1. In these three appeals, the assessee, a firm, is claiming the expenditure incurred by it in running a school for training of Archakas.
2. The assessee is a registered firm of 17 partners. This is a firm of professional Archakas. The partners conduct the poojas, etc., in the temple of Shri Venkateswara situated at Dwarka Tirumala near Eluru.
They are entitled to Dibbi collections which is the main receipt of the firm. These Dibbi collections are divided among the partners according to their profit-sharing ratio after meeting the expenditure.
3. There was some litigation in connection with the properties and the trusteeship of this temple. In the course of this litigation which came up before the subordinate Judge at Eluru in 1925 and was numbered as O.S.No. 1 of 1925 and it ended by a decision of the Supreme Court which was given as we understand, some time in 1980. In the course of the litigation proceedings, a scheme was drawn up in 1950 for the administration of the temple and for the pooja of the deities. The obligations of the Archakas are spelt out in this scheme. As per this scheme, an executive officer shall be appointed by the Commissioner, Hindu Religious Endowments in consultation with the trustees. The executive officer will be in charge of the administration. He, however, has no powers to appoint the Archakas. In Clause (7), it is mentioned that the executive officer shall have power to engage sufficient number of qualified persons as Archakas to conduct the worship and rituals without failure. In case of failure of such services by the Archakas, the executive officer may get the services done by other Archakas and he is entitled to recover the cost from the assessee-Archakas. As per Clause (10), the executive officer shall have the power to appoint all temple servants excepting Archakas. The temple servants including Archakas shall work under the immediate supervision of the executive officer and the hereditary trustees and shall obey all their lawful orders. Clause (11) states that the Archakas and their deputies shall be qualified persons in Vighanasa Agama of the temple. The Archakas and their deputies shall render services in person and they will be entitled to have the services of not more that two deputies at a time.
The deputies must also be qualified persons. Clause (12) states that the Archakas shall attend to the temple every day and they shall provide not less than 5 Archakas on ordinary days and 6 to 7 on festival days.
4. As per the scheme noted above, only qualified persons could be considered as Archakas. There is a requirement for deputies as per Clause (11) and Clause (12) who also have to be qualified to be Archakas. It appears that the partners of the assessee-firm found that sufficient number of qualified Archakas were not forthcoming. They, therefore, started a school on 4-8-1979. In this school, they taught Vighanasa Agama Sastra to the students which will eventually qualify them to be considered as fit for appointment as Archakas. In the first year, which was the assessment year 1980-81, the expenditure in running the school was Rs. 32,590.
5. By the time the second year started, it appears the Government took some interest and paid a stipend of Rs. 75 per month per student and met the salaries of the teachers and other expenses. The result was, for the second year the assessee had to meet only the boarding and lodging expenses of the students. Such expenses amounted to Rs. 29,160 for the assessment years 1981-82 and 1982-83.
6. The above expenses were claimed by the assessee as business expenditure. The ITO found that the right to conduct pooja was hereditary and it was obligatory on the part of the partners to train up their sons as Archakas. To the extent that the expenditure incurred was on the children of the partners, the ITO agreed that it could be allowed as an admissible expenditure. The number of students whose parents were partners was six. He, therefore, allowed proportionate expenditure and disallowed the balance.
7. Against the disallowance, the assessee appealed. Before the Commissioner (Appleals), the assessee mainly relied upon the decision of the Supreme Court in the case of CIT v. Royal Calcutta Turf Club  41 ITR 414 wherein the Supreme Court had allowed as admissible the expenditure for running an institution to train jockeys. The Commissioner found that the ruling will not be applicable to the assessee. He further found that the expenditure incurred by the assessee is personal expenditure insofar as it was spent on educating the children of the partners. He, therefore, upheld the orders of the ITO.8. The assessee is on further appeal before us. Shri Swamy for the assessee submitted that it was obligatory on the part of the assessee to have trained Archakas to carry on the profession. There were two-fold requirements: (?) by way of deputies at the time of festival occasions and other occasions; and (ii) at the time when the women Archakas have their turn for doing the pooja. We may mention here that although the women Archakas are also entitled by the Hereditary to have a right on the collections of Dlbbi, they are not allowed to do the pooja themselves. They have a right of deputing some other Archakas to take their turn on their behalf. This requires deputies. There is also the obligation of continuing the profession and requirement of replacement of partners who would be eventually retiring. Because of this, it was necessary to have qualified Archakas. Therefore, the running of the [school was absolutely essential for the conducting of the profession. He submitted that the case is obsolutely on all fours with the Supreme Court decision. He then pointed out that there was a contradiction in the Commissioner's order. If the disallowance is to be made on the ground that the expenditure is personal, then the expenditure on the children of the partners has to be disallowed and the rest should have been allowed. What the ITO and the Commissioner have done is exactly the opposite. He then explained what was meant by personal expenses as denned by the authorities. In this connection, he referred to the decision of the Bombay Tribunal in the case of ITO v.Thakur Vaidyanath Aiyer & Co.  7 ITD 9. In that case, the Tribunal has held that even the premia paid on the insurance policies of the partners was a business expenditure of the firm.
