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TMI Blog1973 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... e between the wealth-tax authorities and the officials of the Corporation wherein the former persistently contended that the Corporation was liable to pay wealth-tax while the latter vehemently maintained that the wealth-tax is payable only by an individual or a Hindu undivided family or a company and that since the Corporation did not fall within any of those categories it was immune from payment of the tax. The wealth-tax authorities having filled to convince the Corporation officials about the correctness of their stand, they ultimately sent a demand notice on 30th of March, 1968, to the principal officer of the Corporation claiming tax of Rs. 1,87,381, for the assessment year 1959-60. It was suggested to the Corporation simultaneously that if it approached the appropriate authority for its being declared a company under the Act, the tax demand considerably scaled down. However, the Corporation neither paid the tax nor approached the competent authority, for declaring it as a company, and instead preferred an appeal against the assessment notified. The Assistant Commissioner of wealth-tax, with whom the appeal was filed, rejected the same by his order dated October 17, 1968. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Parliament was conversant with such an expression inasmuch as it had been used in sections 3 and 16 of the Indian Income-tax Act, 1922, which was in force at the time the Wealth-tax Act was placed on the statute book of the country in 1957. Again, in item 86, List I, Schedule VII, of the Constitution of India, the expression "individual" had also been used. That item reads : " Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies ; taxes on the capital of companies." Therefore, Parliament must be imputed with the knowledge of the meaning and connotation of the expression "individual" used in the Income-tax Act and the Constitution of India when it adopted the same expression in section 3 of the Wealth-tax Act. The Supreme Court observed in the case of Commissioner of Income-tax v. Sodra Devi, which was decided on 17th of May, 1957, that though the word "individual" has not been defined in the Income-tax Act yet there is authority for the proposition that the word does not mean only a human being but is wide enough to include a group of persons forming a unit. The Supreme Court observed further that the word "individual" includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate consideration. for the immediate or deferred benefit of the individual his or her spouse or minor child (not being a married daughter) or both, or (iv) by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise : Provided that where the transfer of such assets or any part thereof is either chargeable to gift-tax under the Gift-tax Act, 1958 (18 of 1958), or is not chargeable under section 5 of that Act, for any assessment year commencing after the 31st day of March, 1964, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual ; (b) Where the assessee is a partner in a firm or a member of an association of persons, the value of his interest in the firm or association determined in the prescribed manner...." " 6. Exclusion of assets and debts outside India. -In computing the net wealth of an individual who is not a citizen of India or of an individual or a Hindu undivided family not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section discovers any omission or a wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made. Sections 4 and 6 form part of Chapter II which bears the heading "Charge of wealth-tax and assets subject to such charge" while sections 14 and 15 fall under Chapter IV which bears the heading "Assessment". Section 4(1) undoubtedly uses the expression "an individual" in the opening part of it and then refers to "the purpose of such individual" in clause (a)(i), to "a minor child" in clause (a)(ii), and to " the value of his interest " in respect of a partner in clause (b) of it. The point that arises for determination at this stage is whether reference in section 4(1) to human persons in the manner just mentioned necessarily narrows down the generic meaning attaching to the word "individual" used in charging section 3 of the Act. Shri Choudhury urged for the Corporation that the exact scope of the expression "individual" used in section 3 is to be gathered from a harmonious reading of all the provisions of the Act and that when so read the expression would negative the contention of the respondents that it emb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only to the male of the species. The Supreme Court held after elaborate discussion that the only intention of the legislature in enacting section 16(3) was to include the income derived by the wife or a minor child in the computation of the total income of the husband or the father, as the case, may be, for the purpose of assessment, and that the words "any individual" and "such individual" occurring in section 16(3) are restricted in their connotation to mean only the male of the species and not the female. While enunciating this interpretation of section 16(3) the Supreme Court very categorically laid down that the word "individual" used in the charging section 3 of the Income-tax Act encompasses both natural and juristic persons. In other words, the Supreme Court did not whittle down the generic meaning of the word "individual" used in section 3 of the Act while holding that the expression "any individual" in section 16(3) is restricted only to the male and not the female human species. The Supreme Court held further that section 16(3) talks only of "individual" capable of having a wife or minor child or both and that it, therefore, necessarily excludes from its purview a gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, is nevertheless outstanding for a period of more than twelve months on the valuation date." The word "assessee" used in clause (m) is also defined in the Act, vide clause (c) of section 2, to mean a person by whom wealth-tax or any other sum of money is payable under the Act. And clause (42) of section 3 of the General Clauses Act, 1897, states that "person" shall include a company or association or body of individuals, whether incorporated or not. It is manifest that sections 4 and 6 have relevancy for only determining the net wealth of an "individual" of the description given in the said sections. Assuming that those two sections do not cover the case of corporations in the background of their peculiar phraseology, no stalemate is reached respecting the computation of net wealth of corporations. It is for this reason that the expression "net wealth" is defined in clause (m) of section 2 of the Act and on the basis of that definition a corporation's net wealth in reference to a particular valuation date can be worked out. The only consequence of the non-applicability of the provisions of sections 4 and 6 to corporations is that they (the corporations) can neither avail of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother argument pressed into service by Shri Choudhury is founded on the definition of the expession "company" given in clause (h) of section 2 of the Act. The definition, as at present, reads as follows: "(h) 'company' means a company as defined in section 3 of the Companies Act, 1956 (1 of 1956), and includes- (i) a company within the meaning of any law in force in the State of Jammu and Kashmir relating to companies ; (ii) a company incorporated outside India which has a place of business in India ; (iia) a corporation established by or under a Central, Provincial or State Act, which is declared by the Central Government, by general or special order, to be a company for the purposes of this Act ; and (iii) a company within the meaning of any law relating to companies for the time being in force in the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, or Pondicherry and any association in any such Union territory, whether incorporated or not, which is declared by general or special order of the Board to be a company for the purposes of this Act." Sub-clause (iia), it was conceded at the Bar, was added by the Finance (No. 2) Act of 1967. Shri Choudhury submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years, in the same manner as companies formed and registered under the Companies Act, 1956." This note is self explanatory and so we need not elaborate on it. Suffice it to say that the language of the note clearly indicates that Parliament had inserted sub-clause (iia) in the definition of company to confer certain benefits on corporations rather than to impose any burden on them to which they were not previously subject. Therefore, we reject the argument canvassed by Shri Choudhury on the authority of the amended definition of the expression "company". The point at issue is not res integra. We have a Full Bench decision of the Kerala High Court in the case of Kerala Financial Corporation v. Wealth-tax Officer holding that the term "individual" in section 3 of the Act is not restricted to human beings and includes a corporation, like the Kerala Financial Corporation, constituted under a Central, Provincial or State Act. The argument based on the particular wording of section 4(1)(a)(i) and (ii) of the Act on behalf of the Financial Corporation to support its contention that corporations are not liable to wealth-tax was brushed aside by the Full Bench with the observations that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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