as meaning:

"all property belonging to, or given or endowed for the support of maths or temples or for the performance of any service or charity connected therewith whether or not such maths or temples be in ruins or the worship in

ncction with them is discontinued either temporarily "cir permanently and includes the premises of maths or

temples."

440 Slll'REl4E COURT BllPORTS (l!l6GJ Pl_TPI'.

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The explanation thereto reads:

"Where an endowment has been made or property given for the support of an institution which is partly of a religious and partly of a secular character or for the performance of any service or charity connected therewith, or where an endowment made or property given is appropriated partly to religious and partly to secular uses, such endowment or property or the income therefrom shall be deemed to be a religious endowment and its administration shall be governed by the provisions ot this Act." According to sub-s (JJ) of s. 6, 'temple' is defined as follows:

"'temple' means a place, by whatever designation known, used as a place of public religious worship and dedicated to, or for the benefit of, or used as of right by, the Hindu community, or any section thereof, as a place of religious worship and also includes any cultural institution or mandab or library connected with such a place of public religious worship." General superintendence of all religious endowments vested in the Commissioner under s. 11 of the Act. Clause (b) of sub-s. (I) of s. 12 requires the Commissioner to maintain a register for every math or temple and all title deeds and other documents rebting thereto. Sub-s. (2) provides that the register shall be prepared. verified and signed by the trustee of the math or temple or by his authorised agent and submitted by him to the Commissioner within such period after the rnmmencement of the Act a>; the Commissioner may fix. Sub-s. rn authorises the Commissioner to make such enquiry as he mav consider necessary and to direct that the register be approved with such alterations. omissions or additions as he thinks fit to order. Section 13 requires the annual verification of the entries in this register.

Section 46 reads:

"The trustee of a math or temple may. out of the funds of the endowments in his charge, after satisfying adequately the purposes of the endowments. incur expenditure on arrangements for securing the health. safety or convenience of disciples, pilgrims or worshippers resorting to such math or temple: Provided that the Commissioner may. for reasons to be setforth in writing. restrict and place unc!cr such control as he may think fit the exercise by the trustee of his discretion under this section." Section 49 provides that every math or temple and every specific endowment attached to a math or tmple shall pay annual_ly._contributions at specified rates for meetmg the exoenses of the Commissioner when the annual income exceeds a specified amount.

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MAHAJ'l:T RAMANtlS v. StJRASNARAYAN (Dayal, J.) 441

tinder s. 51 (1), the amount of contributions payable by a math under s. 49 was to be assessed on and notified to the trustee of the math, temple or specified endowment concerned in the prescribed manner. The trustee can object to the assessment and has to pay such amount as be finally determined by the Commissioner on considering the objection.

Section 64 reads:

"(!) If any dispute arises as to whether an institution is a math or temple as defined in this Act or whether a temple is an excepted temple, such dispute shall be decided by the Commissioner.

(2) Any person affected by a decision under subsection (]) may, within one year, institute a suit in the Court to modify or set aside such decisions; but subject to the result of such suit, the order of the Commissioner shall be final." Before we deal with the contention about the Emar Math being not a public math, we may first consider what the Commissioner had to do under s. 64(1) of the Act. The Commissioner had to decide under that sub-section whether the Emar Math was a math as defined in the Act. He held that it was and we have to see whether he was right in so doing.

An institution comes within such a definition if it satisfies three conditions: (i) that the institution be for the promotion of the Hindu religion; (ii) that it be presided over by a person whose duty is to engage himself in spiritual service or who exercises or claims to exercise spiritual headship over a body of disciples; an'.!

(iii) that the oflice of such person devolves in accordance with the directions of the founder of the institution or is regulated by usage.

There is ample evidence on the record to show that the Emar Math was presided over by the Mahan!, that the Mahant exercised spiritual headship over the disciples, and that the succession to the oflice of the Mahant was regulated by the usage of the institution. There could be no question that such an institution must have been for the promotion of the Hindu religion. It was for such an object that one would have a body of disciples. It is in evidence that the Mahanl used to preach and had a large number of disciples who were attracted by the high reputation the Mahant enjoyed. It is said that Embarachari was regarded with great respect in his times and that it was on account of such respect that the gift of the land evidenced by the Deed, Exhibit 110, executed sometime is 1767, was made in his favour.

Jt is not disputed for the appellant that the institution is :i H math. What is disputed is that it is not a public math as required by the Act. The premises of the Emar Math constituted a religious endowment, which includes the premises of maths or temples.

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442 - .\ _ (1966] SUPP. s.C.R.

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. , Further, if the premises of the Emar Math had been used both for secular purposes arid for religious purposes, it, according to the explanation to sub-s. (12) of s. 6, shall be deemed to be a religious endowment and its administration shall be governed by the provisions of the Act. This makes it clear that the premises of the Math is not only deemed to be a religious endowment, but is deemed to be -a Hindu public religious endowment to which the Act applies, as the provisions of the Act govern its administration. It follows that an institution which comes within the definition of 'math' under the Act, ipso facto comes within the expression 'Hindu public religious endowment' and therefore becomes subject to the provisions of the Act. In this connection, reference may be made to the definition of 'temple'. While the definition of 'temple' requires that the place would be a temple if it be used as a place cif public religious worship, there is no requirement that an institution to be a math must be a public institution for the promotion of the Hindu religion. The - use of the word 'public' was not necessary in connection with an institution for the promotion of the Hindu religion as any institution for such promotion of the Hindu religion must be of a public nature; the object being to promote Hindu religion, there would be no point in shutting the benefit of the institution to anyone among the Hindus. -

The distinction between a public trust and a private trust is, broadly speaking, that in a public trust the beneficiaries of the trust are the people in general or so:ne section of the people, while in the case of a private trust the beneficiaries are an ascertained body of persons. The beneficiaries of a math are the members of the fraternity to which the math belongs and the persons of the faith to which the spiritual head of the math belongs, and constitute therefore at least a section of the public. Maths, in general, consequently, are public maths. We say nothing as to whether there can be a private math or not. Mukherjea states at p. 390, in !1is 'Law of Endowment', !st Edition: 1.

"By private math should be meant those institutions

- ·· where the head or superior holds the property not on behalf of an indeterminate class of persons or a section of the public but for a determinate body of individuals, viz.; the family or descendants of the grantor." In the-present case, there is no evidence as to who actually founded the Math by granting the property to the spiritual preceptor. The earliest. evidence on the record is of year I 767 when a piece of land was gifted to Emar Gosain on which a portion of the present Math stands. However, there is no evidence, wl1ocver the founder be, that any particular family is the only body of persons who is interested in the Math. The spiritual family of the preceptor consisting of his disciples and the disciples in succession, cannot be deemed to be such a private family for whose benefit

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MAHANT RAMANUJ v. SURAJNARAYAN (Dayal, J.) 443

the Math is founded and on that account the Math be called a private Math. The body of disciples and the disciples' disciples etc., is a very unascertainable body. The Emar Math is therefore not such a private math.

