JUDGMENT
K. SREEDHARAN J. – The short question that arises for consideration is whether the auditorium and the sathram belonging to the petitioner is liable to be taxed under section 66 of the Kerala Panchayat Act. The auditorium owned and maintained by the petitioner is being let out for solemnisation of marriages at the temple, for holding other religious functions and for staging dramas etc. The income received by so letting out the auditorium is ploughed back for the administration of the temple and for other religious and charitable purposes. The santhram is let out for the residence of devotees visiting the temple. In absence of the devotees, it is being let to the members of public as well. The rent thus realised is being made use of for the administration of the temple and for other religious and charitable purposes. Since the income derived by letting out the auditorium and sathram are ploughed back for the administration of the temple and for other religious and charitable purposes, the petitioner claimed exemption from tax under section 72 of Panchayat Act. This claim was repelled by the Panchayat. The Petitioner took up the matter in appeal before the Deputy Director of the Panchayat, Quilon, the second respondent therein. By exhibit P-3 order dated May 9, 1983 the second respondent exempted the sathram from the liability to pay building tax. The claim of the petitioner to exempt the auditorium was denied. The petitioner as well as the Panchayat took up the matter in revisions before the first respondent, State of Kerala. By exhibit P-4 order dated April 6, 1984, the Government dismissed the revision filed by the petitioner and allowed the revision preferred by the Panchayat. Consequently, the petitioner was directed to pay the building tax for the sathram and for the auditorium. This order is under challenge.
According to learned counsel appearing for the petitioner, the petitioner, the Ochira Temple Administration, is a society registered under the Travancore-Cochin Literary, scientific and Charitable Societies Registration Act, 1955 (Act 12 of 1955). This is not in dispute. As per sec 19 of the said Act, the Government has the right to periodically scrutinize the accounts of income and expenditure and of the assets and liabilities of the petitioner. The Registrar appointed by the Government is to periodically examine the accounts. If the accounts are found to be defective, the authorised officer has got the power to seize the accounts or the documents of the society and to pass consequential orders as they deem fit. Under sec 24 of the Act, if the society goes on dissolution, all its assets will become vested in the Government and no member of the society will get any share from its assets. In light of theses statutory provisions, it is argued that the petitioner-society is not the one acting with a profit motive. No member of the society will be entitled to get any part of the profits or assets belong to the society. On account of the stringent provisions contained in the above mentioned Act, it is argued that the society can function only for charitable purpose without any profit motive. The income derived by it should be used for charitable purposes for which the society has been registered and not for any other purpose. The income derived by the way of rental of the buildings belonging to the society are being ploughed back for carrying out the charitable purposes of the society. In such situation, it is submitted that the building belonging to the society must be exempted from taxation under section 66 of the Kerala Panchayat Act.
A detailed counter-affidavit has been filed on behalf of the state. In paragraph 2 of the counter, it is averred :
“The Board (referring to the petitioner) has many building attached to the temple, such as shopping building, lodgings (sathram), auditorium, annadanamandiram, anadhalayam, oottupura, sevapandal, etc. The shopping buildings, sathram and auditorium are being let out for rent for purposes other than charitable purposes. The income derived from these buildings is ploughed back for the administration of the temple and for charitable purposes. The temple administration every day gives free porridge to the poor with the funds donated by the devotees as offerings and not from the income derived from rent of the buildings.”
Further, in paragraph 3 of the counter, it is stated :
“The income derived from this building (referring to auditorium) is ploughed back for the administration of the temple and religious purposes and not exclusively for charitable purposes as laid down under section 72(1)(c) of the Kerala Panchayat Act.”
Since the entire income from the sathram and the auditorium is not being used exclusively for charitable purposes, it is contended that the petitioner is not entitled to claim exemption on its building from the tax liability.
Sub-clauses (b) and (c) of clause (1) of section 72 are the relevant clauses with which I am concerned in this petition. For a proper understanding of those clauses, I read the same.
“Exemption. – (1) The following buildings and lands shall be exempt from tax, cess or duty leviable under section 66….
(b) buildings which are attached to places of public worship and are used for residential or other purposes connected therewith;
(c) choultries for the occupation of which no rent is charged and choultries the rent for the occupation of which is used exclusively for charitable purpose;”
The auditorium is claimed to be a building attached to the temple. That building can claim exemption from tax liability only if it falls under clause (b) quoted above. It is common ground that the auditorium is attached to the place of worship. It is not one, used for residential purpose. It is one used for “other purpose”. If those “other purposes” are connected with “public worship”, then and then alone can the building be exempted from tax liability. So, if the auditorium is to be exempted from tax liability, it should have been put to “other purposes” connected with the public worship. If it is not so used, then it will not fall under sub-clause (b). To see whether the auditorium belonging to the petitioner is being used for “other purpose” connected with “public worship”, the averments in the petition have to be looked into. In paragraph 1 of the petition it is stated : “The auditorium maintained by the temple is also given for marriages solemnised at the temple. The same is also given for Hindu religious functions, dramas, etc.” Marriage and dramas are not purpose connected with public worship. Since, even on the petitioners own showing, the auditorium is used for purposes unconnected with public worship, that said building cannot come within the purview of sub-clause (10 of section 72 of the Panchayat Act and hence is not to be exempted from tax liability under section 66 of the Panchayat Act.
