1967 (11) TMI 18 - HC - Wealth-tax

Whether the WT Act in so far as it levies tax on HUF, is ultra vires the powers of Parliament and is it discriminatory in imposing a higher burden of tax on members of the HUF and consequently void and unenforceable - Held, no

Summary

Issues:
1. Whether the Wealth-tax Act, specifically levying tax on Hindu undivided families, is ultra vires the powers of Parliament and discriminatory?

Analysis:
The judgment pertains to a reference made under section 27(1) of the Wealth-tax Act, 1957, by the Income-tax Appellate Tribunal, Bombay, regarding the validity of taxing Hindu undivided families. Initially, the Tribunal referred a composite question challenging the legislative competency of Parliament to levy tax on Hindu undivided families. The Tribunal's action was based on the belief that it could question the vires of the provisions under which it functions. However, the court held the reference to be incompetent due to the principle established in K. S. Venkataraman & Co. (P.) Ltd. v. State of Madras, stating that a tribunal cannot question the vires of the provisions under which it operates. Despite this, the court proceeded to provide an answer to the question for the parties' benefit.

Regarding the legislative competency of Parliament to tax Hindu undivided families, the court relied on the Supreme Court's decision in Banarsi Dass v. Wealth-tax Officer, affirming that the Wealth-tax Act's provision taxing Hindu undivided families falls within Parliament's jurisdiction. The court emphasized that the expression "individual" in the Constitution includes Hindu undivided families, making the levy of wealth tax on them intra vires.

On the issue of discrimination, the court addressed the argument that taxing Hindu undivided families differently constitutes discrimination. However, the court rejected this contention, citing legal precedents that allow for the classification of taxpayers into different categories. The court highlighted that the unique nature of Hindu undivided families justifies their distinct taxation as a separate entity. The court emphasized the rational classification of taxpayers into individuals, Hindu undivided families, and companies, each taxed differently based on their circumstances. The court concluded that the Wealth-tax Act does not violate Article 14 of the Constitution by taxing Hindu undivided families differently.

In conclusion, the court answered both aspects of the question by affirming the validity of taxing Hindu undivided families under the Wealth-tax Act and dismissing claims of discrimination. The Commissioner was awarded costs, and the counsel's fee was fixed at Rs. 100.