Much has been said on either side with respect to the onus in connection with the Math being public or not. Onus loses its importance when the parties have led evidence sufficient to determine the matter in dispute. The High Court agreed with the trial Court that the onus was on the plaintiff-appellant to establish that the institution was the private property of the Mahan!. It is said in para 10 of its judgment that the initial burden of showing that the Commissioner's decision was wrong was on the plaintiff and that apart from the appellant's position as plaintiff he had a heavy burden to establish affirmatively that the institution was the private property of the Mahant.

It is contended for the appellant that the initial onus lay on the defendant-respondent to establish that the Math was a public math. Reliance is placed on several cases of which reference may be made to Parma Nand v. Nihal Chand(') in which the Privy Council approved of the view of the High Court that it was for the defendants to prove that the plaintiff who was admittedly in possession of the property held it on a trust created for a public purpose of a charitable and religious nature. The application was made to the District Judge by some representatives of the Hindu public alleging that the Baghichi Thakaran was a public endowment for religious and charitable purposes, and calling upon Mahan! Narain Das to furnish details of the nature and purposes of the trust. Narain Das then instituted the suit which ultimately went to the Privy Council.

Section 5(3), the Charitable and Religious Trusts Act, 1920 (Act 14 c; f 1920) provides for the stay of proceedings before the Judge under s. 3 of that Act, in order that the person denying the public nature of the trust may institute a suit for a declaration that the property was not trust property. There was no decision of any binding nature by the Court or by any authority which was to be avoided by the plaintiff instituting a suit for a declaration that the property was not trust property. In the present case the suit was instituted in pursuance of s. 64(2) of the Act which provides that any person affected by a decision under its sub-s. (I) may, within1 one year, institute a suit in the Court to modify or set aside such decision and that, subject to the result of such a suit, the order of the Commissioner shall be final. The plaintiff-appellant instituted this suit for the setting aside of the order of the Commissioner under sub-s. (I) of s. 64 holding the institution to be a 'math' as defined in the Act and the property belonging to it endowed properties. This order of the Commissioner is final, subject to the result of the suit. The plaintiff has to get over it to avoid that decision.

The onus is therefore initially; on the plaintiff to show that the

(') L, R, 65 I.A. 252.

SUPREME COURT UPORTS [1966) SUPP. 8.C.R.

orJcr or the Commissioner is wrong and this he can only show by establishing prima facie that the Math is not a math as defined in the Act and that the various properties were not endowed properties.

Learned counsel for the parties have argued on the basis that \he Act applies to public matbs. It is urged for the appellant that it is not proved to be a public math, while the respondent contends lo the contrary. Undoubtedly, the Math had been h existence for over two centuries. Oral evidence about the founding of the Math

:ould not be possible after such a long period. The mahant of the Math has not come in the witness box. The Courts below have held the Math to be a public math on the basis of several considerations. These arc that the Mahants had been celibate and therefore not likely to have personal ownership in the property including even the dakshinas or cash offered to them, by disciples or other devotees. Religious books. viz.. the Bhagavad Gita and the Ramaynn. are recited daily in the temple of Ragbunathji. There was also the image of Ramanuj. the founder of the cult. This image is carried in procession for five days around the compound of the main temple of Lord Jagannath at Puri. This could be to provide darshan to the devotees of the Vaishnav faith. Some ascetics called babajis reside at the math and are fed by the math authorities. The buildings of the math are many. much beyond the requirements of the Mahant and the few resident disciples. The Mahants of this Math have the privilege of rendering service to Lord Jagannath bo1h in the temple and in the Gundicha Mandir. They also manage the Amrit Manchi properlies the proceeds from which are utilised for olTering bhog to Lord Jagannath and the Maha Prasad therefrom is distributed to the poor pilgrims and the Vaishnav visitors.

Apart from these considerations. certain documents relied upon by the High Court tend to favour the finding that Emar Math is a public math and that the various properties, though ostensibly acquired by the Mahants, were really acquired f<YT the Math. The first document of importance in this respect is Exhibit 110 of I 767.

It is a deed of gift by a private person in favour of Sadhu Emar Gosain. the Adhikari of Ramanuj Kote Math. P.W. 2 states that Ramanuj Kote belongs to Emar Math area. This description supports the conclusion that the Math. though under a different name. had been in existence from befdre the time of Emar Gosain. The plaint alleges that the premises in suit had been known by different names. The gift deed states that the donee will enjoy the property gifted in perretnity. The idea of perpetuity is further emphasised when ii is said in the gift deed:

"Your Chelas. Sishyas and Anusishyas shall all enjoy this property for ever in perpetuity until the sun and moon last." This stipulation shows that it was not a gift personally to Emar, that the gift was for the benefit of chebs. sishyas and anusishyas and that it was in favour of persons indeterminate in number. The

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MAllANT RAMANUJ V. RURAJNAP.AYAN (Dayai, J.J 145

fact that the chelas are distinguished from sishyas and anusisbyas shows that the chela is the nominee of the Guru for the purpose of succession and that though the chela would succeed to the Gaddi. he would hold the properties not for personal enjoyment but for the benefit of sishyas and their sishyas-indicating that the property was trust property. Further, the land donated by this document admittedly is a portion of the site on which the Math stands. The gift of such land could be for no other object but for the purpose of the construction of the Math and therefore a gift to the Math, though it would normally be in the name of the Mahant, the head of the Math.

Another document of importance in this connection is the Will, Exhibit 140. executed by Mahan! Mohan Dass in 1857 in favour of his disciple who was the subsequent Mahan! by the name Mahan! Raghunandan Das. This Will, besides speaking of the careful training given to Raghunandan Das making him fit to succeed to the gaddi, states :

"After me the said Raghunandan as my successor in the Mahantai Gaddi shall become the Mahan!, Malik and Gadanashin and shall continue to exercise ownership and possession in respect of all the properties as he is doing now and shall enjoy as the rightful owner and Malik of all the movable properties of and connected with this Math both within this part of the country and outside (Desh Bideshare) and shall continue to manage the rendering and supplying of the fixed Sheba Puja offerings and Bhog etc. of Shri Jagannath Mohaprabhu in accordance with the traditional customs and shall give food and shelter, as he is doing now. to Bhaishnab guests and other persons arriving in the Ma.th (Abhyagata) etc., and committing no ]aches in this and remaining in observance of his own religion, shall manage all affairs".

F The last expression with respect to giving of food and shelter to Vaishnay guests and other persons arriving in the Math etc. indicates that visitors. belonging lo the Ramanuj Sampraday, used to visit the Math when on a pilgrimage to the Lord Jagannath Temple and the Mathadhish of Emar Math used to give shelter and food to them and the will enjoined the nominee to continue that practice. Such a practice shows that the beneficiaries of the Math properties were G again indeterminate in number. The gift being to the Math, though ostensibly in the name of the Mahant, the Mahant held the properties as a trustee for the indeterminate class of beneficiaries, viz., sishyas, nnusi, hyas and visitors. This stamps the Math with the public character. It is significant to note that there is not a word in this document to the effect that Mahan! Mohan Das possessed any H private property aud that such private property was to go to Raghu· nandan Das who was to succeed him on the gaddi or to somebody else. The only conclusion from such an omission can l;>~ that Mahant

s1; P1EYE COURT REPORTS

(1966] SUP!'. s.c.n.