It is conceded that the sathram belonging to the petitioner will fall within sub-clause (c) of section 72(1) quoted earlier. It is a choultry. It is being rented out for the occupation of pilgrims and others. He rent so collected from the said sathram is being used for the administration of the temple and for other religious and charitable purposes. On this ground, the petitioner claims exemption for that building from tax liability. According to learned counsel appearing for the learned Government Pleader, the choultry can claim exemption only if the entire rent is used exclusively for charitable purposes. When the petitioner has stated that the income derived by way of rent is being used for the administration of the temple and other religious and charitable purposes, it is contended that the building cannot be exempted from tax liability. It is submitted that the petitioner has nowhere in the petition stated that the entire income from the santhram is used exclusively for charitable purposes and for the administration of the temple are not expenditure for charitable purposes and so the sathram is not to be exempted.
The second respondent, the appellate authority, while passing exhibit P-3 order, observed :
“The Executive Officer has stated that the annual rental value of the building No. OP. I/528 (1 to 22) which is a choultry, comes to Rs. 24,310. From the audit of the accounts for 1057 ME, it is seen that the Boards expenditure for the maintainence of orphanage is above Rs. 52,525.11, whereas the grand total of the rentals received from the various buildings is Rs. 23,404.50. There are so many other items of charitable nature also in the audit report. It therefore goes without saying that the entire proceeds by way of rentals is made use of by the temple board solely for charitable purposes.”
This aspect of the matter was not considered by the first respondent in exhibit P-4, it is stated :
“Again it claimed that the amount collected as rent is being utilised for charitable purposes. If this is so, there is no reason why the authorities should charge exorbitant rent during festival occasions. Charity need not be limited to poor people alone. The very occupation of sathram building by pilgrims and others is to get accommodation at concessional rates. If the rooms are let out to pilgrims at a concessional nominal rate for festival seasons, the building should have been eligible for exemption. The maximum exploitation of the public by charging an exorbitant rate cannot be considered as charity. Therefore, the Panchayat is entitled to the assessment and the Temple Administration Board need not grudge of its income as tax which is also to be considered as an act of charity.”
To say the least, the Government has not approached the question in the correct perspective. From the above portion of the order, it would appear that had the petitioner realised only a nominal rent, the building would have been exempted from tax liability. The quantum of rent realised by the petitioner is not at all relevant for deciding the question as to whether the building is to be exempted or not. The question is whether the rent realised is being used for charitable purposes or not. Even if the exorbitant rent that was realised was used exclusively for charitable purposes, the building will have to be exemted under sub-clause (c) of clause (1) of section 72 of the Panchayat Act.
The petitioner states that the Board has already been exempted under section 11(1)(c) of the Income-tax Act because the Board is constituted solely for religious and charitable purposes. This aspect has not been considered by the Government when it passed exhibit P-4 order. The exemption from the Income-tax Act is a relevant matter to be taken note of by the Government. But the fact by itself may not exempt all buildings belonging to the petitioner from liability as per section 72 of the Panchayat Act. For the buildings belonging to the petitioner to claim exemption, it must fall within one or the other sub-clauses of clause (1) of section 72. For the sathram building to be exempted from the tax liability, the petitioner should establish that the income derived from it by way of rent is being used exclusively for charitable purpose. In CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), their Lordships laid down the test to determine the “charitable purpose”. According to their Lordships, the test is “what is the predominant object of the activity – whether it is to carry out a charitable purpose or to earn profit ? If the predominant object is to carry out a charitable purpose and not to earn profit, the purpose would not lose its charitable character merely because some profits arises from the activity.”
The petitioner is engaged in activities of religious and charitable nature. The income derived by the petitioner is ploughed back for the purposes of those activities. The income is being used by the petitioner to augment its assets for enlarging its religious and charitable activities. Such user can only be of a religious and charitable nature. No member of the society earns any profit from the income of the society. The Petitioner has averred that among other activities, they are giving free food to 200 poor persons everyday, that they are holding religious discourses every fortnight by eminent scholars and that they have appointed teachers for conducting the matha padasala. The latter mentioned activities of the petitioner, though they can be described as religious activities, are necessarily activities of a charitable nature. While disposing of the revision petitions, the Government has not considered any of the aspects mentioned above. Therefore, I set aside exhibit P-4 order dated April 6, 1984, and direct the Government to take back the revision petition filed by the Panchayat on June 29, 1983, and dispose of the same in accordance with law and in the light of the observations made earlier in this judgment. Final orders should be passed as expeditiously as possible, at any rate within three months from the date of receipt of a copy of this judgment.