9911796707
TMI Blog1971 (4) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... and Dwarkadas Daga, husband of the petitioner, Radhadevi, was a partner, holding 1/7th share in the partnership firm, M/s. R. B. Bansilal Abirchand, constituted under the partnership deed, dated May 15, 1955. It is alleged in both the petitions that there was an understanding between the parties that the death of a partner will not dissolve the partnership but the partnership business will be carried on with the legal heirs of the deceased partner as partners in place of the deceased partner, the minor being deemed to have been admitted to the benefits of the partnership. The understanding has also been incorporated in the subsequent partnership deed dated December 16, 1957. Dwarkadas Daga died on November 4, 1957, leaving behind him a widow, Radhadevi Daga, petitioner and three minor daughters, viz., (i) Kusumkumari, (ii) Kumudkumari and (iii) Kalakumari. Hiralal Daga died on August 27, 1958, leaving behind him a widow, Shreekunwardevi, petitioner, and two minor sons: (i) Krishnakumar, (ii) Kishorekumar and two minor daughters: (i) Shobakumari and (ii) Nirmalakumari. These were the legal heirs of Dwarkadas and Hiralal under the Hindu Succession Act, which came into force with e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal grounds. We first take up for consideration the contention regarding the legislative competence to enact section 64(ii) of the Act. By this provision, in assessing the total income of the father or mother of a minor who is admitted to the benefits of a partnership in which the father or the mother or both are partners, the income of the minor's share in the partnership is added to the total income of the father or the mother as the case may be and the father or the mother is subjected to the tax on such total income. In other words, the father or the mother is taxed not only for his or her income but also for the income of the minor child or children who have been admitted to the benefits of the partnership. It is contended that the legislature under entry No. 82 of List I of the Seventh Schedule to the Constitution, which reads: "Taxes on income other than agricultural income" is competent to make a law for levying a tax on the income of a person and not on the income of another person, may be that other person is his or her child. It was urged that this question was raised before the Supreme Court in Balaji v. Income-tax. Officer, and in earlier cases but was expressly left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the federal legislature. This decision, therefore, concludes the matter so far as the legislative competence is concerned since the same reasoning would be applicable to a provision, such as section 64(ii), made under entry No. 82 of the Constitution. We are bound by the decision of the Supreme Court. We, therefore, hold that the Central legislature had the competence to enact section 64(ii) of the Act of 1961. The contention about the legislative competence was further supported by the learned counsel for the revenue on another ground. It is contended that even if the topic about this piece of legislation is not strictly covered by any of the entries in the Union List and, particularly, entry No. 82, even then such a legislation would be valid under the overall and residuary powers of the Central Legislature in view of article 248 and the entry No. 97 of the List I as the subject is not covered by any of the entries either in List II or List III. The contention is not devoid of substance. We, however, do not consider it necessary in this case to go into this important question on the view we have taken earlier about the legislative competence. It was then contended that sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kunnathat Thathunni, Moopil Nair v. State of Kerala). There is, however, no fundamental right in a citizen not to pay tax or to pay the tax at a particular rate. If there is an authority of law in the sense that there is in the legislature a competence to pass a law relating to tax and if it does not violate any of the guarantees given by Part III of the Constitution, then it is within the authority of the legislature to levy the tax, at any rate or at any slab. As Mr. Hajarnavis, the learned counsel for the revenue puts it, where there is a joint income and a joint enterprise, there is no fundamental right in a person to say that he should not be taxed at a higher slab in comparison to a person who individually does a business. It is urged on behalf of the revenue that so far as a partnership and its partners are concerned, it is in fact a concession given to the partners in the matter of the payment of the income-tax. It is put in this way. Four persons doing a joint business either as an unregistered firm or as an association of persons are required to pay the income-tax on the net income of the venture taken as one unit and are required to pay the income-tax at a higher slab. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his business in partnership either with strangers or with his adult children. There is no bar even to his carrying on his business, in partnership wherein his minor children can be admitted to the benefits of the partnership. A restriction has, however, only been put in the case of minor children who are admitted to the benefits of the partnership whose share of income has to be taken into consideration in making the assessment of the father or the mother, as the case may be. This cannot be called to be an unreasonable restriction on the right of an assessee to acquire, hold and dispose of property, or to carry on any profession, trade or business, particularly when the concession is already shown to such an assessee doing a business of partnership and that concession is withdrawn to a very small extent so far as the partners wherein minors are admitted to its benefit are concerned: In Navnit Lal C. Javei v. Appellate Assistant Commissioner of Income-tax, sections 2(6A)(e) and 12(1B) of the Income-tax Act, 1922, as introduced by Finance Act No. 15 of 1955, were challenged on the ground that they violated the fundamental right of the petitioner under article 19(1)(f) and (g) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the provisions of section 16(3)(a)(i) and (ii) of the Income-tax Act, 1922, and section 64(i) and (ii) of the Income-tax Act, 1961. Whereas under section 16(3) the share of income of the wife or the minor child who was admitted to the benefits of the partnership was added to the income of the husband or the father, under section 64(i) of the 1961 Act, the share of income of the spouse and of the minor children admitted to the benefits of the partnership are added to the income of the father or the mother, as the case may be, for the purpose of making the assessment. The same factors, therefore, which