Mohan Das did not consider any property to be his own personal propcfrty. Whatever he posaessed and over which he exercised ownership was considered to be the property of the Math or properties connected with the Math and that his successor was to exercise ownership and possession over all such properties.

We therefore hold that the Emar Math is a math as defined in the Act and that it is a public math.

The history of the Emar Math, according to the passage in the Puri Gazetteer, fits in with our finding. The High Court has relied on what has been stated in the Puri Gazetteer of O'Malley of 1908, at pp. 112-113. The relevant portion of the passage relied on is the following:

"No account of Jagannath worship would be complete without some account of the maths in Puri. Maths are monastic houses originally founded with the object of feeding travellers, beggars, and ascetics. of giving religious instruction to chelas or disciples, and generally of encouraging a religious life. The heads of these religious houses who are called Mahant~ or Mathadharis are elected from among the chelas, and ere assisted in the management of their properties by Adhikaris who may be described as their business managel'll. They are generally celibates but in certain maths married men may hold the office. Mahants are the gurus or spiritual guides of many people who present the maths with presents of money and endowments in land. Thus, the Sriramdas or Dakshinaparswa Math received rich endowments from the Mahrattas its abbot having been the guru of the Mahratta Governor; While the Mahant of Emnr Math in the eighteenth century who had the reputation of being a very holy ascetic, similarly got large offerings from his followers.

Both Saiva and Vnishnava Maths exist in Puri. The lands of the latter arc known as Amruta Manchi (literally nectar food), bee<1use they were given with the intention that the proceeds thereof should be spent in offering bhoga before Jagannath and that the Mahaprasad thus obtained should be distributed among pilgrims. beggars and ascetics; they are distinct from the Amruta Manchi lands of the temple itself which are under the superintendence of the Raja. In 1848 Babu Brij Kishorc Ghose roughly estimated the annual income of 28 maths from land alone at Rs. 1.45,400 and this income must have increased largely during the last sixty years.

There are over 70 maths in Puri Town. The Chief Saiva maths are located in the sandy tract near Swarga dwar. viz., Sankaracharya math with a fine library of old manuscripts 1nd Sabkarananda math which has a branch pi J; lbubanshwar. Most of the maths are naturally

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MAUANT RAMANUJ v. SURAJNAP.AYAN (Dayal, J.) 447

Vaishnava. The richest of the latter are Emar, Sriramdasa and Raghavadasa the inmates of which are Ramats or followers of Ramananda." It is urged for the appellant that what is stated in the Gazetteer cannot be treated as evidence. These statements in the Gazetteer are not relied on as evidence of title but as providing historical material and the practice followed by the Math and its head. The Gazetteer can be consulted on matters of public history.

The next question relates to the nature of the properties in suit.

The oral evidence about the foundation of the Math or about the various acquisitions of property by purchase or by gift is nil.

Whatever a witness has deposed has not been on the basis of his personal knowledge. This is natural when the Math was founded about two hundred years ago and when most of the acquisitions had taken place long ago. The best person to speak, though not from personal knowledge, could have been the Mahant himself.

He can base his knowledge on the documents about the history of the Math and the acquisition of the properties. Such documents must naturally be in the custQldy of the Mahant. The Mahant has not come in the witness box. All the documents have not been produced. In fact it is the plaintiff alone who produced a number of documents but he had picked and chosen from among the documents in his possession. Some documents which could have thrown some light on the question under determination have not been produced. It is true that the defendant-respondent also did not call upon the plaintiff-appellant to produce the documents whose existence was admitted by one or the other witness of the plaintiff and that therefore, strictly speaking no inference adverse to the plaintiff can be drawn from his non-producing the list of documents. The Court may not be in a position to conclude from such omission that those documents would have directly established the case for the responden, t. But it can take into consideration in weighing the evidence or any direct inferences from established facts that the documents might have favoured the respondent's case.

The documents relied upon for the appellant relate to acquisition of properties by purchase or gift and are in the name of the Mahant of the Math. Such documents being in the name of the Mahant alone, do not necessarily lead to the conclusion that the G properties were acquired or received in donation by the Mahant in his personal capacity for his personal use and possession. An inference that they were acquired by the Mahant for the Math is equally possible and in fact is to be preferred to what appears on the face of the documents. The onus of proof being on the appellant, it was possible for him to establish his case from the documents H available to him. But he has chosen not to place at the disposal of the Court all the relevant documents. It is significant to note that not a single document has been produced by the plaintiff

Sl'PIUOM& COURT REPORTS [1966] SUPP. s.o.B,

which specifically mentioned the purchase or the gift to be by or to A the Math itself. It is difficult to believe that the'Math acquired no property during the long period of its existence. The Mahant as the head of the institution acts for the Math and is its real representative. All the dealings for and on behalf of the Math must be conducted by the Mahant and it should be no wonder if the Mahant acting for the !\lath acts ostensibly in his own name. Though the

B .. documents relating to purchase of properties have been produced, no evidence was led to show that they were purchased ffom the personal assets of the Mahant. Presumably if there was such evi dence, it would have been produced. The only possible inference which can be drawn is that they were purchased from the assets of the Math.

Reference mav be made to Sitaram Dass Banasi v. H.R.E. Board Madras(') and to Raghbir Lala v. Mohammad Said('). In the former case, Varadachariar, J. said:

"From the few sale deeds filed in the case, it no doubt appears that some of those properties were pur chased in the name of the prior Mahant; but it being admitted that he was an ascetic and celibate and the head of the institution, the probabilities are that they were purchased with the funds of the institution." and in the latter it was said:

"No doubt if a question arises whether particular property acquired by a given individual was acquired on his own behalf or on behalf of some other person or institution with whom or with which he was connected the circumstance that the individual so acquiring property was a professed ascetic may have importance." Reference may also be made in this connection to the Order.

Exhibit 136, of the Maharaja of Puri, to Dewan Bhramarbar Ray.

The order states:

"The Maharaja hereby grants this Sananda taking Rs. 3,000 that he has granted the following 145 Batis and 15 Manas of land. that the income of this land will be utilised in Bhog of Lord Jagannath and distributed among the coming Raishnabas. The 19th day of Mass. Anka 2.

l. Rahang. Ph. Alisa-117 Batis and 15 Manas.

2. Out of Bania Kera-IO Batis.

3. Chabiskud, Ph. Tinikud-18 Batis."

Of the three properties mentioned in this order, the first one belongs to Schedule Ka I. the second to Scedulc Kha and te third to Schedule Ka-2, attached to the plamt. The property m Schedule Ka-I is the property which is said to have been ac quired by the plaintiff and h_is ancestors. 1:he property in. Sh~- H dule Ka-2 is the property said to be acqmred by the plamuff s

(') IJ,.R. 193D!ad.197: A.I.B. 1937 !.rad. 18&-187. (') A.I.R. t9,3P.O. 79.

itAHAl<T RAA!ANUJ i. 8URAJNARAYAN (Dayal, J.) 449

A ancestors for personal services to Lord Jagannath while the properties in Schedule Kha are said to be acquired subject to a charge of offering Bhog to Lord Jagannath. The order makes no distinction in the nature of the objects for which the three properties are given. In fact it shows that the income from all the three properties was to be utilised in offering Bhog to Lord B Jagannath, and for distributing the prasad among the Vaishnavas who would visit the place. There is nothing in this order that any of the properties was for the personal enjoyment and possession of the Mahant alone. Tt is not possible to hold that the properties covered by the same grant should fall in different categories as is the case, according to the schedules attached to the plaint. c

Apart from tthese general considerations, the documentary evidence on record does not support the case of the plaintiff with respect to the properties in schedule Ka-I and Ka-2. It may also be mentioned at this stage that there is no document on record with respect to the properties in schedules Kha and Ga. We have already referred to document Exhibit 110, the gift deed with respect to the land which forms part of the site of the Math.

