Commissioner of Hindu Religious & Charitable Endowments, Mysore v. U. Krishna Rao & Ors.

Shah, J. The Madras Religious and Charitable Endowments Act 19 of 1951 was enacted to provide for the better administra-tion and governance of Hindu Religious and Charital!le Institutions and Endowments in the State of Madras.· This Court in The Commissioner of Hindu Religious and Charitable Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(') held that ss. 21, 30(2), 31, 55, 56 and 63 to 69 of Act 19 of -J 951 were ultra vires, in that they infringed the guarantee of the fundamental rights in Arts. 19(1)(f), 25 and 26 of the Con-stitution of India. This Court also held. that s. 76(1) providing for imposing liability for payment of contribution which was of the nature of a tax -and not a fee, was beyond the legislative com-petence of the State Legislature.

The Legislature then amended the Act by Madras Act 27 of 1954. On August 11, 1955, the Government of Madras framed Rules under the Act prescribing a graduated scale of rates of con-tribution under s. 76(1).

Th~ respondents w!io .are trusteeli' bf the Venkataramana Tem-ple al Mulki, Distri<;,t Scitith Kanaqi, moved a petition in the High Court \lf Madras"'Jor an order restraihing the Commissioner of Hindu Religious and Charitable End.owrhents from 'enforcing the provisions of the AmendJng Act 27 .of 1954. Under the schemt! of reorganization of State of Madras, the petition was tral).sferred for trial to the High cour\ of M:xsore. The )1igh Court of Mysore by order dated March I 0, 19'59, held that ss. 21, 10(;1), 31, 63 to '69 and 39 as amended by' AC! 27 of 1954 were inv'alicf: Devraja Shcnoy·v. The State'•o(Madras( 1). , " • ,•

THe Assistant Commissioner of Religious Endowments Mysore, issued on September 30, 19~9 directing the respondent. to pay the arrears of contributions and audit fee under the Commissioner's demand notice dated·June' '25, 1957. The.respondents moved an-other petition in the ;High Court of Mysore challenging t.he validity .of the demand. The High Court upheld the plea.on the ground that no rules· had been frmfied under s. 100 of the Act, and there-fore, the demand for levy.a~ contribution.was.r,remature, and that audit fee deihanded by the Commissjoner. was .without ,determina-tion under s. 76('f) of th~ Act and WflS :'on that, accoul).t w,ithout competence or authori\y of Jaw". With.certificate granted·by the High Court, the Commissioner of Hindi,! Religious & Charitable Endowments has preferred thiS appeal. '

The provisions of the Act ·which are r~levant may first be read :

S. '71-" (1) The trustee of every religious institu-tion sjiall keep regular a~counts of air receipts and dis-bursements.

(2) The accounts of evefy. religious ,institution, the an)rnal income· of which as calculated for the· ourposes of 'section 7 6 for the fasli year immediately preceding is not less than sixty thousand rupees, shall be subject to concurrent au,dif, that is tq s'ay, the audit shall take place as apd'when expenqiture is incurred.

'"(3) ( 4) The audit sh,all be made- ( a) in the case of a religious institution the annual income of which calculated as aforesaid for the fasli year immediately· i:receding is pot !Css than· one thousand rupees, by auditors .appoh1te_c!. in.~he prescribed ll)afmer, ... ,. (b) (I) (1900) Mys. L.J. 24.S:

S. 76-"(l) In respect oi the services rendered by the Government and their office;s and for defraying the expenses :ncurred on account of such services every re-ligious institution shall from the income derived by it, pay to the Commissioner annually such contribution not exceeding five per centum of its income as may be prt scribed.

(2) Every religious institution, the annual income of which, for the fasli year immediately preceding as cal-culated for the purposes of the levy of contribution under sub-section (!), is not less than one thousand rupees, shall pay to the Commissioner annually, for meeting the cost of auditing its accounts, such further sum not ex-ceeding one and a half per centum of its income as the Commissioner may determine.

(3) (4) The Government shall pay the salaries, allow-ances, pensions and other beneficial remuneration of the Commissioners, Deputy Commissioners, Assistant Com-missioners and other officers and servants (other than exe-cutive officers of religious institutions) employed for the purposes of this Act and the other expenses incurred for such purposes, including the expenses of Area Commit-tees and the cost of auditing the accounts of religious institutions. ,,

(5) S. 100-." ( 1) The Government may make rules to carry out all or any of the purposes of this Act ·and not inconsistent therewith.

