The Judgment of the Court was delivered by

Sinha, J.:— This is a reference under Section 66(1) of the Income-tax Act.

2. The facts which have given rise to this reference may be stated as follows. By a registered instrument of dedication, dated 7-9-1861, Rani Katyani dedicated certain immovable properties situate in Calcutta to the Deity Sree Sree Iswar Gopal Jew which she had installed in the Cossipore house, in order to defray the expenses of the daily sheba and the periodical festivals of the said deity. The deed made provision for meeting the expenses of the seva and puja of the deity out of the income of the dedicated properties, and then went on to provide as follow:

“During my lifetime, I, in my capacity as shebayet will remain in possession of the said debutter properties, subject to the conditions or trusts attached thereto and out of the income of the houses and bazar aforesaid, I will pay the rates and taxes and the costs of repairs of the houses &c., and all other necessary expense and apply the surplus income to the sheba or service &c., of the illustrious Thakoor.”

3. Provision was also made by the instrument for devolution of shebaitship.

4. I ought to mention that Dr. Pal pointed out that the translation of the deed of dedication in so far as it used the word ‘trust,’ was not correct. He read the original Bangalee deed to us and it appeared that there was no word in the original which could be translated as “trust.” Be that as it may, the deed has to be read as a whole and its construction is not affected even if the word “trust” occurred there.

5. The question arose whether the income of the properties of the deity held under the endowment was exempt from assessment to income-tax. The years of assessment were 1941-1942, 1943-1944 and 1945-1946. The assesses was the said deity through Kumar Arun Chandra Singha, as shebait.

6. Before the Income-tax Officer, a claim was made on behalf of the assessee for total exemption under Section 4(3)(i) of the Income-tax Act. The Income-tax Officer held that the purpose for which the endowment was created was strictly private and that the fact that a certain section of the public was allowed admission into the temple or to partake of the distribution of the bhog offerings, did not alter the private character of the endowment. He further held that the deity, as the owner of the income, was assessable to tax and not entitled to exemption. He assessed the tax for 1941-1942 upon a total income of Rs. 51,700 under Section 23(3) of the Act.

7. On appeal to the Appellate Assistant Commissioner, various points were urged to which it is not now necessary to make reference. Suffice it to say that exemption was claimed on the footing that the properties were held under a “legal obligation wholly for religious purposes,” within the meaning of Section 4(3)(i) of the Act. The Appellate Assistant Commissioner rejected that contention and observed as follows:

“A perusal of the arpannama shows that the properties were dedicated to the Deity for the maintenance of the worship and for other religious purposes. The shebait holds the property as trustee for the spiritual benefit of Rani Eatyani's descendants. I hold it is a private religious trust.”

8. On appeal the Appellate Tribunal held that the deed created a private religious trust for the upkeep of the deity and as no part of the income of the trust enured for the benefit of the public, the assessee was not entitled to exemption from tax under the Act.

9. The question which has been referred by the Appellate Tribunal is in these words:

“Whether on the facts and in the circumstances of the case and upon a proper construction of the deed (arpannama) dated 7-9-1861, the income of the endowed property of Sree Sree Iswar Gopal Bigraha or any part thereof is exempt from taxation under the provisions of Section 4(3)(i) of the Income-tax Act, read with the explanation of that sub-section.”

10. The relevant exemption clause in Section 4 of the Act is in the following terms.

“Section 4 …………………………………….

(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them.

(i) Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto………………. In this sub-section “charitable purpose” includes relief to the poor, education, medical relief, and the advancement of any other object of general public utility, (but nothing contained in clause (i), clause (ia) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income of a private religious trust which does not enure for the benefit of the public”)

11. The words within brackets were introduced by the amendment of 1939.

12. Leaving out portions not material for purposes of this reference, the section grants exemption from assessment to income-tax in respect of income derived from property (a) held under trust, (b) held under other legal obligation, and wholly for religious purposes.

13. The explanation contained in the last paragraph of that section, withdraws the exemption from that part of the income of a prrivate religious trust which does not enure for the benefit of the public.

14. On the facts narrated above, the following questions fall to be considered: (i) Are the properties dedicated or belonging to the endowment, held under a trust? (ii) if not, are they held under a legal obligation wholly for religious purposes? (iii) if so, is the income of the endowed property, the income of a private religious trust. In dealing with these questions, it is necessary to keep in mind the solid distinction which has been recognised between a trust and a Hindu endowment.

“A trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him for the benefit of another or of another and the owner”. (Section 3 of the Trusts Act (II[2] of 1882).

15. Three parties are necessary to the constitution of a trust, namely, the settlor, the trustee and the beneficiary. A trust is not completely constituted until the trust property is vested in trustees for the benefit of the cestui que trust.

16. On the other hand, a Hindu who wishes to establish a religious or charitable institution, may, according to his law, express his purpose and endow it. A trust is not required for that purpose. All that is necessary is that the religious and charitable purposes should be clearly specified, and that the property intended for the endowment should be set apart for or dedicated to those purposes: See Mulla (10th Ed.) p. 492, Article 407(2).

