1. By this petition under Article 226 of the Constitution, the petitioner seeks to challenge the order dated July 2, 1975 (annex. E), of the Assistant Commissioner, Property Tax, Sagar, as well as the order dated August 30, 1975 (annex. F), of the Deputy Commissioner Property Tax, Gwalior.
2. The facts of the case, in brief, are that the petitioner is a public trust duly registered under the M.P. Public Trusts Act. This trust was created by one Shri Naraindasji Genda for religious and charitable purposes by a will dated 19th April, 1896, a copy whereof is filed as annex. A with the petition, Clauses 6 and 7 of which recite the purpose of the said trust to be religious and charitable. Besides a temple and dharamshala this trust also owns many houses which are let out to various tenants of the trust. According to the petitioner, the rental income derived from the houses of the trust is exclusively used and applied for religious and charitable purposes and also for charitable institutions.
3. The Property Tax Officer, Sagar (respondent No. 1), commenced proceedings under the provisions of the M. P. Nagariya Sthawar Sampatti Kar Adhiniyam, 1964 (hereinafter referred to as ' the Adhiniyam '), to assess and recover property tax on the houses of the trust situated within the Sagar Municipality. The petitioner resisted its liability on the ground that the rental income from the properties is being applied exclusively for religious and charitable purposes according to the directions of the trust. The petitioner filed detailed accounts of the rental income and expenditure showing also the items of expenditure incurred in realising the said rental income such as salaries of the trust employees, taxes, insurance premium, legal expenses and expenses incurred in the repairs and maintenance of the trust properties, etc.
4. Originally by order dated March 22, 1971, the Property Tax Officer, Sagar, had exempted all the buildings held by the trust from the liability for payment of property fax. But later on, by order dated January 25, 1975, of the Asst. Property Tax Commissioner, Jabalpur, the matter regarding the liability of the trust for assessment and payment of property tax was reopened. The Property Tax Officer held that the entire rental income from the trust houses is not exclusively applied for dharamshala, and he, therefore, exempted the dharamshala building alone and imposed tax on all the other houses for the year 1970-71. In appeal, the Asst. Property Tax Commissioner maintained that order. But, in second appeal, the Deputy Commissioner, Property Tax, Gwalior, by his order dated January 11, 1975 (annex. D), remanded the case to the Asst. Commissioner, Property Tax, Sagar, with directions that the accounts of the trust be examined and seen as to how the income was applied vis-a-vis the aims and objects of the trust.
5. On remand, the Asst. Commissioner examined the accounts of the trust for the years 1970-71, 1971-72 and 1972-73 and held that the amounts spent by the trust were not spent exclusively for religious and charitable purposes. He, therefore, directed the Property Tax Officer to exempt only the temple and dharamshala and assess property tax in respect of all other buildings of the trust. In appeal before the Deputy Commissioner, Gwalior, decided on August 30, 1975 (annex. F), the order was maintained, against which this petition has been filed to quash the same.
6. Learned counsel for the petitioner contended that, as shown in the Schedules of expenditure (annex. B) and (annexs. R-V to VII), the rental income derived from all the houses of the trust is not spent and applied on any item except the religious and charitable purposes and matters connected therewith, which is exempt from tax liability under Section 6(f) of the Adhiniyam. He further urged that the expenses incurred towards the taxes, insurance premium, litigation, salaries of employees and repairs and maintenance of the buildings of the trust are all items of expenditures directly and exclusively connected with and relating to the trust properties which constitute exclusive use and application of the rental income in religious and charitable purposes covered by the exemptions under Section 6(f) of the Adhiniyam. We find there is much force in this argument of the learned counsel for the petitioner. Before we proceed to appreciate the aforesaid contention, we feel it necessary to reproduce the provisions of Section 6(f) of the Adhiniyam, for better appreciation, which run as under :
' 6. The tax shall not be leviable in respect of the following properties, namely:.....
(f) buildings and land or portions thereof used exclusively for public worship or public charity such as mosques, temples, churches, dharamshalas, gurdwaras, hospitals, dispensaries, orphanages, alms-houses, drinking water fountains, infirmaries for the treatment and care of animals and public burials or burning grounds, or other places for the disposal of the dead :
Provided that the following buildings and lands or portions thereof shall not be deemed to be used exclusively for public worship or for public charity within the meaning of this section, namely :-- (i) buildings in, or lands on, which any trade or business is carried on unless the rent derived from such buildings or lands is applied exclusively to religious purposes or to public charitable institutions aforesaid; (ii) buildings or lands in respect of which rent is derived and such rent is not applied exclusively to religious purposes or public charitable institutions aforesaid.'
