1. There is an ancient temple of Ambaji Mata at Surat which was originally founded by a person named Premji Bhatt. He managed the temple, attended to the adornment of the deity and the performance of the puja and allowed the members of the public to visit the temple and to have darshan of the deity. Whatever offerings were made to the deity by the people visiting the temple were collected by him and retained by him as his income. In course of time, the temple passed to his descendants by inheritance and during the account years ended 31st March 1950, to 31st March, 1957, being the previous years for the assessment years 1950-51 to 1957-58, the following five persons who are assessees before us claimed to be the owner of the temple in the following share :

Rs. As. Ps.

2. The assessee performed the aforesaid functions in regard to the temple and claimed to be entitled to the offerings made to the deity in the aforesaid shares. Of the assessee, three were ladies. For the purpose of sharing the offerings which might be made to the deity, what is known as vara system, i.e., the system by turns, was followed by the assessees. Under this system, each assessee attended the temple as pujari by turns during the particular days allotted to him by casting lots and collected the offerings to the deity during that period and such offerings were retained by him as his own income. The number of days allotted to each assessee in a period of two months depended on the share to which he was entitled. On the days allotted to him, each assessee managed and looked after the temple, attended to the adornment of the deity, performed the puja and did all other things required in connection with the temple and collected the offerings made to the deity as his own individual income. The ladies, of course, did not attend the temple personally, but at the time of their turn some male members performed the duties on their behalf and also collected the offerings made to the deity on their behalf. On festival days, the number of devotees visiting the temple would naturally be much larger than on the other days and, consequently, the extent and value of the offerings do the deity would also be much larger and all the assessees, therefore, attended the temple on those days, looked after the adornment of the deity and the performance of the puja, collected the offerings made to the deity and shared them in the aforesaid proportions to which they were entitled. The ladies were also given their share of the offering even though they did not attend the temple on the festival days.

3. On these facts, the Income-tax Officer held that the assessees were liable to be assessed as an association of persons in respect of the offerings to the deity collected by them and since there were no books of account or documents to show what were the offerings to the deity, he estimated them and assessed the assessees as an association of persons in respect thereof for the assessment years 1950-51 to 1957-58. The assessees, being dissatisfied with this decision, preferred appeals to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner took the view that there was no association of persons constituted by the assessees and they were not liable to be assessed as an association of persons. According to him, each assessee was liable to be assessed separately in respect of his or her share of the offerings received by him or her and he accordingly set aside the assessment made on the assessees in the status of an association of persons. At the hearing of the appeals, a contention was urged on behalf of the assessees that, in any event, the assessment was liable to be set aside inasmuch as the offerings to the deity constituted the income of a public religious trust and were, therefore, not assessable in the hands of the assessees, either as individual or as an association of persons. This contention was however not set out as a ground of appeal in the memorandum of appeal before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner therefore not being satisfied that the omission of this ground from the memorandum of appeal was not willful or unreasonable, refused to entertain this contention. The explanation given by the assessees for not taking this contention as a ground of appeal in the memorandum of appeal was that the order of the Assistant Charity Commissioner holding that the temple was a public religious trust was dated 14th April, 1959, whereas the appeals were filed prior to that date on 2nd April, 1959, and this contention could not therefore be taken as a ground in the appeals. The Appellate Assistant Commissioner, while not disputing the facts pointed out by the assessees had not accepted the decision of the Assistant Charity Commissioner that the temple was a public religious trust and had, as a matter of fact, preferred an appeal against it before the Charity Commissioner. the Appellate Assistant Commissioner accordingly refused to entertain this contention but, since he decided in favour of the assessees on the question of status, he set aside the assessment.

4. The revenue thereupon carried the matter in appeal to the Tribunal. Before the Tribunal, the assessees sought to sustain the order of the Appellate Assistant Commissioner on the ground decided against the assessees, namely, that the offerings to the deity constituted the income of a public religious trust and not the income of the assessees either as individuals or as an association of persons and arguments were heard upon this ground. But when the Tribunal ultimately came to make its order in the appeals, the Tribunal omitted to deal with this ground. On the question whether the assessees constituted an association of persons or not, the Tribunal accepted the contention of the revenue and held that the assessees were liable to be assessed as an association of persons and were rightly assessed as such by the Income-tax Officer. The Tribunal accordingly set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. Since the Tribunal did not deal with the contention of the assessees that the offerings constituted the income of a public religious trust and not the income of the assessees, the assessees made a miscellaneous application to the Tribunal requesting the Tribunal to deal with this contention and to dispose of the same on merits. The Tribunal rejected this application, broadly, on two grounds. The first ground was that the application was undated and was not signed by all the assessees, and the second ground was that, even though it was true that the assessees had raised the contention at the hearing of the appeals before the Tribunal, the assessees were not entitled to agitate the contention since the assessees had not come in appeal to the Tribunal against the refusal of the Appellate Assistant Commissioner to entertain this ground.

