1963 (8) TMI 62 - HC - Income Tax

Summary

Issues Involved:
1. Constitutionality of wealth-tax on lands and buildings.
2. Competence of Parliament to impose wealth-tax on undivided families.
3. Violation of Article 14 of the Constitution by the Wealth-tax Act, 1957.

Detailed Analysis:

1. Constitutionality of Wealth-Tax on Lands and Buildings:
The petitioner contended that wealth-tax on lands and buildings is ultra vires of the powers of Parliament, arguing that entry 86 of List I of the Seventh Schedule should be read subject to entry 49 of List II, which reserves the field of taxation on lands and buildings for the State. The court referred to its previous ruling in Krishna Rao L. Balekai v. Third Wealth-tax Officer, City Circle I, Bangalore, where it was held that the Wealth-tax Act is not ultra vires of the Central Legislature as it pertains to non-agricultural lands, which fall under entry 86 of List I. The court reiterated that every entry in the three Lists should be given the widest possible connotation, and there is no conflict between entry 86 of List I and entry 49 of List II. Thus, the power to impose wealth-tax on non-agricultural lands and buildings is within the legislative jurisdiction of Parliament.

2. Competence of Parliament to Impose Wealth-Tax on Undivided Families:
The petitioner argued that entry 86 of List I does not empower Parliament to levy wealth-tax on undivided families as it only mentions "individuals and companies." The court noted that various High Courts have interpreted the term "individual" to include undivided families, as the latter is essentially a collection of individuals. The court also emphasized that the Constitution has not left any legislative field vacant, and if the power to levy wealth-tax on undivided families cannot be found in List II or List III, it must be within the competence of Parliament either under entry 86 or under the residuary power given by entry 97. Therefore, the court held that Parliament had the competence to enact a law imposing wealth-tax on undivided families.

3. Violation of Article 14 of the Constitution:
The petitioner contended that the Wealth-tax Act, 1957, is violative of Article 14 of the Constitution as it discriminates against Hindu undivided families by not imposing similar taxes on other undivided families like Moplah Marumakkathayam Tarwad. The court noted that while Hindu undivided families are specifically mentioned in the Act, other undivided families are liable to be taxed as "individuals." This interpretation is supported by multiple judicial decisions. The court observed that the incidence of tax on non-Hindu undivided families is heavier than that on Hindu undivided families, and thus the petitioner cannot be considered an aggrieved party. Consequently, the court dismissed the petitions, concluding that the petitioner had no legitimate grievance.

Conclusion:
The court dismissed the petitions, affirming the constitutionality of the Wealth-tax Act, 1957, and holding that Parliament had the competence to impose wealth-tax on undivided families. The court also found no violation of Article 14 of the Constitution, as non-Hindu undivided families are also subject to taxation under the Act. The petitioner was not considered an aggrieved party, and the petitions were dismissed with costs.