7. At the very outset, it may be made clear that the words and expression ' religious purposes ', ' public worship ', or 'public charity' are neither defined by the Adhiniyam nor by the M. P. Public Trusts Act, 1951, and, therefore, there is a wide scope for interpreting these expressions, with reference to the context in which they are used in Section 6 of the Adhiniyam. Broadly speaking 'religious purposes' under the Adhiniyam will include objects relating to the observance of rituals, ceremonies and propagation of the tenets of religion as also its advancement. Similarly, the term 'charity' or 'charitable purpose' will include relief to the poor, education, medical relief and advancement of any other object of public utility. In view of this, what we feel is that the income applied for fulfilment of a religious purpose or charitable object such as construction of a temple for public worship and construction of a dharamshala for public utility and convenience and maintenance of trust properties, payment of salaries of the employees of the trust engaged for realising the rent, etc., would all be items of expenditure directly relating to and connected with the main object of the trust within the scope and meaning of Section 6(f) of the Adhiniyam.
8. After a perusal of the provisions of Section 6(f), we find that in order to support a claim for exemption of tax under this section, the concurrence of the following main conditions is necessary:
(i) that buildings and land or portions thereof are exclusively used for public worship or public charity as enumerated in Section 6(f);
(ii) that the rent derived from the properties is applied exclusively, for public charitable institutions ; and
(iii) that the rent derived from the properties is exclusively applied for religious purposes.
9. The provisions of Clause (f) of Section 6 of the Adhiniyam unequivocally contemplate that a place of public worship and dharamshalas, etc., are exempt from payment of tax under the Adhiniyam. But, the provisions of that clause are subject to the conditions laid down in the provisos (i) and (ii) to the said Clause (f) of Section 6, according to which the buildings or lands covered by the said clause, shall not be deemed to be used exclusively for public worship or public charity within the meaning of Section 6(f) unless the rent derived from such buildings or land is applied exclusively to religious purposes or to public charitable institutions. With a view to claim exemption the petitioner contended that the houses are trust properties which is an admitted fact. The only question is whether the income derived from rent of those houses is exclusively applied for religious and charitable purposes or not, so as to bring it within the exemption clauses.
10. The terms ' religious purposes ' or ' charitable purposes ', to our mind, are not to be so rigidly and narrowly construed as to exclude all other incidental expenses which are directly connected with the upkeep, maintenance and existence of the trust itself the objects of which are exclusively religious and charitable. In our opinion, the terms noted above, have not been used in a narrow and limited sense, but they have been used in a larger and wider sense so as to cover and include within its ambit all expenses directly connected with and ancillary to the maintenance, upkeep, safety and existence of the corpus of the trust. It is an admitted fact that the trust owns enormous house properties which are let out to various tenants. Naturally, proper and regular accounts have to be maintained and the properties have to be kept under proper repairs and maintenance for which the trust will have to employ some persons for this purpose as also. In recover And collect rent from the tenants. If need be, the trust will have to institute suit for recovery of rent and to seek evictions of the tenants, and thus to incur expenses in litigation also. If the trust is subject to any tax liability under some tax statute, it will be paid only out of the rental income and if the trustees feel it necessary to insure the trust properties or any part thereof against fire, theft or other damages, they will have to pay premium for the same. In our opinion, these are all incidental expenses relating to and connected with the main objects of the trust which are exclusively religious and charitable. If the trust property is not properly maintained and proper accounts are not kept, the very existence of the trust will be in jeopardy and its object and purpose will be lost. In this view of the matter, simply because a part of the rental income is spent in the maintenance, repairs, payment of salaries to employees, taxes and legal expenses, etc., it could not be said that the rent derived from the trust houses is not applied exclusively to religious purposes or charitable institutions.
11. It is not the case of the respondents nor it has been so contended in the return filed by the respondents that after meeting out all the aforesaid expenses, the remaining balance of the rental income derived from the trust houses, is not applied exclusively in religious purposes or charitable institutions, while it is specifically so stated by the petitioner in para. 8 of the petition. That being so, it could not be said that the rental income is not applied exclusively to the said purposes. In our opinion, the use ofthe expression, ' the rent derived from such buildings ' in the prov. (i) to Clause (f) of Section 6 of the Adhiniyam, would mean the amount which is actually received by the trust after meeting out the expenses legitimately made in the recovery and collection of the rent as well as other incidental expenses.
12. In the result, the petition is allowed and the aforesaid impugned orders of the Asst. Commissioner, Property Tax, Sagar (annex. E), and the Deputy Commissioner, Property Tax, Gwalior (annex. F), could not be sustained in law and, therefore, the same are quashed. We, however, pass no orders as to costs of this petition. The security amount be refunded to the petitioner.