5. The assessees, thereupon, made an application to the Tribunal for reference of certain questions of law, which according to the assessees, arose out of the order of the Tribunal. On the application the Tribunal referred the following two questions for the opinion of this cour :

"(1) Whether, on the facts and circumstances of the case, the assessments upon the applicants as an association of persons are correct in la ?

(2) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the income from the said temple on non-festival as well as festival days accrued to the applicants as an association of person ?"

6. There was also a third question which the assessees wanted the Tribunal to refer to this court and that arose out of the contention of the assessees that the offerings to the deity constituted the income of a public religious trust and were therefore not assessable in the hands of the assessees either as individuals or as an association of persons. But in view of the order made by the Tribunal on the miscellaneous application of the assessees, to which we have just referred, the Tribunal refused to refer the third question to the court for its opinion on the ground that the assessees not having been allowed to raise this contention before the Tribunal and the Tribunal not having dealt with it in its order, no question of law with regard to that contention could be said to arise out of the order of the Tribunal. The assessees, thereupon, made an application to this court under section 66(2) and when the application came up for hearing, we directed that the following question, namel :

"Whether the Tribunal erred in law in declining to consider the contention of the applicants that as the income of the Ambaji Temple was the income of a public religious trust, the same was no assessable in the hands of the applicants in their individual capacities at all, either as an association of persons or otherwise, only on the ground that the applicants had not preferred any appeal from the refusal of the Appellate Assistant Commissioner to entertain their contention as an additional ground"

7. be referred for the opinion of this court. There are thus three questions which call for answer from us on this reference.

8. The first two questions relate to the status in which the assessees are liable to be assessed in respect of the offerings to the deity collected by them. The point which arises under these questions is whether the assessees constitute an association of persons within the meaning of section 3 of the Income-tax Act, 1922, so as to be liable to be assessed as such in respect of the offerings to the deity collected by them or whether each of the assessee is liable to be assessed separately in respect of his or her share of those offerings. Now, what constitutes an association of persons within the meaning of section 3 of the Income-tax Act, 1922, is no longer open to controversy and is settled by the decision of the Supreme Court in Commissioner of Income-tax v. Indira Balkrishna. The Supreme Court in that case, after referring to three decisions, two of the High Court of Bombay and one of the High Court of Calcutta, laid down that - "an association of person must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains." The Supreme Court approved the observations of Costello J. in In re B. N. Elias, where the learned judge said while dealing with the question as to what constitutes an association of person : "... it may well be that the intention of the legislature was to hit combinations of individuals who were engaged together in some joint enterprise but did not in law constitute partnership... When we find... that there is a combination of persons formed for the promotion of a joint enterprise...then I think no difficulty whatever arises in the way of saying that... these four persons did constitute an association..."

9. The test which must, therefore, be applied in order to determine whether the assessees constituted an association of persons is whether the assessees joined in a common purpose or common action with the object of producing income and income in the shape of offerings to the deity arose to them as a result of the joint enterprise in which they were engaged. To determine this, let us examine the facts of the case.

10. Now, before we consider this question, we must first clear the ground by pointing out that the determination of this question must proceed on the basis that the temple was a private temple of the assessees during the relevant accounting years. Of course, the assessees contended before the Tribunal that the temple was a public religious trust as declared by the Appellate Assistant Commissioner by his order dated 14th April, 1959, but this contention was not entertained by the Tribunal on the ground set out above, and the refusal of the Tribunal to entertain the contention forms the subject-matter of the third question. If we decide the third question in favour of the assessees and, on the matter going back, the Tribunal takes the view that the Appellate Assistant Commissioner was wrong in not entertaining the contention or decides, having regard to the facts before it, to entertain the contention despite the refusal of the Appellate Assistant Commissioner to do so and ultimately holds that the temple was a public religious trust, the question whether the assessees constituted an association of persons in respect of the offerings to the deity collected by them would not arise, as the offerings to deity would in that event be the income of the public religious trust and not the income of the assessees. The offerings to the deity become the income of the assessees only on the basis that the temple was a private temple of the assessees and we will, therefore, assume for the purpose of this argument that the temple was a private temple belonging to the assessees. Now the assessees inherited the temple by descent from the original founder, Premji Bhatt, and they were jointly entitled to the temple and other movable and immovable properties appertaining to the temple. The ornaments and jewellery for the adornment of the deity also belong jointly to the assessees and remained in their joint possession. Whenever any new properties were purchased, they were also purchased by the assessees as joint owners. The assessees managed and looked after the temple, attended to the adornment of the deity and the performance of the pooja in accordance with certain well-defined traditions and standards and allowed the public to visit the temple at regulated hours to have darshan of the deity and to make such offerings as they liked. The object of the assessees in doing all this clearly was that devout Hindus may come to the temple and make offerings to the deity so that the assessees may earn income in the shape of such offerings. The assessees thus engaged themselves in a joint enterprise with the object of earning income received by way of offerings to the deity.

