PETITIONER: COMMISSIONER OF HINDU RELIGIOUS & CHARITABLEENDOWMENTS. MYS Vs. RESPONDENT: U. KRISHNA RAO & ORS. DATE OF JUDGMENT: 17/10/1969 BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S. CITATION: 1970 AIR 1114 1970 SCR (2) 917 1969 SCC (3) 451 ACT: Madras Hindu Religious and Charitable Endowments Act, 1951, as amended by Act 27 of 1954-Sections 76(1) and 100-Nature of contribution leviable-Rules prescribing the levy need not be framed for individual temples. HEADNOTE: In 1955 the Government of Madras framed Rules under the Madras Hindu Religious and Charitable Endowments Act, 1951, as amended by Act 27 of 1954, prescribing a graduated scale of rates of contribution under s. 76(1) of the Act. The rules remained in force in the State of Mysore after reorganisation of the State of Madras and applied to the temples in the South Kanara district which was incorporated in the Mysore State. On a petition by the respondents,- trustees of a temple in the South Kanara district, the High Court of Mysore in Devraja Shenoy v. The State of Mysore [1960 Mys. L.J. 245] declared invalid certain provisions of the amended Act imposing control upon the administration of temples governed by the Act. Thereafter the Assistant Commissioner of Religious Endowments directed the respondents to pay the arrears of contribution and audit fee. The respondents again moved the High Court challenging the validity of the demand. The High Court upheld their plea on the ground that no rules had been framed under s. 100 of the Act, and, therefore, the demand for recovery of contribution was premature. The decision of the High Court was largely influenced by some observations made in the judgment in Devraja Shenoy's case. The court observed that since what was stated in that case on behalf of the State wag that the amount of contribution payable by the petitioner (respondent) temple had to be prescribed by a rule which 'remained to be made it meant that what was decided was that no contribution could be recovered from the temple until such a rule was made. Regarding the demand for arrears of audit fee the court held that the Commissioner had not "determined" the cost of auditing the account of the respondent temple under s. 76 (2) of the Act and the demand was "on that account without competence or authority of law." In appeal to this Court, HELD : (i) It is true that the High Court declared invalid certain provisions of the Act imposing control over the administration of temples governed by the Act. But on that account the power to make rules was not restricted nor were the rules framed by the government rendered invalid. The assumption made by the High Court that the Government had to make under s. 100 rules applicable to each temple separately and prescribing the levy for determining contribution, finds no support in the provisions of the Act or its scheme. Under the Act a fee though levied for rendering services of a particular type need not be co-related to the services performed for each individual who is intended to obtain the benefit of the services. The co-relation must be between the expenses incurred by the authority levying 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 general rules prescribing the levy of fee from religious endowments have to be made and not rules governing individual endowments. Such general rules were in fact framed and were in operation when the 918 demand was made. The concession made by the Advocate- General at the hearing in Devraja Shenoy's case did not oblige the State to frame separate rules in respect of each individual religious institution. Even if the respondent! temple did not need the services or did not obtain benefit of the services provided the contribution would still be recoverable. 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 certain provisions of the Act under which services were to be rendered, the rules framed in 1955 cannot be held to be inapplicable. [921 A-B, G; 922 E, G-923 B] H. H. Sudhindra Thirtha Swatniar v. Commissioner for Hindu Religious & Charitable Endowments, Mysore, [1963] Supp. 2 S.C.R. 302, referred to. (ii) It was not the case of the respondents in their petition in the High Court that the Commissioner had a not "determined" the audit fee under s. 76(2). It was merely asserted that the fee demanded was excessive. Since the High Court proceeded upon the ground of absence of determination by the Commissioner which was never pleaded and the High Court had not determined whether the audit fee demanded was for meeting the cost of auditing the accounts of the respondent temple, the order passed by the High Court must be set aside and the case remanded. [924 C] JUDGMENT:
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. Chagla, S. S. Javali and S. P. Nayar, for the
appellants.
M. K. Nambyar, G. L. Sanghi and J. B. Dadachanji for
respondents Nos. 1 to 5.
The Judgment of the Court was delivered by
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 Charitable
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(1) held that ss. 21, 30(2), 31, 55, 56 and 63 to
69 of Act 19 of 1951 were ultra vires, in that they
infringed the guarantee of the fundamental rights in Arts.
19(1)(f), 25 and 26 of the Constitution 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
competence 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 contribution under s. 76(1).
(1) [1954] S.C.R. 1005.
919
The respondents who are trustees of the Venkataramana Temple
at Mulki, District South Kanara, moved a petition in the
High Court of Madras for an order restraining the
Commissioner of Hindu Religious and Charitable Endowments
from enforcing the provisions of the Amending Act 27 of
1954. Under the scheme of reorganization of State of
Madras, the petition was transferred for trial to the High
court of Mysore. The High Court of Mysore by order dated
March 16, 1959, held that ss. 21, 30(2), 31, 63 to 69 and 89
as amended by Act 27 of 1954 were invalid : Devraja Shenoy
v. The State of Madras(1).