Exhibit 112 refers to certain land given to the Adhikari of Emar Math for building a temple for the God.

The document states that the drain for the gruel from the temple of Lord Jagannath used to pass over this land and that this drain had to be shifted.

It is difficult to believe that the land which was being used in connection with a public temple would have been given for the purpose of personal enjoyment by the Mahan! or for the purpose of constructing a private temple.

The land mentioned in Exhibit 115 and Exhibit 116 were . acquired by the Mahan! on payment of certain amounts. He was further required to pay certain amount towards the 'Kotha Bhoga' of Lord Jagannath. Exhibit 117 relates to a land purchased by the Mahant. He was required to pay certain amount towards F Chamar Seba of Lord Jagannath.

Exhibit 118 mentions that certain land which the Mahant .. had purchased was being assigned to his Math in order that he might enjoy it for all times to come. This clearly brings out that the land purchased by the Mahan! from some person was made over to the Math. He was exempted from payment of all sorts G of extra taxes or other similar duties. Exemption from revenue and taxes appears to have been granted because it was under- _,. stood that the lands were of the ownership of the Math and not the personal properties of the Mahan!. Even this property which has been clearly assigned to !he Math, according to this document is mentioned. in Schedule Ka-1, indicating thereby that no H particular care had been taken in preparing the schedule which just included the properties which had been acquired by sale deeds.

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' sul'RF.llt OOt; RT REPORTS [l!l66i

SUPP.

S.C.R.

Exhibit 119 sanctions certain purchases by Mahan! Samuja- A matra and states that he wHI enjoy the same for all time to come on dedication of all sorts of requirements for Gund ichaghar Chali (House of Lord Jagannath).

No other demand towards Kotha should be made on him. This again clearly indicates that the property was dedicated for meeting the expenses of Gundichaghar Chali and was exempted from any other demand towards B the Kotha presumably the Kotha Bhog of Sri Lord referred to in Exhibits 115 and 116. This property is included in Schedule Ka-2.

It appears that the various maths at Puri were founded by saints following different cults, but devoted to Lord Jagannath.

They had to offer seva to Lord Jagannatb in different fonns, e.g., offering Bhog and getting back Maha Prasad, Chamar Seva i.e., fanning of the Lord etc. For Bhog or other services which requir ed expenses, the saints were in need of funds and naturally the devotees of the saints would make gifts to them to enable them to perform these services. Gifts of property to the Mabants or exempting the Mahants to pay taxes etc. with respect to the lands purchased by them was therefore merely to provide them with funds necessary for rendering services to Lord Jagannath, on behalf of the Math and also to meeting the necessary expenses in running of the Maths which would include expenses on the maintenance of the buildings, feeding of the Mahan! and the disciples and such other persons who came to reside at the Math and also for distributing food to the poor.

The documents referred to above make this amply clear and thus show that the properties to which they relate do not belong to the Mahant personally but really belonged to the Math. It makes no difference to the nature of the properties whether they were purchased by the Mahants in their own names or in the names of the Math.

Some properties have been shown to be purchased by the chelas of the Mahants previous to their occupying the gaddi of the Mahan!, that is to say, such properties were purchased when they were mere chelas and not mahants. It is therefore submitted for the appellants that these properties could not be held to be math properties now. It is true that the presumption that the properties that were obtained during the period when they were not Mahants cannot be presumed to be properties purchased or acquired for the Math. But the fact remains that when they them selves became Mahants such self-acquired properties did not appear to have been treated in any separate manner.

Proceeds from such properties were mixed up with the proceeds of the other property. Letters. Exhibits C & D. by Mahant Gadadhar Des to the Commissioner speak of the entire mingling of the accounts of the private and Math properties. Some witnesses of tbe plaintiff stated that Gadll(lhar Das told them later that he had made wrong statement in those letters for ulterior purposes.

Courts below did not rightly believe such statements. Further, it

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; ). l I

i J c ' .

L-. ·.,\

MAirAN'.r jlAMAl!\Jj tJ, suRAhiARAYAN ; hayai, .T.) 451

may be noted that it appears from the sale deed, Exhibit 77, executed in favour of Gadadhar Ramanuj Das, Chela of Mahan!

Raghunandan Ramanuj Das in 1909, that the founder owed a sum of Rs. 400 /- to the Mahan! Guru of Gadadhar and that this sum was ad justed towards the purchase price of the property conveyed under this deed. Mahan! Mohan Das, by his will Exhibit 140, permitted his Chela Raghunandan, who was nominated to succeed him to get his own name gradually mutated in respect of the lands and zamindaris standing in the name of the Mahan!.

It follows therefore that the mere fact that certain properties were ostensibly purchased by the chelas does not necessarily mean that those properties were either acquired as their personal properties or that they continued to be their personal properties after they succeeded to the gaddi.

The plaintiff has failed to produce the expenditure accounts with respect to the income from the properties in suit. He has not produced the consofidated budget which is prepared. That could have indicated whether the income and expenditure over the property in suit was treated as of the Math or not. Accounts showing the sources of money from which the properties were acquired have not been produced. These omissions, together with statements in letters Exhibits C & D, are sufficient to support the findings of the Courts below that even these properties had been treated as Math properties.

We are therefore of opinion that the properties mentioned in Schedules Ka-I and Ka-2, alleged to be the personal properties of the Mahan!, are not his personal properties but are properties of the Math.

We may now consider the properties in schedule Kha said to be the Amrut Manohi properties of Lord Jagannath and held by the plaintiff as marfatdar. The plaintiff alleges that these properties were acquired either by purchase or 'krayadan' or by way of gift subject to a charge of some offering to Lord Jagannath which depended upon the individual judgment and discretion of the plaintiff, and that the public had no concern with the enjoyment or management of the usufruct thereof.

The Gazetteer makes a reference to such properties and states: -

"Both Saiva and Vaishnava Maths exist in Puri. The lands of the latter are known as Amruta Manohi (literally nectar food), because they were given with the intention that the proceeds thereof should be spent in offering bhoga before Jagannath and that the Mahaprasad thus obtained should be distributed among pilgrims. beggars and ascetics; they are distinct from the Amruta Manohi lands of the Temple itself which are under the superintendence of the Raja''.

SUl'REllK <X, URT REPORTS t1966] SUPP. s.c.tt

This statement makes it clear that lands endowed to the temple A of Lord Jagannath arc distinct from the lands or property en dowcd to the Vaishnava Maths for the purpose of utilising the proceeds of those properties for offering bhoga before Lord Jagannath and the subsequent distribution of that Mahaprasad among pilgrims, beggars and ascetics, presumably visiting the Math, or approaching its authorities for a portion of the Maha Prasad.

