1965 (10) TMI 72 - HC - Wealth-tax

Issues Involved:

1. Constitutionality of the Wealth-tax Act, 1957, under Entry 86 of List I of the Seventh Schedule.
2. Validity of Section 3 of the Wealth-tax Act under Article 14 of the Constitution.
3. Assessment of Moplah Marumakkathayam tarwad under the Wealth-tax Act.
4. Compliance with Section 20 of the Wealth-tax Act in the assessment process.

Issue-Wise Detailed Analysis:

1. Constitutionality of the Wealth-tax Act, 1957, under Entry 86 of List I of the Seventh Schedule:

The petitioners challenged the constitutionality of the Wealth-tax Act, 1957, arguing that Parliament lacked the requisite legislative power under Entry 86 of List I of the Seventh Schedule. This contention was previously overruled by the Supreme Court in Banarsi Dass v. Wealth-tax Officer [1965] 56 I.T.R. 224 (SC). Consequently, the court did not entertain this argument further.

2. Validity of Section 3 of the Wealth-tax Act under Article 14 of the Constitution:

The petitioners argued that Section 3 of the Wealth-tax Act was discriminatory under Article 14 of the Constitution. They contended that while "individual" and "Hindu undivided family" are units of assessment, non-Hindu undivided families like Moplah Marumakkathayam tarwads and Christian joint families are excluded, resulting in discrimination against Hindu undivided families.

The revenue argued that non-Hindu undivided families are included under the term "individual" and are assessed as such. They also contended that Moplah Marumakkathayam tarwads are insignificant in number, and their exclusion does not attract Article 14.

The court noted that the term "individual" in Section 3 is comprehensive and includes groups of individuals. However, the specific mention of "Hindu undivided family" implies a distinction. The court concluded that non-Hindu undivided families are not covered by the term "individual" and are thus outside the charging section of the Act. The exclusion of Moplah tarwads does not amount to material discrimination under Article 14.

3. Assessment of Moplah Marumakkathayam tarwad under the Wealth-tax Act:

The court examined whether the net wealth of a Moplah Marumakkathayam tarwad is assessable under Section 3 of the Wealth-tax Act. The court concluded that the term "individual" in Section 3 includes groups of individuals, but the specific mention of "Hindu undivided family" implies the exclusion of non-Hindu undivided families like Moplah Marumakkathayam tarwads. Therefore, the net wealth of a Moplah Marumakkathayam tarwad is not assessable under Section 3 of the Act.

4. Compliance with Section 20 of the Wealth-tax Act in the assessment process:

In O.P. No. 684 of 1959, the petitioner argued that the Wealth-tax Officer did not comply with Section 20(1) and (2) of the Act before making the assessment. The court found that an order under Section 20(1) or (2) is a necessary prelude to making an assessment and that the Wealth-tax Officer did not follow the required procedure. The court quashed the assessment order and directed the Wealth-tax Officer to reconsider the plea under Section 20(1).

Judgment:

The court allowed O.P. No. 684 of 1959 on the merits, directing the Wealth-tax Officer to comply with Section 20 of the Act before making a fresh assessment. O.P. No. 674 of 1958 was also allowed on the ground that the Moplah Marumakkathayam tarwad is outside the purview of Section 3 of the Act. The demand notice was quashed. No order as to costs was made in either of the petitions.

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