(2) In particular, and without prejudice to the gene-rality of the foregoing power, they shall have power to make rules with reference to the following matters :-

(c) the method of calculating the income of a reli-gious institution for the purpose of levyin_ contribution and the rate at which it shall be levied;

Rules were framed by the State of Madras on August 11, 1955 authorising the imposition of a graded levy of contribution. The Rules framed by the Government of the State of Madras remained in force in the State of Mysore after reorganization of the State of Madras, and applied to the temples in the South Kanara Dis-trict which was incorporated in the Mysore State. It is true that the High Court of Mysore declared invalid certain provisions of the Act imposing control upon !he administration of temples gover-ned by the Act. Bu( on that account the power to make rules was not restricted, nor were the rules· framed by the Government rendered invalid. The decision of the High Court that no rules for the levy of contribution were framed was largely influenced by the observations made in the judgment in Devraja Shenoy's case('). It was observed in that case that since the respondents had applied for restraining the State from enforcing any of the provisions of the Act, an investigation into the c: substainability of that claim would have involved determination the validity of s. 76(1) and of any demand for contribution under its provisions and since the Advocate General appearing for the State in that case had informed the Court that the question did not fall to be deter-mined because rules prescribing the contribution payable by the respondent-temple "had yet to be made, which meant that until such rule was made no contributio)l. could be demanded", the conclusion reached by the Court was in truth "a decision on one of the material questions arising in that case, and binding on all the parties to that case." The Court proceeded to observe :

"In that view of the matter it is incontrovertible that what was stated in the previous case on behalf of the State was that the amount of contribution payable by the petitioners (respondent) temple should be prescribed by a rul.: which remained to be made which means that what was decided by this Court was that no such contri-bution could be recovered from that temple until such a rule was made.

The impugned demand made on June 25, 1957 befo1G this Court rendered its decisio)l. in Devraja Shenoy's case(') on March 10, 1959 having no efficacy or effect, since it was a plainly premature demand made even before the liability to pay the contribution came into existence, has to be and is accordingly quashed." This view, in our judgment, proceeds upon an incorrect view of' the true nature of the contribution leviable under s. 76(1) of the Act. The assumption made by the Court that under the Act the Government had to make under s. 100 rules applicable to each temple separately and pre,cribing the method for determining con-tribution finds no support in the provisions of the Act or its scheme.

The true nature of the contribution exigible under s. 76(1) under Madras Act 19 of 1951 was explained by this Court in H. H. Sudhindra Thirtha Swamiar v. Commissioner for Hi:1du Religious & Charitable Endowments, Mysore('). It was pointed out that (p. 323) :

(I) (1)61) My;. L.J. 245. (2) [1963] Supp. 2 s.<;.R. 302.

"A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness pres~nt in it, nor is it a pos-tulate of a fee that it must have direct relation to the ac-tual services rendered by the authority to individual who obtains the benefit of the service. ICwith a view to pro-vide a specific service, levy is imposed by law and ex-penses for maintaining the service are met out of the amounts collected there being a reasonable relation bet-ween the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax. It is true that ordinarily a fee is uniform and no account is taken of the varying abilities of different recipients. But absence of unifor-mity is not a criterion on which alone it can be said that it is of the nature of a tax. A fee being a levy in consideration of rendering servjce of a particular type, co-relation between the expenditure by the G'overnment and the levy must undoubtedly exist, but a levy will not be regarded as a tax merely because of the absence of uniforn1ity in its incidence, or because of compulsion in the collection thereof, nor because some of the contri-butories do not obtain the same degree of service as others may."

Under the Act a fee though levied for rendering services of a par-ticubr type is not to be co-related to the services performed for each individual who is intended to obtain the benefit of the services. The cc-relation must be between the expenses incurred by the au-thority kvying the fee for generally providing the service and the aggregate of the levy from persons who are to be made subject thereto. It is a necessary corollary that under the Act general rules prescribing the levy of fee from religious endowments have to be made, and not rules governing individual endowments.