B The mere fact that the proceeds of the properties were to be so used, would not justify the conclusion that these properties were not endowed to the Maths but were endowed to the temple of Lord Jagannath.

Properties endowed to the temple of Lord Jagannalh were. according to this statement, in the Gazetteer, not under the superintendence uf any Math or Mahant but under the superintendence of the Raja of Puri himself. 0

As already stated, these Amrit Manohi properties arc pro perties which are endowed to the Math by the devotees for a particular service, which is done to Lord Jagannath by the Mahant on behalf of the Math. The properties are therefore properties endowed to the Math and not merely gifted to the plaintiff or, as had been suggested, to Lord Jagannath.

The properties in Schedule Ga arc said to be endowed to private deities whose sole marfatdar was the Mahant. The properties in this schedule are 200 in number and entries about them refer them to be of many a deity. These properties too appear to be endowed to the Math in the same way as Amrut Manohi properties had been endowed, that is lo say, the devotees of the Mahant provided for the offering of Bhog or any other seva to E the various deities by the Mahant as rcpresenling the Math. There is nothing unusual about it as a Hindu's devotion is not necessarily lin1itcd to one particular deity. to whichever persuasion of the Hindu religion he may belong. The Mahant of a Math, and of such a well-renowned Math as the Emar Math, is not expected otherwise to be the marfatdar of so many deities as a result of F properties endowed by a number of persons. The very fact that the Mahan! of Emar Nath took upon himself the marfatdari of so many deities indicates that his devotees could think of endowing properties to the Math for the purpose of doing seva of other deities as well.

The fact that the appellant has paid income-tax and municipal taxes with respect to the income from certain proprties in G suit is not sufficient to rebut the inference to be derived from the various other facts mentioned above.

We therefore hold that the properties in the Schedules to the plaint arc the properties of the Math. The result is that the decree of the High Court is correct and the appeal is dismissed with costs.

'Appeal dismissed.

nAs

SURAJr<ARAYAN DASS &.ANR

SARKAR, C.J.

M. HIDAYATULLAH

R. S. BACHAWAT

M. SHELAT

s. 49

s. 6

s. 64(])

Schedule D

s. 49

s. 64(1)

Section 2

s. 6

s. 6

s. 6

s. 6

s. 11

s. 12

Section 13

Section 46

Section 49

s. 51

s. 49

Section 64

s. 64(1)

s. 6

Section 5(3)

s. 3

s. 64(2)

s. 64


F l

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FATEHCHAND MURLIDHAR AND ANH •

COMMISSIONEH OF INCOME-TAX, CALCUTTA

July 19, 1966

[K. N. WANCHOO ANDS. M. S!KRI, JJ.]

Income-tax Act (11 of 1932), s. 23(5)(a:-Scope of-Partnership- Sub-partnership between a pa.rtner and strangers-Agreement-to share profits and losss of partner in the Partnershqr--Income from the Partnership-Whether belongs to partner or sub-partnership.

The assessee was a partner in a registered firm. In 1949, he entered into a partnership with persons v.rho \vere strangers to the registered firm and a deed of partnership was executed between them.

It recited that the profits and losses for the share of the asscssce in the registered firm should belong to the new firm and be divided and borne by the partners of the new firm in accordance with the shares specified in the deed.

On the question whether the income of the assessee from the registered firm for the years 1952-53, 1953-54 and 1955-56, should be jncluded in his individual assessment,

HELD: The income should be included in the assessment of the new firm and not in the personal assessment of the assessee.

(i) The new partnership constituted a sub-partnership in respect of the assessee's share in the registered firm. Tn the case of a subpartnership, it creates a superior title and d1verts the lncome before it becomes the inoome of the partner, that is, the partner in the main firm receives the income not only on his o\vn behalf but on behalf of the partners in the sub-partnership. The fact that a sub-partner can have no direct claim to the profits vis-avis the other partners of the main firm and that it is the partner alone who is entitled to the profits vis-a-vis the other partners in the main firn1, does not show that the changed character of the partner should not be taken into consideration for income-tax purposes. r461E-F; 462Cl

Iii) The object of s. 23(5)(a) is not to assess the firm itself but to apportion the income among the various partners. After the income has been apportioned, the Income-tax Officer has to find whether it is the partner who is assessable or whether the income should be taken to be the real income of some other person. If it is the real income of another firm, it is that firm which is liable to be assessed under the section. There is nothing in the section that prevents the income of the assessee from the registered firm being treated as the income of the sub-partnership and the section being applied again.

G r463C, Fl Charandas Haridas v. Commissioner of Income Taa:, S.C.R. 296, and Commissioner of Income Tax, Bombay v.

Tirathdas [19611 3 S.C.R. 634, followed.

[1960] 3 Sitaldas

Commissioner of Income Ta~-:c, Punjab v. Laxmi Trading Co. 24 I.T.R. 173 and R.rititat 13. Daftari v. Commissioner of Income Ta.x, H Bombay, 36 I.T.R. 18, referred to.

Mahaliram Santhatia v. Commissioner of Income Tax 33 I.T.R. 261, overruled.

SUPllElfE COURT REPORTS tJ 966) ~Ul'P. S.tJ,11,

CIVIL APPELLATE JuRJsDICTION: Civil Appeal Nos. 1108 to A 1110 of 1964.

Appeals by special lea.ve from the judgment and order dated August I, 1962 of the Calcutta High Court in Income-tax Reference Nos. 20 and 21 of 1959.

A. K. Sen, S. C. Mazumdar and J. Dalla Gupta. for the B

appellants. ; R. M. /lazarnavis, R. Ganapathy Iyer and R. N. Sac!tthey, fo! the respondent.

The Judgment of the Court was delivered by Sikri, J. These appeals by special leave are directed against the judgment of the High Court of Calcutta in two cases referred to it by the Income Tax Appellate Tribunal, Calcutta Bench, under s. 66(1) of the Indian Income-tax Act !XI of 1922) hereinafter called the AcO. One of the references (income Tax Reference No. 20 of 1959) was made at the instance of Mis Fatehchand Murlidhar, and the other (income Tax Reference No. 21 of 1959)

was made at the instance of Shri Murlidhar Himatsingka. In the former reference the question referred was "whether on the facts D and in the circumstances of the case, the income of Murlidhar Himatsingka for his share in the firm of Messrs. Basantlal Ghan- ; hyamdas for the assessment years 1952-53 and 1953-54 was rightly excluded from the income of the applicant firm". In the latter reference the question referred was "whether on the facts and circumstances of the case the income of Murlidhar Himatsingka for his share in the firm of Messrs. Basantlal Ghanshyam- E das for the assessment year 1955-56 was rightly included in his personal assessment for that year".

