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TMI Blog1961 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... n is supported with reference to the language of entry 86 in List I of the Seventh Schedule to the Constitution of India. That entry is in the following words: Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; tax on the capital of companies. The contention is that this entry only empowers the legislature for the imposition of wealth-tax on individuals and companies but that the entry does not empower legislation imposing a tax on Hindu undivided family wealth. The contention is that a Hindu undivided family is not an individual nor a collection of individuals but that it stands on its own footing and that this is recognised both by Hindu law and by legislative practice relating to taxation and that, therefore, the legislative field given to entry 86 does not cover Hindu undivided family wealth but covers only that of individuals and companies. It is contended that a Hindu undivided family is more in the nature of a corporation and is not in the nature of a collection of individuals. It is contended that in a Hindu undivided family there is a commmunity of interest and a unity of possession between all the members of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mere collection of individuals. The individuals who compose a joint Hindu family cannot be considered to be separate juridical entities nor can a joint Hindu family be considered to be a corporate juridical entity, even though it can sue or can be sued in the joint family name and property held by it can be conveyed in its joint character by the manager or father acting within the scope of their authority. The joint Hindu family is a peculiarity of Hindu society and it cannot be put into the framework of any of the well-known juridicial concepts namely, individual person or corporations. It seems to me, therefore, that there is substance in the contention that the field of entry 86 does not cover the Hindu undivided family because it is confined to individuals and companies. It is also, I think, correct to say that in taxation legislation prior (and subsequent) to the Constitution of India a Hindu undivided family has been separately treated and provision has been made both in the Income- tax Act and the Business Profits Tax Act and in the different Finance Acts to charge a joint Hindu family on its own footing and it has been made liable to tax as a Hindu undivided family expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hindu undivided families. It must not be overlooked that the various entries in the three Lists of the Seventh Schedule are not powers of legislation but fields of legislation. The power to legislate is given by article 246 and other articles of the Constitution. The entries in the Lists are mere legislative fields and are of an enabling character. They are designed to define and delimit the respective areas of the legislative competence of the Union and State Legislatures and they neither impose any implied restriction on the legislative powers conferred by the articles nor prevent any legislature from exercising that legislative power in any particular manner, vide State of Bihar v. Sir Kameshwar Singh [1952] 21 I.T.R. 382 (Pat.) . It is true that the language of entries should be given the widest scope of which their meaning is fairly capable because they set up a machinery of Government, vide Hans Muller v. Superintendent [1955] 1 S.C.R 1284 at 1289 and Western Indian Theatres v. Cantonment Board [1959] Suppl. 2 S.C.R. 63 , but none the less their scope should not be so widened as to give over a field to a particular entry which it was not meant to embrace. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated words of limitation expressly placing a restriction upon the competence of the Union Parliament to enact any legislation imposing a tax on capital value on the assets of Hindu undivided families, and that limitation cannot be ignored when considering the residuary powers contained in article 248 and the residuary entry 92 in List II of the Seventh Schedule. I am wholly unable to accept this contention. There is no reason to think that the Constituent Assembly was desirous of saving Hindu undivided families from the burden of wealth-tax. Nor can the language of a topic of legislation affect the plenary power granted by article 248 of the Constitution. Nor in my view does entry 86 impose any restriction of the nature suggested; all that it does is to demarcate a particular field of legislation as falling within the sphere of Union legislation. At the same time there is located a residuary taxation field by entry 97. The residuary powers under article 248 remain intact and resort can be had to those residuary powers in order to justify a legislation of this nature. In my view, therefore, the Act cannot be impugned on the ground that there was no power in Parliament to pass an Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter not enumerated in the Concurrent List or the State List and clause (2) of this article further says: Such power shall include the power of making any law imposing a tax not mentioned in either of those List. It is contended that if it be held that the word individuals does not include a Hindu undivided family the Parliament has the power to make the impugned law under article 248(1) of the Constitution and more particularly under article 248(2) which expressly provides for the making of a law imposing a tax not mentioned in either of those Lists (Concurrent List or State List). I respectfully agree with my brother, Gurtu, that the word individuals in entry 86 cannot be stretched so as to include a Hindu undivided family. He has referred to the legislative practice evident from several taxing enactments to show that a Hindu undivided family has been always taken to be a unit of assessment different from an individual. In addition to those statutes one may also refer to a more recent enactment. The Expenditure-tax Act of 1957 says in section 3 of that Act that the tax is imposed in respect of expenditure incurred by any individual or Hindu undivided family in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to cover matters not enumerated. If the word individual includes a Hindu undivided family, there can be no doubt that the Act is valid. If the word individual is not