The Act does not contemplate separate rules to be made in respect of each religious institution likely to obtain the benefit of Services rendered by the State for which the contribution is to be levied. The concession m•"- by the Advocate-General at the hear-inj! in Devraja Shenoy's case( 1) does not oblige the State to frame separate rules in respect of ea9h individual religious institution. The rules under the Act have to be general. And such rules were in fact framed and were in operation. We are unable therefore, to agree with the High Court that appropriate rules were not in exis-tence at the time when the demand was made. and on that account the demand was premature.

If services are provided. assuming that the Venkataramana temple either does not need the services, or does not obtain the

(I) (1961) Mys. L. J. 245.

benefit of the services, the contribution would still be recoverable. We are also unable to ac.cept the argument raised that because the-rules were framed at a time when several different kinds of services were intended to be rendered and the Court later struck down cer-tain provisions of the Act under which services wer~ to be ren-dered, the rules framed in 1955 were rendered inapplicable.

The order passed by the High Court upholding the claim of the respondent-temple on this part of the case must therefore, be· set asicte.

The High Court has not investigated the question whether there-is a reasonable relation betweei;i the expenditure incurred by the Go~ernment for providing services and the amounts intended to be colle~ted from the religious institutions for whose benefit the ser-vices are to be rendered. Since this is a matter to be decided on evidence, we do not propose to enter upon that question in this appeal.

The second question relates to the levy of audit fee. Under s. 76(2) of the Act audit fee is not to be prescribed by rules : the Commissioner has to determine the fee for auditing the accounts of each religious endowment. The power of the Commissioner is subject to a three-fold restriction : (I) that the annual income of the religious institution for the relevant year preceding the year is Rs. 1,000/- or more; (2) that the fee does not exceed 1!% of the inccme; and ( 3) that the fee is levied for meeting the cost of audit-ing 1 he accounts of the religious institution. In the present case; ccnditions (I) & (2) .are satisfied. But the High Court was of the view that the Commissiow· r had not determined the cost of audit-ing the accounts of the respondent-temple, and proceeded to observe :

"It is sufficient to say that the demand made of the-petitioners' temple for the payment of a sum of Rs. 1, 162-83 nP towards the audit of its accounts in res-pect of the year 1963 fasli does not rest upon any deter-mination made under Section 7 6(2) and is therefore one made without competence or the authority of law."

In so observing, in our judgment, the High Court erred. It was not the case, of the respondents in their petition that the Commis-· sioner had not determined the audit fee under s. 76(2). In para-graph-12 of the petition it was merely asserted that the fee deter-mined by the Commissioner at the rate of H% of the income was excessive. It is true that the Commissioner may not under s. 76(2) of the Act impose a flat rate of audit fee on the religious institu-tions governed by the provisions of the Act : he has to detennine audit fee for meeting ihe costs of auditing the accounts l!S a per-centage of the income of each religious institution. The Commis-sioner has w determine, having regard to the facts and circum-stances of each case, the fee (being not more \han the maximum 'prescribed) for meeting the cost of audit of the institution. That im-plies that the Commissioner has to form an estimate of the reason-able cost which may be incurred in making an effective audit of the accounts of the religious institution, and ,to state it in terms of a percentage of !he income. The percentage of income levied as audit fee must of necessity.be based on an estimate, and the demand wil1 not be struck down merely because it turns out that the amount demanded is not precisely equivalent to the cost actually incurred for auditing the accounts.

Since the High Court has proceeded upon the ground of ab-sence of determination by the Commissioner, which was never plea-ded, and the High Court has not determined whether the audit fee demanded was in truth for meeting the cost of auditin,g, the ac-counts of the Venkataramana tempJe:, the order passed by the High Court in respect of this part of the case must also be set aside.

The order of the High Court is set aside and it is directed that the case do stand remanded to the High Court and that the High Court do dispose of the case according to law and in the light of the observations made in this judgment.

Costs of this ap!'eal will be costs in the High Court.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2312 of 1966.

Appeal from the judgment and order dated November 7, 1962 of the Mysore High Court in Writ Petition No. 781 of 1960.

M. C. Chag/a; S. S. Java/i and S. P. Nayar, for the appellants. M. K. Nambyar, G. L. Sanghi and J. B. Dadachanji for respondents Nos. 1 to 5.