The tacts and circumstances out of which these references were made arc common because the real question raised by these references is whether the income of Murlidhar Himatsingka, from the firm of M / s Basantlal Ghanshyamdas, in which he was a part- I' ner, should be included in his personal assessment <'r in the assessment of the firm of Fatehchand Murlidhar, to which Murlidhar Himatsingka had purported to assign the profits and losses from M / s Dasantlal Ghanshyamdas. It is sufficient to take the facts from the statement of the case in Income Tax Reference No. 21 of 1959. made at the instance of Murlidhar Himatsingka. Murlidhar Himatsingka was carrying on business in shellac, jute, G hessian etc. under the name and style of "Fatehchand Murlidhar" at 14/1, Clive Row and 71, Durlolla Street, Calcutta. He was also a partner in the registered firm, Messrs Basantlal Ghanshyamdas having -i2/8 share. On December 21, 1949, a deed of partnership was executed by the said Murlidhar Himatsingka and his two sons, Madanlal Himatsingka and Radhaballav Himatsingka and H a grandson named Mahabir Prasad Himatsingka. The deed recited that Murlidlrnr llimatsingka had bec<'>me too old and infirm

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MURLIDHAR V. C. I. T. (Sikri, J.) 455

to look after the various businesses and that Madanlal and Radha Ballav were already practically managing the business and that they had signified their intention to become the partners of the said firm "Fatehchand Murlidhar" and had agreed to contribute capital, Rupees ten thousand, Rupees five thousand and Rupees five thousand respectively. The parties further agreed to become and be partners in the business mentioned in the deed. Clause S of this deed is important for our purpose and reads as follows: -

"The profits and losses for the share of the said Murlidhar Himatsingka as partner in the said partnership firm of Basantlal Ghanshyamdas shall belong to the present partnership and shall be divided and borne by the parties hereto in accordance with the shares as specified hereafter, but the capital with its assets and liabilities will belong exclusively to Murlidhar Himatsingka the party hereto of the First Part and the Parties hereto of the Second, Third and Fourth parts shall have no lien or claim upon the said share capital or assets of the party hereto of the first part in the business of the said Messrs Basantlal Ghanshyamdas".

Clause IO provides:

"The Profits and losses (if any) of the partnership including the shares of the profits and losses of the said partnership firm of Basantlal Ghanshyamdas aforesaid shall be divided and borne by and between the parties in the following manner: -

Party hereto of the First Part-Six annas (Murlidhar Himatsingka).

Party hereto of the Second Part-Four annas (Madanlal Himatsingka).

Party hereto of the Third Part-Three annas (Radhaballav Himatsingka).

Party hereto of the Fourth Part-Three annas (Mahabirprasad Himatsingka).

Clause 11 provides that "all partnership moneys and securities for money shall as and when received be paid into and deposited to the credit of the partnership account". In clause 13 it is provided that "the party hereto of the First Part shall have the sole control and direction of the partnership business and his opinion shall prevail if there be any dispute between the parties hereto".

Clause 16 provides that "the net profits of the partnership after payment of all outgoings interest on capital or loans and subject to the creation and maintenance of any reserve or other fund shall belong to the parties and the losses, if any, shall also be borne and paid by the parties in proportion to their shares as stated in Clause IO hereof''.

For the assessment year 1955-56 the Income Tax Officer included the income from the share in the registered firm of

L/S5SCI-31

SUPR'f'.JU: COURT REPORTS (1966) SUI"l'.

8.C.R.

Basantlal Ghanshyamdas in the individual assessment of Murli A dhar Himatsingka, Murlidhar Himatsingka appealed to the Appel late Assistant Commissioner. Referring to s. 23(5)(a) of the Act, he held that as Murlidhar Himatsingka was a partner in the registered firm of Hasantlal Ghanshyamdas, his share had to be assessed in his hands. He further held that the agreement was merely an arrangement which came into force after the profits B were earned and not before they were earned. He held that this agreement being a subsequent disposition of profits, after they had been earned, had to be disregarded.

Murlidhar Himatsingka appea'ed to the Income Tax Appel late Tribunal. The Appellate Tribunal heard this appeal together with the two appeals filed by Mis Fatehchand Murlidhar. The C Appellate Tribunal, agreeing with the views of the Appellate Assistant Commissioner, dismissed the appeal.

The High Court held that it was a case of diversion of in come by Murlidhar Hirnatsingka after it had accrued to him and it was not a diversion at the source by any overriding interest.

In the result, the High Court answered the questions in the affir D mative in both the references. Murlidhar Hirnatsingka and Mis Fatehchand Murlidhar having obtained special leave, the appeals are now before us.

The learned counsel for the appellants, Mr. A. K. Sen, con tends that a partner"s share is property capable of being assigned, mortgaged, charged and dealt with as any other property, and where a partner sells his share to a stranger, though that stranger does not become a partner yet the vendor partner holds the property as trustee for the purchaser and consequently the income received by the partner is not his income but the income of the purchaser. He says that similarly if a partner assigns part of his share the same result fol'ows. He further contends that in this case, by the agreement dated December 21, 1949, Murlidhar Hirnatsingka had entered into a sub-partnership with his two sons and a grandson in respect of his share in the firm Basantlal Ghan shyamdas, and it is the sub-partnership that is entitled to the income from the firm Basantlal Ghanshyamdas and not Murli dhar Himatsingka who must be taken to be acting on behalf of the firni Fatehchand Murlidhar. Mr. Sen further urges that the lndian Income Tax Act taxes real income and not notional in come and the real income in this case belonged not to Murlidhar but to Mis Fatehchand Murlidhar.

Mr. Hazarnavis, on the other hand, contends that this agreement is a mere device for dividing income which had accrued to Murlidhar Himatsingka among his sons and grandson.

In the alternative he contends that the Indian Income Tax Act does not B contemplate the application of s. 23<5)(a) twice. He says that the firm of Basantlal Ghanshyamdas was a registered firm and the

\. -

MURLIDBAR V. C. I. T. (Sikri, J.J

A Income Tax Officer was bound, under s. 23(5)(a), to assess Murlidhar in respect of the income received from this firm; he could not carry this income to the assessment of another registered firm, namely, Fatehchand Murlidhar, and then apply s. 23(5)(a).

The first point that arises is whether the agreement dated B December 21, 1949, has succeeded in diverting the income from Murlidhar's share in Mis Basantlal Ghanshyamdas to Mis Fatehchand Murlidhar before it reached Murlidhar. What is the effect of the agreement? In our opinion the agreement dated December 21, 1949, constituted a sub-partnership in respect of Murlidhar's share in MI s Basantlal Ghanshyamdas. The High Court in this conc

nection observed : -

"At best it could be called a sub-partnership entered into by Murlidhar with strangers in respect of his share of the partnership".

In arriving at this conclusion we attach importance to the fact that losse~ were also to be shared and the right to receive profits and pay losses became an asset of the firm, Fatehchand Murlidhar.

In Commissioner of Income-tax, Bombay v. Sitaldas Tirathdas,(') Hidayatullah, J., speaking for the Court, laid down the following test for determining questions like the one posed above.

After reviewing a number of authorities, he observed: -

"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 in every case, but it is the nature of the obligation which is the decisive 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 to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; 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 excused 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, does so, not as part of his income but for and on behalf of the person to whom it is payable".

(') [1961] 3 S.C.R. 634, 642.

St:PRKJ, n; COt:RT REPORTS [ 1966) Sl'PP, S.C. R.