11. Mr. S. P. Mehta, learned advocate appearing on behalf of the assessees, contended that the offerings were made to the deity by members of the public because of the deep and abiding faith which they have in the deity and not because of any efforts on the part of the assessees. He pointed out that the offerings came not because of anything which the assessees did or did not do, but because of the devotional urge of the people visiting the temple which had no relation to the activities of the assessees. The argument in other words was that the offerings did not flow directly from the efforts of the assessees and the joint enterprise was not responsible for producing the income. The argument, though at first blush attractive, is, in our opinion, fallacious in that it looks at the problem from a wrong angle. It is no doubt true that when people visit the temple and make offerings to the deity they do so because of the religious faith and devotion which they have for the deity and not because they want to remunerate the assessees for the management of the temple or the adornment of the deity or the performance of the pooja or any other activities in connection with the temple. But the question is not what is the motive or reason which prompts people to make offerings to the deity, but what is the object of the assessees in doing these activities. Why do the assessees look after the temple, adorn the deity, perform the pooja and allow people to come to the temple to have darshan and to make offerings to the deit ? Obviously the assessees know that if devout and religious-minded people come to the temple, they would almost always as a matter of course make offerings to the deity and this would bring income to the assessees. In order to produce this income the assessees must, therefore, see that people come to the temple and for that they must maintain the temple, perform pooja including arti at certain fixed times, make offering of what is called than, i.e., plate of food to the deity, and allow people to come to the temple to have darshan of the deity. All this is done by the assessees in order to earn income in the shape of offerings to the deity. The temple is the source which produces income by reason of the faith and devotion which devout and religious-minded people have for the deity in the temple and it is this source which is exploited by the assessees with a view to producing income. It was not contended before us, and indeed it could not be contended, that the activities of the assessees in regard to the temple were purely for earning spiritual merit and there was no income-making motive behind them. The very fact that the allotment of days for the performance of pooja and other functions in regard to the temple in each period of two months was made amongst the assessees in the proportion in which they were entitled to share the offerings to the deity so that by collecting and retaining the offerings made to the deity during the particular number of days allotted to him or her, each of the assessees should be able to receive his or her proportionate share of the offerings to the deity and the performance of these functions by the assessees was kept joint on the festival days since the offerings on these days would be very large and it would not be possible to equitably divide these days amongst the assessees so that each assessee may get his or her proportionate share of the offerings, shows that the motive of the assessees was clearly a profit-making motive and not a motive merely to earn spiritual benefit by performing these functions. If the object of the assessees had been merely to earn spiritual benefit and the offerings came to them because of their ownership of the temple, it would not have been possible to say that they were engaged in a joint enterprise with the object of earning income. Mere sharing of income in such a case would not have been enough. There being no joint enterprise with a view to producing income, the case would have fallen within the ratio of the decision in Commissioner of Income-tax v. Indira Balkrishna. But, when we find that the assessees joined in a common purpose and common enterprise with a view to earning income, the case would be more akin to that in Commissioner of Income-tax v. Laxmidas Devidas, a decision which was approved by the Supreme Court in Commissioner of Income-tax v. Indira Balkrishna. We are therefore of the view that the assessees constituted an association of persons who were joined together in a common purpose or common action with the object of producing income and income in the shape of offerings to the deity was liable to be assessed in their hands in the status of an association of persons.