wide enough to include a Hindu undivided family, it is evident that the power to impose a tax on the capital assets of a Hindu undivided family cannot be treated as a matter enumerated in entry 86 of the List in the Seventh Schedule. It was urged that the members of the Constituent Assembly were fully aware that a capital levy on the assets of a Hindu undivided family could also be a field of legislation and they must be deemed to have provided for it by using the word individual in a wide sense so as to include a Hindu undivided family. I find myself unable to accept this argument. Hindu undivided families are a peculiar feature of this country. When taxes prevalent in other countries are sought to be imposed in this country the peculiar character of a Hindu undivided family calls for special treatment. The provisions of the Income-tax Act show this. The Hindu undivided family is specifically mentioned in section 3 of that Act. The question as to whether a Hindu undivided family is a resident in the taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If they had any such intention, the intention would have found expression in the language used. According to the New English Dictionary (Oxford) individual means: (1) One in substance or essence; forming an indivisible entity. (2) That which cannot be separated, inseparable. (3) Existing as a separate indivisible entity; numerical one, single. (4) Inseparable things. (5) Single human being as opposed to society, family etc. The dictionary meaning appears to be inconsistent with the view that a Hindu undivided family, which is a group of individuals, should also be included within the meaning of the word individual . An individual is an indivisible entity. A Hindu undivided family can be subjected to partition resulting in the individual members of the family forming separate units by themselves. Reliance is sought to be placed on the view taken by a Bench of this court in In re Ramratan Das and Madan Gopal [1935] 3. I.T.R. 183 (All.) , that the word individual may in certain contexts include a Hindu undivided family. The provision which came up for consideration in that case was section 55 of the Income-tax Act as it stood then. The section read as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence made by the Income-tax Commissioner on a previous occasion it has been held that the registered firm could not in law be partner in the aforesaid nine unregistered firms. The result of this decision according to the Bench was that each of the two joint families was severally a partner in the nine unregistered firms. Niamatullah J., in delivering the judgment of the Bench and stating the facts, observed [1935] 3 I.T.R. 183, 185 (All.) : The assessee in the present case is a joint Hindu family represented by its karta, Lala Ramratan Das. The assessee in the connected case is a joint Hindu family represented by its karta, Lala Jaidayal. The two joint families entered into a partnership having equal shares and became a registered firm styled Jaidayal Madangopal. This registered firm (consisting of the two joint families as partners) became a partner in nine other unregistered firms. On a reference made by the Income-tax Commissioner on a previous occasion it has been held by a Bench of this court that the registered firm (consisting of the two joint families) could not in law be a partner in the aforesaid nine unregistered firms. The result of this decision was that each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacities. The facts, therefore, on which the later case, Ramratan Das and Madan Gopal, In re [1935] 3 I.T.R. 183 (All.) is based do not find support in the earlier decision. The Bench which decided the 1935 case proceeded on the assumption that the two families were partners and they found it necessary to construe individual including a family. The legal position which is now well established is that neither families nor firms can become partners in a firm. It appears from the judgments in the 1933 case that the kartas of the two joint families entered into a partnership and the assumption in the case, Ramratan Das and Madan Gopal, In re [1935] 3 I.T.R. 183 (All.) , that the two joint families entered into the partnership styled Jaidayal Madangopal is, with great respect, not correct. This erroneous assumption appears to be responsible for the necessity felt by the learned judges of widening the meaning of individual in the proviso to section 55 and in holding that the word had been used in the same section in two different senses. In In re Ram Kumar Ramniwas [1952] 22 I.T.R. 474 (All.) this court held that a Hindu family as such cannot be a partner in a firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships of the Supreme Court laid down the law as follows: When two kartas of two Hindu undivided families enter into a partnership agreement the partnership is popularly described as one between the two Hindu undivided families but in the eye of the law it is a partnership between the two kartas and the other members of the families do not ipso facto become partners. There is, however, nothing to prevent the individual members of one Hindu undivided family from entering into a partnership with the individual members of another Hindu undivided family and in such a case it is a partnership between the individual members and it is wholly inappropriate to describe such a partnership as one between two Hindu undivided families. In commissioner of Income-tax v. Sodra Devi [1957] 32 I.T.R. 615, 620 (S.C.) the question before their Lordship was whether the word individual in section 16(a)(ii) of the Income-tax Act includes also a female and whether the income of the minor sons derived from a partnership to the benefits of which they have been admitted is liable to be included in the income of the mother who is a member of the partnership. Their Lordships be a majo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law may be treated as an individual. A Hindu undivided family which is essentially different in nature from such corporations cannot be placed on the same footing. The learned judges relied, for the nature of the Hindu undivided family, on Mayne's Hindu Law where he has observed that the joint family is a corporate body of which the members are individuals and that the family property is owned by the whole coparcenary as a sort of corporation. The