1967 (8) TMI 8 - HC - Wealth-tax

WTO assessed the assessee, in respect of family assets, in the status of a HUF - assessee appealed before the AAC and, inter alia, contended that the assessee being a member of a Jain family could not be treated as a HUF - contention of assessee is acceptable - assessment were rightly set aside by tribunal

Summary

Issues Involved:

1. Whether the assessee, a Jain undivided family, was not a Hindu undivided family within the meaning of section 3 of the Wealth-tax Act, 1957.
2. Whether the levy of wealth-tax on Hindu undivided family or joint family governed under the Mitakshara school of Hindu law was beyond the legislative competence of Parliament and ultra vires the Constitution of India.
3. Whether the Wealth-tax Act in so far as it purports to levy wealth-tax on Hindu undivided families is void and inoperative, as it offends article 14 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Whether the assessee, a Jain undivided family, was not a Hindu undivided family within the meaning of section 3 of the Wealth-tax Act, 1957:

The Tribunal had accepted that the assessee was a Jain undivided family and not a Hindu undivided family. The Wealth-tax Act, 1957, under section 3, did not explicitly define whether a Jain undivided family could be considered as a Hindu undivided family. The Tribunal referred to Mulla's Hindu Law, which states that Jains do not fall under the traditional Hindu caste system and have distinct religious beliefs, rejecting the authority of the Vedas. Consequently, the Tribunal concluded that Jains are not Hindus and thus cannot be considered under the term "Hindu undivided family" for the purposes of the Wealth-tax Act. The High Court upheld this view, stating that Jains are non-Hindus who are generally governed by Hindu law but do not form a Hindu undivided family. Therefore, the taxation of the assessee as a Hindu undivided family was not proper and legal. The High Court answered this issue in the affirmative and in favor of the assessee.

2. Whether the levy of wealth-tax on Hindu undivided family or joint family governed under the Mitakshara school of Hindu law was beyond the legislative competence of Parliament and ultra vires the Constitution of India:

This issue was not pressed before the High Court for an answer. The Supreme Court in K. S. Venkataraman & Co. (P.) Ltd. v. State of Madras had observed that the Tribunal, being a creature of the statute, could only decide disputes in terms of the provisions of the Act and had no jurisdiction to entertain or decide on the question of ultra vires. Consequently, the High Court noted that the Tribunal had no jurisdiction to address this question, and thus, it was not necessary to answer this issue.

3. Whether the Wealth-tax Act in so far as it purports to levy wealth-tax on Hindu undivided families is void and inoperative, as it offends article 14 of the Constitution of India:

Similar to the second issue, this question was also not pressed before the High Court for an answer. The Supreme Court in C. T. Senthilnathan Chettiar v. State of Madras reiterated that the Tribunal had no jurisdiction to decide on the question of ultra vires. Therefore, the High Court did not provide an answer to this issue and noted that the Tribunal should not have referred this question.

Conclusion:

The High Court concluded that the assessee, being a Jain undivided family, could not be taxed as a Hindu undivided family under section 3 of the Wealth-tax Act, 1957. The questions regarding the legislative competence of Parliament and the constitutionality of the Wealth-tax Act were not addressed due to the Tribunal's lack of jurisdiction to entertain such questions. No order for costs was made in this reference.