12. It was then contended on behalf of the assessees that, in any event, the assessees could not be said to constitute an association of persons in so far as the offerings to the deity on non-festival days were concerned. A distinction was sought to be drawn between the position obtaining on festival days and the position obtaining on non-festival days. The argument was that on non-festival days the management of the temple, including the performance of the functions such as pooja, arti and the adornment of the deity was divided amongst the assessees and each assessee performed these functions on the days allotted to him and collected the offerings made to the deity during those days and retained them as his own individual income. There was, the argument ran, no common action or enterprise during those days and it could not therefore be said that there was an association of persons which by its common action or enterprise was earning income during those days. This argument, however, overlooks the fact that the management of the temple including the performance of the various functions, to which we have referred earlier, was one concerted activity of the assessees as a body with the object of earning income in the shape of offerings to the deity and merely because for the purpose of sharing that income in the proportion to which the assessees were entitled they arrived at an arrangement by which these functions were to be performed by the assessees in turns on non-festival days, it does not mean that there was no common purpose which was being carried out on those days when one or the other assessee, according to the arrangement, performed these functions. The performance of these functions by one or the other assessee on non-festival days was in furtherance of the common purpose of the assessees, namely, to earn income by exploiting the source, namely, the temple which belonged to all of them. Instead of all the assessees performing these functions jointly for exploiting this source of income, the assessees amongst themselves arrived at an arrangement for proper exploitation of this source of income and under this arrangement each assessee was to perform these functions to his turn on non-festival days and to collect the offerings made to the deity during the days allotted to him and to retain such offerings as and by way of his proportionate share in the income arising from this source. It is significant to note that on festival days, which it was not possible to divide equitably amongst the assessees having regard to the fact that the offerings on those days were very large, the assessees performed these functions jointly and divided amongst themselves in the proportions to which they were entitled to the offerings made to the deity during those days. What was done merely by way of convenience on non-festival days cannot in any way destroy the essential character of the transaction, namely, that the assessees were carrying out a common purpose, namely, exploitation of the source with the object of earning income. We are, therefore, of the opinion that the position obtaining on non-festival days was not different from that obtaining on festival days and the assessees constituted an association of persons not only in respect of the offerings collected on festival days but also in respect of the offerings collected on non-festival days. In view of this, our answers to questions Nos. (1) and (2) will be in the affirmative.

13. That takes us to the third question which the Tribunal has referred to us pursuant to the order made by us on the application of the assessees under section 66(2). That question must clearly be answered in the affirmative, for it is evident that the Tribunal was in error in declining to consider the contention of the assessees that the offerings made to the deity constituted the income of a public religious trust and not the income of the assessees, on the ground that the assessees had not preferred any appeal from the refusal of the Appellate Assistant Commissioner to entertain this contention. This contention was not raised in the memorandum of appeal before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner therefore refused to entertain this contention, taking the view that the omission of the ground relating to this contention in the memorandum of appeal was wilful and unreasonable. When the matter went in appeal before the Tribunal, the assessees urged this contention before the Tribunal in support of the order made by the Appellate Assistant Commissioner annulling the assessment, but the Tribunal omitted to deal with it in its order. On the miscellaneous application made by the assessees requesting the Tribunal to consider this contention, the Tribunal observed that inasmuch as the assessees had not preferred any appeal from the refusal of the Appellate Assistant Commissioner to entertain this contention, the Tribunal was not entitled to consider this contention and, in that view of the matter, the Tribunal refused to entertain this contention. Now obviously the assessees having succeeded before the Appellate Assistant Commissioner could not possibly file an appeal against the refusal of the Appellate Assistant Commissioner to entertain this contention and the ground on which the Tribunal refused to consider this contention in the appeals preferred by the assessees was therefore not a valid ground. We must, therefore, answer the third question referred to us in favour of the assessees. We would, however, make it clear that our decision is confined only to the question whether the Tribunal was justified in declining to consider the contention of the assessees on the ground that the assessees had not preferred any appeal from the refusal of the Appellate Assistant Commissioner to entertain the contention. When the matter goes back to the Tribunal, the Tribunal may take the view that the Appellate Assistant Commissioner was right in not entertaining the contention or that the Appellate Assistant Commissioner was wrong in doing so. The Tribunal may also take the view that, having regard to the facts before it and in the interests of justice, it will still entertain the contention of the assessees despite the refusal of the Appellate Assistant Commissioner to do so. These are matters which it will be for the Tribunal to consider and decide. All that we say is that the ground on which the Tribunal refused to consider the contention of the assessees was wrong and the Tribunal will now have to consider what it should do in the matter. Our answer to the third question is therefore in the affirmative.

14. The assessees will pay the costs of the reference to the Commissioner while the Commissioner will pay to the assessees the costs of the application under section 66(2).