9. Shri Santhanam for the department made a submission that as per paragraph No. 10 of the scheme, Archakas were also servants of the executive officer. If they are servants, the income is only by way of salary. There would be no deduction at all permissible. He admitted that the department has treated the assessee as a firm, but he submitted that he could take up this argument to support the disallowance. He then submitted that there was no obligation at all on the assessee to run the school. It was, on the other hand, the obligation of the Government. From the second year onwards, the Government had paid stipends and met the salaries payable to the teachers. So, from the second year onwards, what the assessee has done is only to provide food for the students. This is in the nature of a charitable expenditure. It could also be construed as entertainment expenditure in view of the amended provisions. He then submitted that the Supreme Court did not deal with any hereditary rights and it had no relevance at all to the point at issue.
10. We have considered the submissions. As per the scheme drawn up, there is an obligation on the Archakas to conduct the pooja and the ceremonies in the temple. This obligation on the Archakas has now befallen on the assessee-firm since the Archakas are the partners here and the firm was formed only for this purpose. All the expenses incurred by the firm in discharge of the obligation under the scheme will be legitimate professional expenditure and allowable as a deduction. Thus, the expenses incurred by them in arranging for cooks, servants, etc., are all expenses incurred in connection with the profession. The department had allowed such expenses and there is no dispute thereon. The obligation arising out of the scheme is not limited in time but it appears to go more or less permanent or till such time another scheme is drawn up for the administration of the temple. The professional firm of Archakas have to take into account not only the short-term requirements of discharge of their obligations but also the long-term requirements. The long-term requirement would be to provide services of Archakas on long-term basis for future years also.
In our opinion, both for short-term objective as well as long-term objective, it is absolutely essential for the Archakas to run the institution.
11. The short-term objectives are the requirement of the deputy Archakas which is envisaged in paragraph No. 7. The requirement of male Archakas to take up the turns of female Archakas and the requirements of additional Archakas at the time of festival days is given in paragraph No. 12. There is obligation on the assessee -firm to provide these Archakas and deputies. Now, since the partners can take only those who are qualified in the Vighanasa Agamas, the sources are extremely limited. Therefore, as part of their profession, they are obliged to train up those who are willing to undergo the rigors of training in this Agama. It is only those who were trained in this manner would be acceptable according to the scheme to work as deputies.
Therefore, the case is really akin to the Supreme Court's decision in Royal Calcutta Turf Club's case (supra). In that case, the Supreme Court found that the assessee cannot conduct races unless there were qualified jockeys. Therefore, they conducted an institution for training up jockeys. In this case also, it is essentially for the partners to have trained deputies and for this purpose, they are running the institution.
12. Viewed from the long-term angle also, it is essential that the assessee should bring up qualified Archakas to take the place of the partners eventually. As we have pointed out the scheme drawn up will govern the management of the temple and the pooja for a number of years. In order to keep-up the profession and the hereditary rights of the partners, it is essential that the qualified Archakas are groomed up for continuing the obligations of the Archakas as per the scheme.
For this purpose also, it is essential that they should run the institution. We, therefore, find that the expenditure is allowable as a deduction.
13. We will now consider the objection taken by the Commissioner. He had assumed that there was no obligation on the partners for grooming up Archakas. We have already dealt with this point earlier and had pointed out that it was in the course of discharging their obligations under the scheme that they had to run the institution. The second objection of the Commissioner is that this is partly the expenditure of training the children of the partners and, therefore, personal expenditure. As Shri Swamy had pointed out, the expenditure incurred on the training up of the children of the partners had already been allowed by the ITO. What is now in dispute before us is the balance of expenditure which is not spent on the children or the relations of the partners. Therefore, this argument is not relevant. In any case, in view of what we have stated in the earlier paragraphs, we have to say that even if the children of the partners are students, it makes no difference. It will still be a professional expenditure.
14. We will now consider the submissions of Shri Santhanam. He first had submitted that the firm itself is not valid and the partners are really employees of the temple. We are unable to accept this submission. The executive officer has not appointed them. He could not instruct them as to how to conduct the poojas. His argument is based on a provision in Clause (10) which states that the executive officer has the power to fine, suspend, remove or dismiss the servants for neglect of duties or disobedience, etc. He had also the right to take disciplinary action. Although the right to take disciplinary action is a test to find out whether there is employer-employee relationship, that by itself is not conclusive. The tests to be applied in such'cases have been given by the Supreme Court in the case of Ram Prashad v. CIT  86 1TR 122 : 'It is stated that in many cases the test laid down is that in the case of a master and servant, the master can order or require what is to be done and how it is to be done but in the case of an independent agent an employer can only say what is to be done but not how it shall be done.' If we see these tests, we will find that the Archakas are not the employees.
15. It was submitted by Shri Santhanam that since the Government has paid for the stipend to the students and the teachers' salaries, it was no longer the obligation of the assessee-firm. It is true that a part of the expenditure has been met by the Government for the next two years. However, the Government has not met fully all the expenditure.
In an institution like this, teaching vedic texts, it is traditionally expected that the institution will meet all the expenditure of the students including their food, boarding and lodging. The expenditure met by the Government is only the teachers' salary and a part of the expenditure of the students to the extent of Rs. 75 per month per student. Obviously this has not been found to be sufficient. Insofar as traditionally the full expenditure is to be incurred by the institution and since the assessee is running the institution, the assessee has the obligation of meeting the expenditure left out by the Government. We do not consider such expenditure as simple charity. We are also not able to consider such expenditure as entertainment expenditure. The students of the institution would be part of the assessee's professional establishments and, therefore, the expenditure on providing meals to them would be coming under the category of provision to the employees in the place of their work. Therefore, it could not be considered as entertainment expenditure either.
16. In the result, we hold that the assessee is entitled to the deductions. The appeals are allowed.