17. By the instrument of dedication Rani Katyani made an absolute and complete grant of properties to the deity. On such dedication the Rani became divested of the ownership of the properties which vested in the deity. No trustee was appointed nor was any property vested in any trustee. After the dedication, the deity held the properties as the owner thereof though in an ideal sense. The shebait appointed by the instrument had no legal ownership in the dedicated properties or the funds of the endowment. The shebait had the right of possession and management of the endowment properties because, in the nature of things, the deity can only act through a human agency and such rights must vest in the shebait by virtue of his office.

18. As was observed by the Privy Council in Vidya Varuthi Thirtha v. Balusami Ayyar, 48 I.A 302 at p. 311 : (A.I.R (9) 1922 P.C 123).

“When the gift is directly to an idol or a temple, the seisin to complete the gift is necessarily effected by human agency. Called by whatever name, he is only the manager and custodian of the idol or the institution. In almost every case he is given the right to a part of the usufruct, the mode of enjoyment and the amount of the usufruct depending again on usage and custom. In no case was the property conveyed to or vested in him, nor is he a, “trustee” in the English sense of the term, although in view of the obligations and duties resting on him, he is answerable as a trustee in the general sense for mal-administration.”

19. An endowment may of course be created through the medium of a trust. But in this case it is clear that the endowment was created by an instrument of dedication and not through the medium of a trust.

20. The essential elements necessary to constitute a trust are therefore lacking in the deed of dedication. The property or the income thereof held under this deed, whether by the deity or by the shebait, cannot be said to be held under a trust.

21. The word “trust” in S. 4(3)(i) is used in contradistinction to “other legal obligation”. The deed of dedication created a legal obligation in the deity and its shebait to hold and apply the income of the endowed properties for the purposes specified in the deed of dedication and for no other purpose. Any transaction which diverted the properties or funds of the endowment to purposes other than those provided for in the deed would be invalid and not binding on the endowment. It cannot be and has not been suggested that the purposes for which, under the deed, the income of the endowment were to be spent are not wholly religious purposes. It is therefore clear that the income of the endowed properties is being held wholly for religious purposes; and there is a legal obligation so to hold. It is not material to consider whether such income is being held by the deity or by its manager, the shebait. In either case, the income is being held under a legal obligation for wholly religious purposes.

22. The next question is—is there anything in the last paragraph of S. 4, which has the effect of withdrawing or modifying the exemption granted by S. 4(3)(i)?

23. If the endowment can be sail to be a private religious trust, it would be necessary, in order to get the benefit of the exemption, to prove that the income or part thereof enured for the benefit of the public. The word “trust” must have the same meaning in the explanation as in S. 4(3)(i). I have already held that the endowment is not a “trust”. The endowment cannot, therefore, be “a private religious trust”. The words used are “a private religious trust” not “a private religious endowment”. The Legislature has made a distinction between “trust” and “endowment” and has used appropriate words where necessary. The gift here was made directly to the idol. No trust was created. The shebait appointed was merely a ministrant of the worship and manager of the properties of the deity. The elements necessary to constitute a private religious trust do not therefore exist in this case.

24. It follows that the deity has brought itself within the exemption contained in S. 4(3)(i) and such exemption is not affected by the explanation in the last paragraph of the section.

25. In Tribune Trustees v. Income-tax Commissioner, 66 I.A 241 : (A.I.R (26) 1939 P.C 208) the question arose whether trustees appointed under a will to maintain a press and a newspaper and to devote the surplus income in improving the newspaper, were entitled to exemption from taxation under S. 4(3)(i) on the ground that the income was held for charitable purposes. Sir George Bankin in considering the question observed incidentally as follows:

“It is to be observed, moreover, that under the Income-tax Act the test of general public utility is applicable not only to trusts in the English sense but is to be applied to property held under trust or “other legal obligation”—a phrase which would include Moslem wakfs and Hindu endowments.” This observation lends support to the view that Hindu endowments, which are not created through the medium of a trust, are included in the words, “other legal obligation”. If they are charitable endowments, they have to satisfy the definition of the words “charitable” in the explanation. But if they are religious, they can only be affected if they can be said to be “private religious trusts”. In any other case, income derived from property held under a legal obligation to apply it wholly for religious purposes is within the ambit of the exemption in S. 4(3)(i).

26. Dr. Gupta submitted that under Section 40 of the Act, the shebait is assessable as guardian of the deity, who is a perpetual minor. It is, however, firmly established that the deity is not a minor and the shebait is not its guardian. The shebait is only the Manager of the deity, the human agency through which the purpose of the endowment is carried into effect. Section 40 has, in my view, no application to the case of a shebait.

27. The result is that the question referred must be answered in the affirmative.

28. The assessee is entitled to the costs of the reference. Certified for two counsel.

29. Harries, C.J:— I agree.

V.B.B

30. Reference answered.