The Assistant Commissioner of Religious Endowments Mysore,
issued on September 30, 1959 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 another petition in the High Court of
Mysore challenging the validity of the demand. The High
Court upheld the plea on the ground that no rules had been
framed under S. 100 of the Act, and therefore, the demand
for levy of contribution was Premature, and that audit fee
demanded by the Commissioner was without determination under
s. 76(2) of the Act and was “on that account without
competence or authority of law”. With certificate granted
by the High Court, the Commissioner of Hindu Religious &
Charitable Endowments has preferred this appeal.
The provisions of the Act which are relevant may first be
read:
S. 71 “(1) The trustee of every religious
institution shall keep regular accounts of all
receipts and disbursements.
(2) The accounts of every religious
institution, the annual. income of which as
calculated for the purposes of section 76 for
the fasli year immediately preceding is not
less than sixty thousand rupees, shall be
subject to concurrent audit, that is to say,
the audit shall take place as and when
expenditure is incurred.
(3)
(4) The audit shall be made-
(a) in the case of a religious institution
the annual income of which calculated as
aforesaid for the fasli year immediately
preceding is not less than one thousand
rupees, by auditors appointed in the
prescribed manner,
(b)
(1) (1960) Mys. L.J. 245.
920
S. 76-“(1) In respect of the services
rendered by the Government and their officers
and for defraying the expenses incurred on
account of such services every religious
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 prescribed.
(2) Every religious institution, the annual
income of which, for the fasli year
immediately preceding as calculated for the
purposes of the levy of contribution under
sub-section (1), 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 exceeding one
and a half per centum of its income as the
Commissioner may determine.
(3)
(4) The Government shall pay the salaries,
allowances, pensions and other beneficial
remuneration of the Commissioners, Deputy
Commissioners, Assistant Commissioners 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 Committees 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 generality 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 religious institution for the purpose of
levying 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 District which was incorporated
in the Mysore State. It is true that the High Court of
Mysore declared invalid certain provisions of
921
the Act imposing control upon the administration of temples
governed by the Act. But 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(1). 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 sustainability of that claim would
have involved determination of 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 determined because rules prescribing the contribution
payable by the respondent-temple “had yet to be made, which
meant that until such rule was made no contribution 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 rule which remained to be made
which means that what was decided by this
Court was that no such contribution could be
recovered from that temple until such a rule
was made.
The impugned demand made on June 25, 1957
before this Court rendered its decision in
Devraja Shenoy’s case(1) on March 10, 1959
having no efficacy or effect, since it was a
plainly premature demand made even before the
liability to Day 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 prescribing the
method for determining contribution finds no support in the
provisions of the Act or its scheme.
The true nature of the contribution eligible under S. 76(1)
under Madras Act 19 of 1951 was explained by this Court in
H. H. Sudhindra Thirtha Swamiar v. Commissioner for Hindu
Religious & Charitable Endowments, Mysore (2) It was pointed
out that (p. 323)
(1) (1961) Mys. L.J. 245.
(2) [1963] Supp. 2 S.C.R. 302.
922
“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
present in it, nor is it a postulate 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. If with a view to provide a specific
service, levy is imposed by law and expenses
for maintaining the service are met out of the
amounts collected there being a reasonable
relation between 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 uniformity 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 service of a
Particular type, co-relation between the
expenditure by the Government and the levy
must undoubtedly exist, but a levy will not be
regarded as a tax merely because of the
absence of uniformity 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 particular 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 co-relation must be between
the expenses incurred by the authority levying 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 by the
Advocate-General at the hearing in Devraja Shenoy’s case(1)
does not oblige the State to frame separate rules in respect
of each 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
existence 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.
(1) (196)) Mys. L. J. 245.
923
benefit of the services, the contribution would still be
recoverable. We are also unable to accept 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 certain provisions
of the Act under which services were to be rendered, 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 aside.
The High Court has not investigated the question whether
there is a reasonable relation between the expenditure
incurred by the Government for providing services and the
amounts intended to be collected from the religious
institutions for whose, benefit the services 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 : (1) 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 11/5% of
the income; and (3) that the fee is levied for meeting the
cost of auditing the accounts of the religious institution.
In the present case, conditions (1) & (2) are satisfied.
But the High Court was of the view that the Commissioner had
not determined the cost of auditing- 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, 1 62-
8 3 nP towards the audit of its accounts in respect of the
year 1963 fasli does not rest upon any determination made
under Section 76(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 Commissioner had not determined the audit fee under s.
76(2). In paragraph-12 of the petition it was merely
asserted that the fee determined by the Commissioner at the
rate of 1-1/2% 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 institutions
governed by the provisions of the Act : he has to determine
audit fee for meeting the costs of auditing the accounts as
a per-
924
centage of the income of each religious institution. The
Commissioner has to determine, having regard to the facts
and circumstances of each case, the fee (being not more than
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 reasonable 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 the income. The percentage of income levied
as audit fee must of necessity be based on an estimate, and
the demand will 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
pleaded, and the High Court has not determined whether the
audit fee ;demanded was in truth for meeting the cost of
auditing, the accounts of the Venkataramana temple, 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 appeal will be costs in the High Court.
Y.P. Case remanded.
925