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TMI Blog1954 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... med for the purpose of carrying on the business and the three minor sons who were sharers in the assets and good will of the business were admitted to the benefits of the partnership. The genuineness of this firm is not in dispute. The Income-tax Officer added the share income of the three minor sons to the total income of the assessee under section 16(3)(a)(ii) of the Act and this order was confirmed by the Appellate Tribunal. 3. Under the Indian Income-tax Act, tax is payable on the total income of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of an association individually. The word individual is not defined in the Act or in the General Clauses Act; but it does not mean only a human being but is wide enough to include a group of persons forming a unit and includes a corporation created by a statute. The total income includes all income, profits and gains from whatever source derived which are received, accrue or arise or deemed to be received, accrue, or arise. Section 4 of the Act elaborately provides for the application of the Act to the various classes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships between husband and wife or parent and minor child, or by the nominal transfer of assets to a wife or minor child, or to an 'association' consisting of husband and wife when there was no substantial separation of the interests of the assessee and the wife or child. It was stated that the proposals in the report regarding the aggregation of incomes of husband and wife went beyond the immediate necessities of the case and to that extent their adoption would involve the admission of a new principle which the Government of India did not desire to establish in advance of the general public discussion of the report which had been arranged. Section 16(3) was thus designed to bring within the ambit of taxation incomes of wives and minor children as income of husband or parent, which otherwise would escape the whole burden of taxation. 6. In the 5th Edition (1939) of Sundaram's Income-tax Act, the commentary on this sub-section runs thus:- The sub-section does not cover transfers from wife to husband. The position about transfers from a mother to a minor child is not clear. The word 'individual' in sub clause (iv) refers to the 'individual' at the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income cannot be included in the wife's income so as to tax the wife on a husband's income. 7. The learned counsel for the assessee relies on these commentaries and submits that on a true interpretation of the sub-section, in the light of the surrounding circumstances, the word individual means a male person and does not include a female. It is argued that it was the intention of the Legislature to include in the income of the father or husband the income of the minor children or wife. Reliance was also placed on Chorlton v. Lings [1868] L.R. 4 C.P. 374, The Pharmaceutical Society v. The London and Provincial Supply Association [1880] 5 App. Cas. 857, Beresford Hope v. Lady Sandhurst [1889] 23 Q.B.D. 79 and Nairn v. University of St. Andrews and Others [1909] A.C. 147. The learned counsel for the Commissioner, on the other hand, relies on Srimathi Chanda Devi v. Commissioner of Income-tax (supra) which was followed by the Punjab High Court in Commissioner of Income-tax v. Shrimati Damayanti Sahani [1953] 23 I.T.R. 41 and by the Allahabad High Court in Musta Quiwa, Begum, In re [1953] 23 I.T.R. 345. If these cases are correctly decided, the answer to the question mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had to be cured as well as at the cure provided. Lord Goddard, C.J., quoted these words with approval in R. v. Paddington and St. Marylebone Rent Tribunal [1949] 65 T.L.R. 200 at p. 203. 10. Four things have to be borne in mind in interpreting a statute: (1) what was the law before the making of the Act, (2) what was the mischief and defect for which it did not provide. (3) what was the intention of the Legislature to cure the defect of the existing Act, and (4) the true reason of the remedy. It is the duty of all judges to make such construction as shall suppress the mischief and advance the remedy according to the true intent of the makers of the Act. 11. In The Pharmaceutical Society v. The London and Provincial Supply Association Limited [1880] 5 App. Cas. 857 it was held that whether the word person in a statute can be treated as including a corporation must depend on the consideration of the object of the statute and of the enactments passed with a view to carry that object into effect. 12. In Nairn v. University of St. Andrews and Others [1909] A.C 147 their Lordships were interpreting the word person in section 27 of the Representation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brougham's Act (13 and 14 Vict. c. 21) provided: In all Acts of Parliament, words importing the masculine gender shall be deemed and taken to include females, and the singular to include the plural, and the plural the singular, unless the contrary as to gender or number is expressly provided. Even so it was held that in the Representation of the People Act, 1868, the word man or person did not include a woman. 13. As already observed, there was a widespread and growing avoidance of tax by nominal partnerships between husband and wife, father and minor children. In the case of Hindu undivided trading families, a partition by metes and bound was resorted to and wife and minor children were admitted to the family business as partners. Such devices being apparently valid according to the general law, the Income-tax was rarely in a position to prove that the alleged partition, or the participation of the minors in the benefits of partnership, and the alleged participation of the wife were unreal. Tax was also sought to be avoided by transferring directly or indirectly the father's or husband's assets in the name of his children or wife. The enquiry report d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute. It is a cardinal principle of interpretation of taxing statutes that in case of ambiguity it should be construed in favour of the subject and not against the subject: In re Har Krishna Das [1931] A.I.R. [1931] All. 401. In Sunder Das v. Collector of Gujrat [1922] I.L.R. 3 Lah. 349 Sir Shadi Lal, C.J., observed: It is a sound principle that the subject is not to be taxed without clear words to that effect; and that in dubio, you are always to lean against the construction which imposes a burden on the subject. It is said income-tax and equity are strangers. Equitable considerations have, therefore, no place in construction of section 16, sub-section (3), clause (a)(ii), to determine whether the income of a minor is to be included in the total of income of the mother. 15. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the income of his father. The use of the ambiguous words such individual in sub-clause (ii) appears to be inadvertent or unguarded. This new burden of taxation cannot be imposed on the mother without express language. In view of all these circumstances we are of the opinion that it was not the intention of the Legislature to impose additional tax on a mother assessee by including in her income the income of her minor children arising from the benefits of partnership of a firm in which the mother and the minors are partners. 16. The learned counsel for the Commissioner submits that the word individual must be literally construed and that there is no warrant for the restricted meaning suggested by the learned counsel for the assessee. He relies on the three reported decisions already referred to. In Chanda Devi's case [1950] 18 I.T.R. 944 their Lordships of the Allahabad High Court found no difficulty in interpreting the word individual in the generic sense to mean both man and woman though in some parts of the sub- section it means only a man. According to their Lordships the word individual is used in this sub-section as a unit for the purpose of income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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