This test cearly shows that it is not every obligation to apply . income in a particular way that results in the diversion of income before it reaches the asse5fce. In its judgment in the above case (Sitaldas Tirathdas v. Commissioner of Income-tax.

Bombay(') the High Court of Bombay had observed: -

"It is not essential that there should be a charge, it is quite sufficient if there is a legally enforceable claim".

These observations must be treated as unsound. The test laid down by this Court is quite clear, though like some other tests it is not easy of application in all cases.

The other cases cited before us, namely, K. A. Ramachar v.

Commissioner of lncf'me-tax, Madra,(') and Provat Kumar Mitter

v. Commissioner of Income-tax, West Bengal(') do not assist us in disposing of this case because the facts are not similar. Only two cases, one of the Bombay High Court and the other of the Calcutta High Court, have close resemblance to the facts of this case and we may now consider them. In Rati/al B. Daftri v. Commissioner of Income-tax. Bombay(') the assessee who was one of the sixteen partners in a registered partnership had contributed Rs. 25,000/- out of the capital of the partnership, Rs. 3,45,000/-.

In order to contribute this capital of Rs. 25,000/- he had entered into an agreement with four others on the same date on which the registered partnership deed was executed, which provided for contribution of diverse sums by the four others and it was further provided in this agreement that the five parties would share the profits and losses in proportion to their individual contribution.

It was also mentioned that the terms and conditions mentioned in the registered partnership were to be applicable and binding on them. The Bombay High Court held that the assessce was liable to be assessed only in respect of his share o[ the profits of the registered partnership. In coming to this conclusion, the High Court relied on two other decisions of the same Court, namely, Mori/a/ Manekchand v. Commissioner of Income-tar(') and Sitalda~ Tirathdas v. Commissioner of Income-tar(') As pointed out by the learned counsel for the respondent, Mr.

Ha1.arnavis, Sitaldas Tirathdas v. Commissioner of Income-tax(') was reversed by this Court in Commissioner of Income-tax v. Sita/dal' Tirathdas(') Hidayatullah, J .. at p. 374 of his judgment reversing the judgment of the Bombay High Court. had also referred to Mori/al Manekchand

v. Commissioner of Income-tax(') but did not expressly dissent from this case. In our opinion the case of Rati/al B. Daftari v. Commissioner of Income-tax, Bombay(') was rightly decided, although the reasoning given by the learned Judges of the High Court has to some extent not been accepted by Hidayatullah. J., in Commissioner of Income-tax v. Sitaldas Tirathdas('). We say so far the follow-

('I 33 I.T.R. 39J,31}4.

I') 42 I.T.u. 26. (') 41 l.T.n. (;~4,

(') 36 I.T.R. 18.

1'1 311.T.R. 73;, <'J 41 l.T.I\. 36;, [1961] 3 8.CR. 6~4.

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MURLIDHAR v. C, I. T. (8ikri, J.) 459

ing reasons. Lindley on Partnership, 12th Edition, page 99, deals with sub-partnerships as follows: -

"A sub-partnership is, as it were, a partnership within a partnership; it presupposes the existence of a partnership to which it is itself subordinate. An agreement to share profits only constitutes a partnership between the parties to the agreement. If, therefore, several persons are partners and one of them agrees to share the profits derived by him with a stranger, this agreement does not make the stranger a partner in the original firm. The result of such an agreement is to constitute what is cal'ed a sub-partnership, that is to say, it makes the parties to it partners inter !Ye; but it in no way affects the other members of the principal firm".

He further states: -

"Since the decision of the House of Lords in Cox v. Hickman (1860) 8 H. L. Cas. 268, a sub-partner could not before the Partnership Act, 1890, be held liable to the creditors of the principal firm by reason only of his participation in the profits thereof, and there is nothing in that Act to alter the law in this respect".

Sub-partnerships have been recognised in India and registration accorded to them under the Indian Income Tax Act. (See Commissioner of Income-tax, Punjab v. Laxmi Trading Company)(') The question then arises is whether the interest of the subpartnership in the profits received from the main partnernship is of such a nature as diverts the income from the original partner to the sub-partnership. Suppose that A is carrying on a business as a sole proprietor and he takes another person B as a partner.

There is no doubt that the income derived by A after the date of the prtnership cannot be treated as his income; it must be treated as the income of the partnership consisting of A and B.

What difference does it make in principle where A is not carrying on a business as a sole proprietor but as one of the partners in a firm? There is no doubt that there is this difference that the partners of the sub-partnership do not become partners of the original partnership. This is because the Law of Partnership does not permit a partner, unless there is an agreement to the contrary, to bring strangers into the firm as partners. But as far as the partner himself is concerned, after the deed of agreement of sub' partnership, he cannot treat the income as his own. Prior to the case of Cox v. Hickman('), sub-partners were even liable to the creditors of the original partnership. Be that as it may, and whether he is treated as an assignee within s. 29 of the Indian Partnership Act, as some cases do, a sub-partner has definite enforceable rights to claim a share in the profits accrued to or received by the partner.

('I 24 I.T, R. 173. (') [1860] 8 H.L. Cas. 268.

SUPRBllB OOURT REPORTS

[1966] SUPP. 8.0.B,

The decision of this Court in Chararulas Haridas v. Commis- A sioner of Income-tax (') seems to support, at least by inference, this conclusion. In that case the facts were as follows. Charandas Haridas was the karta of a Hindu undivided family consisting of his wife, his three minor sons and himself. He was a partner in six managing agency firms and the share of the managing agency commission received by him as such partner was being assessed I as the income of the family. By a memorandum executed by the co-parceners of the family a partial portion of the income from the managing agency was brought about.

The memorandum stated: -

"We have decided that ........ .in respect of the commission which accrues from !st January, 1946 and received after that date each of us becomes absolute owner of his one-fifth share and therefore from that date ...... these commissions cease to be the joint property of our family".

This Court held that the document effectively divided the income and the income could no longer be treated as that of the Hindu undivided family. This case shows that although the karta continued to be a partner in the managing agency firm, yet the character in which he received the income vis-a-vis the Hindu undivided family had changed and the Court gave effect to the change of his position. Previously he was acting as a karta on behalf of the Hindu undivided family in the managing agency firm; later he became a partner on behalf of the members of the family.

It seems to us that when a sub-partnership is entered into the partner changes his character vis-a-vis the sub-partners and the Income Tax authorities, although other partners in the original partnership are not affected by the changes that may have taken place.

In our view the Calcutta High Court decision relied on by the High Court and the learned counsel for the respondent (Mahaliram Santha/ia v. Commissioner of Income-tax(') was wrongly decided. The facts in that case were these. Mahaliram Santhalia was a partner in the firm MI s Benares Steel Rolling Miils. He was also a partner in another firm named MI s Radhak:issen Santhalia. By agreement dated April 3, 1944, between the partners of M / s Radhakissen Santhalia, it was provided that the partnership income from MI s Benares Steel Rolling Mills would belong not to Mahaliram Santhalia individually but to the firm of M / s Radhakissen Santhalia. The High Court of Calcutta held that the agreement amounted only to voluntary disposition by Mahaliram Santhalia of his income and there was no diversion of income to the firm MI s Radhakissen Santhalia before it became

(1) [1960) 3 S.C.R. 296.

