Commissioner of Gift-tax vs Vanamamalai Ramanuja Jeer Swamigal

R. Jayasimha Babu, J.—The questions referred to us at the instance of the Revenue read as follows :

(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was no gift of offering''s

received by the Vanamamalai Jeer to this Mutt ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in its conclusion that the assessee did not, own the

funds offered to him, but held out in trust ?

Shri Vanamamalai Ramanuja Jeer Swamigal, Nanguneri, is the head of the Shri Vanamamalai Mutt, Nanguneri, Tirunelveli District. He created a

trust under a deed dated February 29, 1983, named after the presiding deity of the Mutt Shri Aranganagarappan Saswatha Dharmasthapana

Trust. The principal object of the trust was to renovate the buildings of the mutt and temples and to establish schools for propagation of Sanskrit

and the Vaishnavite tradition. The trust was created with an endowment of Rs. 5,000. Subsequently, a further sum of Rs. 2,50,000 was given to

that trust.

The moneys that were given to the Swamigal were the amounts which have been received as padhakanikkai and sambhavanai from his devotees

who had made offerings out of their personal regard, personal esteem and admiration for the Swamiji. This court in Commissioner of Income Tax

Vs. Vanamamalai Ramanuja Jeer Swamigal, negatived the Revenue''s contention that the amount so received constituted taxable income. The court

held that the voluntary contributions having been made as offerings to the Swamiji, they would not be considered as income assessable under the

income tax Act.

During the previous year relevant to the assessment year 1984-85, the offerings received by the Swamiji, and given by him to the trust created

by him was sought to be taxed by the Gift-tax Officer by treating the same as gift. He was of the view that the application of the funds by the

Swamiji for the purposes of the trust itself amounted to a gift. That view of the Gift-tax Officer though affirmed in appeal, was not found to be

acceptable by the Income Tax Appellate Tribunal, which allowed the appeal of the Swamigal and held that there was no transfer of the amount

from him to the trust. The Tribunal referred to the decision of the Privy Council in Vidya Varuthi Thirtha Swamigal v. Baluswami Ayyar AIR 1922

PC 123, wherein it was observed that when the gift is made to a holy person, it carries with it in terms or by usage and custom certain obligations

and though the property given to such a person did not vest in him and he was not a trustee in the English sense of term, in view of the obligation in

duties resting on him, he was answerable as a trustee in the general sense of formal administration. The Tribunal has held that when a devotee

places some money as an offering at the feet of the sanyasi, there is a dedication of property for religious purposes and that it is a gift by him for

which no acceptance is necessary to complete the gift. The Tribunal observed that the dedication is nothing but a compendious expression of the

pious purpose for which the dedication is designed and the sanyasi merely accepts the responsibility of carrying out the intention of the devotees,

who have laid the offerings at his feet. The Tribunal concluded that the application of the money by the Swamigal by dedicating it for religious

purposes and for the use of the Mutt through the medium of the trust did not amount to a gift and there was no transfer of the money to the trust by

the Swamigal.

Learned counsel for the Revenue submitted before us that having regard to the definition of ""gift"" in Section 2(xxiv) of the Gift-tax Act, 1958,

which refers to alienation including creation of a trust, it must be held that the creation of a trust and giving of the money to that trust had resulted in

alienation of the property by the Swamigal in favour of the trust and such alienation was without any consideration thereby amounting to a gift.

Learned counsel for the assessee submitted that the trust was formed only with the object of spending amounts for the maintenance of the Mutt

and for meeting the expenditure connected with the objects for which the Mutt has been established and this was merely a case of the Swamigal

giving a concrete shape to the desire of the devotees who had dedicated money for religious purposes and had offered money to him as

padhakanikkai and sambhavanai. The Supreme Court in the case of Shri Krishna Singh Vs. Mathura Ahir and Others, , considered at some length

the Hindu law with regard to religious endowments. The court observed that the head of a Mutt is bound to spend a large part of the income

derived from the offerings of his followers on charitable or religious objects. The words ""the burden of maintaining the institution"" must be

understood to include the maintenance of the math, the support of its head and his disciples and the performance of religious and other charities in

connection with it, in accordance with usage. Thus, the head of a Mutt, when he receives sambhavanai or padhakanaikkai from his followers, does

not receive the money for himself to be spent as he likes and for any purpose of his choice and the offerings are given by his followers with the

object to apply the offerings for religious purposes more particularly those connected with the Mutt of which the Swami to whom the offerings are

made is the head. The offerings so received are subject to an obligation even at the time of its receipt to be applied for religious purposes

connected with the Mutt and its activities.

In case the Swami who receives the offerings creates a trust with the express object of ensuring the upkeep of the Mutt and for the propagation

of the activities for which the Mutt is established, and uses the money received by him as offerings given to him by his followers, all that is being

done is the application of the money for the discharge of the very burden with which it was impressed even at the time of its receipt. It cannot,

therefore, be said that there is any transfer of the ownership of the funds in the hands of the Swami or the head of the Mutt, to the trust which could

attract gift-tax.

A Division Bench of the Gujarat High Court comprising S. H. Sheth J. and G. R. Nanavati J. (as he then was) in the case of Suleman Isubji

Dadabhai Vs. Naranbhai Dahyabhai Patel and Others, , while dealing with the case of a trust wherein the settlor had appointed himself as sole

trustee, held that the trust deed in such case was merely a vesting declaration which invests the settlor with the legal ownership of the property and

divests him of the beneficial ownership transferring the latter to beneficiaries of the trust. It was also held that to take a different view would result in

a conflict between Section 122 of the Transfer of Property Act, and Section 6 of the Trusts Act because, while Section 122 of the Transfer of

Property Act contemplates the transfer of property to the donee and acceptance thereto on behalf of the donee, Section 6 of the Trusts Act does

not contemplate the transfer of property to oneself. We are in respectful agreement with what been held in that decision by the learned judges.

The creation of the trust by the Jeer, therefore, has only to be regarded as a vesting declaration which did not involve the transfer of the money

which has been offered to him by way of padhakanikkai or sambhavanai, which amounts in fact were burdened with the obligation to apply the

same for religious purposes and for the attainment of the objectives of the Mutt and, therefore, did not involve any gift to the trust which could

attract gift-tax.

The questions referred to us are answered in favour of the assessee and against the Revenue. The assessee is entitled to costs with a sum of

Rs. 2,500 (rupees two thousand and five hundred only).