held the provisions of section 16(3)(a)(i) and (ii) of the Income-tax Act, 1922, valid will be relevant and will govern the provisions of section 64(i) and (ii) of the Income-tax Act, 1961, and we do not see why different considerations should apply in applying the test to these two provisions. We are, therefore, of the opinion that the provisions of section 64(i) and (ii) of the Income-tax Act, 1961, do not infringe the fundamental guarantees given under article 19(1)(f) and (g) of the constitution, nor do they violate any of these fundamental guarantees and are constitutionally v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s much less and in the category No. 3 the possibility is nil. Yet it is urged that all these three categories are painted with the same brush and treated alike, though they are differently situated. Such a classification, it is urged, is highly unreasonable and unfair which includes the last two categories also. In the said provision no connection can be established with the object sought to be achieved which is the prevention of the evasion of tax which is non-existent in cases of categories Nos. 2 and 3. It is argued that if the evil of the evasion of tax is to be remedied, as the object of the Act is to strike at the evasion of the tax, then the remedy for that purpose should be commensurate or proportionate with that object and should not be excessive. It is said that in the case of the first category there may arise a presumption of evasion, but in the second category, there is only a likelihood of evasion while in the case of the third category, there is no possibility of evasion and these three stand on different footing. It is, therefore, urged that so far as categories Nos. 2 and 3 are concerned, the remedy adopted is too excessive, and, therefore, unreasonable and the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of a minor he has no choice and the choice is made by his parents and the parents may admit their children to the benefits of the partnership irrespective of whether the partnership would be a prospering concern or a struggling concern. The fate of the minor children would depend upon the adventure of the parents is such cases. This would be so even if the funds may belong to the minors exclusively, either by way of succession or otherwise. It is not unlikely that the parents may use the funds belonging to their children to their advantage to the maximum possible and even by inflating those funds for reducing the tax liability. There may be cases where taking advantage of the control over the property of the minors the parents would try to exaggerate the value of that property and then put the same into partnership so that the share of income of the minors could be increased while that of the parents proportionately reduced, with the result that the income-tax payable on the total income of the parents would be reduced and subsequently the income falling to the share of the minor would be diverted to their advantage. We do not say that this would in every case be done. There ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to the benefits of the partnership the investment is mostly that of the father or the mother. There may be a few cases and in comparison they are negligible, where the minor may have exclusive funds independently of the father or the mother, but the control of the father or the mother over those funds is still there. One such source of independent funds to the minors would be by way of succession under the Hindu Succession Act so far as Hindu families are concerned, but in such cases also there can also be a possibility of attempts to reduce the tax. Taking all these factors into consideration if the minors of all the categories are grouped together so as to reduce the chances of evasion of tax to a minimum, it cannot be said that unlike or dissimilar persons have been grouped together and are treated alike. In the larger interests of the public it was necessary to group them together in order to achieve the object. It cannot be expected that for finding out the tax liability the authority should hold elaborate enquiries for finding out whether the funds alleged to be of the minors are part of the funds of their parents or their independent or exclusive funds and the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective Acts are almost similar without any substantial difference, in our opinion, the decision in Balaji's case is binding on us even with respect to the provisions of section 64(i) and (ii) of the Income-tax Act, 1961. It is urged on behalf of the assessee that Balaji's case can no longer be considered to be a good law in view of the decision of the Supreme Court in what is known as the bank nationalisation case: Rustom Cawasji Cooper v. Union of India. We do not think that the authority of Balaji's case is shaken by the decision in the bank nationalisation case. It is urged on the authority of the bank nationalisation case that in order to find out the object of the Act the impact of it on any particular class of persons is to be seen and it is to be found out whether it is necessary to achieve that object and if it is so necessary, then alone it could be said that there is a nexus between the classification and the object sought to be achieved. Reference was made to paragraphs 56 to 60 of the said case. We do not think that this decision bears out the contention of the learned counsel for the assessee. It was further urged that the authority of Balaji's case is further i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion us of section 64(i) and (ii). Whatever may be said about the women, we do not see any change between them and now so far as the minors, are concerned. We are dealing with the case of the minor's income being clubbed with that of the father or the mother. We do not therefore, see how the decision in Balaji's case ceases to be an authority for upholding the validity of section 64(i) and (ii) of the Income-tax Act, 1961, which, as we said earlier, is not much different from section 16(3)(a)(i) and (ii) of the 1922 Act. In fact, on the argument advanced on behalf of the assessee, if the women in India have become more advanced than before then the legislature was justified in adding the income of the minor children to the income of their mothers also. We have, however, no material before us to take a different view. It is also urged that the Hindu Succession Act has now made a change in the status of the minor children and both males and females on succession get absolute ownership to the property, as in the present case the wife and the sons and daughters of a Hindu succeed to his property on his death and get shares in accordance with the provisions of section 8 of the Hindu S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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