(1) 88 I.T.R.1181.

' •

MURUDHAR V. c. i. T. (Sikri, J.; 461

Mahaliram Santhalia's income. The High Court observed at p. 272:-

"lf, as Mr. Mitra conceded, Mahaliram was rightly taken as a partner of the Benares Steel Rolling Mills in personal capacity and if a one-fourth share of the income was rightly allocated to him, any agreement between him and his three partners of the firm of Radhakissen Santhalia, under which the income was to be treated as the income of the whole firm, could only be an agreement by which Mahaliram Sanihalia was allowing what was really his income to be treated as the income of the firm or, in other words, as agreement by which he was applying or distributing an income which he had already himself earned and received. Such application or distribution would be a voluntary act of Mahaliram Santhalia in respect of a sum which it was conceded, had rightly been included in his own total, income and, therefore was his own income. If the moment the share of the income from the Benard; Steel Rolling Mills was allocated to Mahaliram Santhalia, it became his income and liable to be inclut.'!..1 in his own total income for the purpose of his personal assesment, an agreement by him with other persons regarding the rights to that income could only be a voluntary disposition of his income by him. No question of a diversion by superior title could possibly arise." With respect, we are unable to agree with most of this reasoning.

In our view, in the case of a sub-partnership the sub-partnership creates a superior title and diverts the income before it becomes the income of the partner. In other words, the partner in the main firm receives the income not only on his behalf but on behalf of the partners in the sub-partnership. The Calcutta High Court also seems to be, in our opinion, erroneously impressed by the argument that "It is impossible to see how, after a proportionate share of the income had thus been included in the total income of a partner for the purposes of his personal assessment, it could then go anywhere else or could be further divided between such partners and other parties." We will deal with this aspect while dealing with the second point raised by the learned counsel for the revenue.

Mr. Hazarnavis, in this connection, drew our attention to the following passage in K. A. Ramachar v. Commissioner of lncometax. Madras('):-

"This, in our opinion. is neither in accordance with the law of partnership nor with the facts as we have found on the record. Under the law of partnership, it is the partner and the partner alone who is entitled to

(') 42 I.T.R. 25, 29.

462 8t; PRBl!Jo~ COURT REPO&TS

[1966) HUPP. S.C.I<.

the profits. A stranger. even if he were an assignee, has and can have no direct claim to the profits. By the deeds in question, the assessee merely allowed a payment to his wife and daughters to constitute a valid discharge in favour of the firm; but what was paid was, in law, a portion of his profits. or, in other words, his income".

This passage was also relied on by the High Court. In our opinion, these observations have to be read in the context of the facts found in that case. In that case it was neither urged nor found that a sub-partnership came into existence between the assessee who was a partner in a firm and his wife. married daughter and minor daughter. It was a pure case of assignment of profits (and

not losses) by the partner during the period of eight years. Fur- C !her the fact that a sub-partner can have no direct claim to the profits vis-a-vis the other partners of the firm and that it is the partner alone who is entitled to profits vis-a-vis the other partners does not show that the changed character of the partner should not be taken into consideration for income tax purposes.

This Court held in Commissioner of Income-tax, Gujarat v.

Abdul Rahim(') that registration of the firm could not be refused on the D ground that a partner was a binamidar and that a benamidar is a mere trustee of the real owner and he has no beneficial interest in the profits of the business of the real owner. Under the law of pannership it is the benamidar who would be entitled to receive the profits from the other partners but for income tax purposes it does not mean that it is the benamidar who alone can be assessed in respect of the income received by him.

In conclusion we hold that the High Court was in error in holding that there was no question of an overriding ogligation in this case and that the income remained the income of Murlidhar Himatsingka in spite of the sub-partnership created by him under the agreement dated December 21, 1949.

The second contention raised by Mr.

Hazarnavis was not r debated in the High Court, but in our opinion, there is no substance in this contention. We have already mentioned that a benamidar can be a partner in a firm. Now if Mr. Hazarnavis's contention is right, under s. 25<5)(a) of the Act it is only he who could be assessed, but there is no warrant for this proposition. In Commissioner of Income-tax, West Bengal v.

Ka/u Babu La/ Chand(') this Court mentioned with approval Kaniram llazarimul/ G

v. Commissioner of Income-tax(') where income from a partnership received by a ktJrta was held to be assessable in the hands of Hindu Undivided famlly.

This Court observed at p. 12 as follows: -

"If for the purpose of contribution of his share of H the capital in the firm the karta brought in monies out

(') 5~ 1.1'.R Ml.

I') 37 I.T.R. 123. ('l. 27 l.T.R. 294.

MUP..LIDHAR V. C. I. T. (8ikr/, J,)

of the till of the Hindu undivided family, then he must be regarded as having entered into the partnernship for the benefit of the Hindu undivided family and as between him and the other members of his family he would be accountable for all profits received by him as his share out of the partnership profits and such profits would be assesseable as income in the hands of the Hindu undivided family. Reference may be made to the cases of Kaniram Hazarimull v. Commissioner of Income-tax(') and Dhanwatav v. Commissioner of Income-tax(') in support of this view".

The object of s. 23(5)(a) is not to assess the firm itself but to apportion the income among the various partners. After the income has been apportioned, the Income Tax Officer has to find whether it is the partner who is assessable or whether the income should be taken to be the real income of some other person. If it is the real income of another firm, it is that firm which is liable to be assessed under s. 23(5)(a) of the Act.

This view was taken by the Bombay High Court in Ratilal B. Daftri v. Commissioner of Income-tax('). The Bombay High Court observed at p. 24 as follows:-

"The principle asserted in that case is that even in the case of a partner in a registered firm, when the question arises as to his individual assessment, what is to be considered is not the income allocated to his share by employing the machinery of section 23(5)(a), but his real income, and that real income is what remains after deducting the amounts which may be said to have been diverted and never constituted his real income and such amounts will have to be excluded before his real income is reached".

In conclusion we hold that there is nothing in s. 23(5)(a) that prevents the income from the firm Basantlal Ghanshyamdas being treated as the income of MI s Fatehchand Murlidhar and s. 23(5) ·(a) being applied again.

In the result we accept the appeals, set aside the judgment of the High Court and answer the questions in the negative. The appellants will be entitled to costs here and in the High Court. One hearing fee.

Appeals allowed.

(') 27 I.T.R. 294.

(') 32 I.T.R. 682.

(') 36 I.T.R. 18.

1 •

FATEHCHAND MURLIDHAR AND ANH

COMMISSIONEH OF INCOME-TAX, CALCUTTA

K. N. WANCHOO

Income-tax Act

s. 23(5)(a)

s. 66(1)

Income-tax Act

Clause 11

clause 13

Clause 16

s. 23(5)(a)

s. 23

s. 23(5)(a)

s. 23(5)(a)

[1961] 3 S.C.R. 634

Partnership Act, 1890

s. 29

Indian Partnership Act

[1960) 3 S.C.R. 296

s. 25

s. 23(5)(a)

s. 23(5)(a)

section 23(5)(a)

s. 23(5)(a)

s. 23(5)