1967 (8) TMI 36 - HC - Income Tax

Expenditure Tax Act, 1957 - Expenditure of wife and minor child of assessee out of their separate income - includibility in assessee s expenditure - held that since the assessee s wife and minor children had properties of their own, the assessment of their expenditure in the assessee s hands was not justified

Summary

Issues Involved: Interpretation of the term "dependant" under Section 2(g)(i) of the Expenditure-tax Act, 1957, and the inclusion of expenditure incurred by the wife and minor children of an assessee from their own income and property in the taxable expenditure of the assessee.

Issue-wise Detailed Analysis:

1. Definition of "Dependant" under Section 2(g)(i) of the Expenditure-tax Act:

The primary issue was whether the term "dependant" in Section 2(g)(i) of the Expenditure-tax Act includes the wife and minor children of an assessee, even if they incur expenditure from their own income and property. The Tribunal had interpreted that the expenditure of the wife and minors, irrespective of the source, is taxable in the hands of the assessee.

Analysis:
- The Tribunal upheld that the amended definition of "dependant" included the spouse and minor child without the necessity of being dependent on the assessee for support and maintenance.
- The Tribunal emphasized the punctuation (comma) after "minor child" to argue that the dependency criteria did not apply to the spouse or minor child but only to "any other person."

2. Inclusion of Expenditure under Section 4(ii) of the Expenditure-tax Act:

Another issue was whether the expenditure incurred by dependants from their own resources should be included in the taxable expenditure of the assessee under Section 4(ii).

Analysis:
- The Tribunal interpreted Section 4(ii) to mean that any expenditure incurred by dependants, regardless of the source, should be included in the assessee's taxable expenditure.
- The Tribunal's interpretation was challenged on the grounds that it could lead to double taxation if both spouses are considered assessees, as each could be taxed for the other's expenditure.

3. Interpretation of Legislative Intent and Statutory Construction:

The court had to consider the legislative intent behind the amendments made in 1959 and the proper construction of the statutory provisions.

Analysis:
- The court noted that punctuation should not be a determining factor in statutory interpretation, referencing several judicial precedents.
- It was argued that the definition of "dependant" should retain its ordinary meaning, implying that the spouse or minor child must be wholly or mainly dependent on the assessee.
- The court found that the construction put by the Tribunal led to absurd results, such as double taxation, which was not the intent of the Act.

4. Application of Section 4(ii) to Individual and Hindu Undivided Family (HUF) Assessees:

The court examined whether the latter part of Section 4(ii) applied equally to individual assessees and HUF assessees.

Analysis:
- The court concluded that Section 4(ii) applies to both individual and HUF assessees, meaning that expenditure incurred by dependants can only be included if it comes from income or property transferred by the assessee.
- The court rejected the Tribunal's interpretation, which differentiated between individual and HUF assessees without valid reason.

5. Judicial Precedents and Comparative Analysis:

The court also considered contrary views from other High Courts, particularly the Andhra Pradesh High Court's decision in His Highness Prince Azam Jah v. Expenditure-tax Officer.

Analysis:
- The court disagreed with the Andhra Pradesh High Court's reliance on the Finance Minister's Budget Speech and the statement of objects and reasons for interpreting the statute.
- The court emphasized that legislative intent should be derived from the statute itself, not external aids like speeches or statements.

Conclusion:

The court concluded that the term "dependant" in Section 2(g)(i) includes only those who are wholly or mainly dependent on the assessee for support and maintenance. Consequently, the expenditure incurred by the spouse or minor children from their own income or property cannot be included in the taxable expenditure of the assessee. The court answered the reference in the negative, ruling in favor of the assessee and against the revenue's interpretation. The assessee was awarded costs, and the hearing fee was set at Rs. 200.