learned judge, therefore, held that the property of Hindu undivided family is within the ambit of entry 86. In support of this view the learned judge took certain characteristics of a Hindu family into consideration. He (sic.) observed [1957] 37 I.T.R. 191, 200 (Bom.) : Now, the contention of the petitioner that a Hindu undivided family is outside the scope and ambit of the expression 'individuals' and therefore of entry 86 can possibly succeed only if the property of such family can be shown to vest not in the individuals who are members or coparcenary of the family but is a jural entity which is in the eye of law distinct from its members or coparceners....When it is said that the ownership of the coparcenary prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A.P.) , which was decided by the Andhra Pradesh High Court, the Bombay case referred to above has been followed and the view is supported by reference to those cases where co-operative societies or bar councils have been considered as individuals within the meaning of the Income-tax Act. Discussing the nature of a Hindu undivided family the learned judges took the view that a joint family, though at times spoken of as a corporation, cannot be taken as a legal person in the strict sense of the term. It is an association of persons and as such would only fall within the expression individual . With great respect, an association is a group of individuals formed by agreement. A Hindu undivided family is not the outcome of any agreement. A person is born in the family and becomes a member of that family by mere birth. I would therefore hesitate to call a Hindu undivided family an association. Besides, individuals may form an association but the association itself is not an individual. I have given full and respectful consideration to these two cases but I am unable to agree. In Commissioner of Income-tax v. Sarwan Kumar [1945] 13 I.T.R. 361 (All.) a Bench of this court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e coming into existence of a juristic entity. The association according to the learned Chief Justice was natural . In Subramanian's; case [1960] 40 I.T.R. 567 (A.P.) the learned judges of the Andhra High Court have mentioned this case and have referred to a part of the passage quoted above to show the view taken by the judges about the nature of a Hindu undivided family. They have observed that in some cases a Hindu undivided family has been called a corporation or something in the nature of a corporation. They have also referred to the decision of a Bench of the Madras High Court in Sokkanadha Vannimundar v. Sokkanadha Vannimundar [1905] I.L.R. 28 Mad. 344 , where it was held that a joint family, though at times spoken of by judges as a corporation, cannot be taken as a legal person in the strict sense of the term. The learned judges have themselves referred to the decision of the Bombay High Court in Mahavirprasad's case [1959] 37 I.T.R. 191 (Bom.), [1945] 13 I.T.R. 361 (All.). mentioned above rejecting the contention that a Hindu undivided family is a corporation. The observation therefore in Sarwan Kumar's case cannot afford any basis for the view that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislative lists under the Constitution have been made more exhaustive than they were in the Government of India Act, 1935, and chances of leaving anything as a residuary were eliminated as far as human ingenuity could devise. Mr. B.L. Gupta contended that it is futile to suggest that human ingenuity could not have devised a tax on the capital of a Hindu undivided family in 1950 when the Constitution was framed. The Hindu undivided family had been taxed in several statutes by that time and if the Constitution does not mention the Hindu undivided family in entry 86 the only reason for it could be the object of the framers to refrain from providing for the imposition of such tax on the capital assets of a Hindu undivided family. No omission can be read where a limitation is placed. In entry 86 the area or field is expressly delimited and if legislation beyond the delimited area is attempted it is clear that powers are sought to be exercised which are not possessed under the Constitution. Entry 97 of List I of Schedule VII reads as follows: 97. Any other matter not enumerated in List II or List III including a tax not mentioned in either of those Lists. This residu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of a tax on the capital assets of all and sundry they would have left entry 86 as wide as entry 82. The fact that they did not do so and provided expressly for the levy of tax on individuals and companics cannot be construed in any other manner except as providing for the levy of tax on these two persons only. After giving anxious consideration to the argument of the learned counsel for the Central Board of Revenue I find myself unable to accept the contention that the word individual would cover a Hindu undivided family and that in the circumstances and having regard to the language of the various entries any other matter in entry 97 cannot be considered so as to cover a tax on the capital assets of a Hindu undivided family. Reliance is placed on article 245 to support the contention that the Parliament has extensive residuary powers to make any law and that a piece of legislation made by the Parliament should be accepted as valid unless it is in violation of any provision of the Constitution. Article 245 reads as follows: 245. (1) Subject to the provisions of the Constitution Parliament may make laws for the whole or any part off the territory of India, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the other provisions contained in this Act there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net Wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule. This section authorises the imposition of the tax on a Hindu undivided family. The question is whether the Union Parliament could enact this section and if so under which entry the imposition of such a tax can be justified? On behalf off the income-tax department it has been contended, firstly, that entry 86 of List of the Seventh Schedule off the Constitution enabled the Union Parliament to enact section 3 of the Act and, secondly, that if the imposition of the tax could not be justified under that entry in any case such a tax could be provided for by virtue of the provisions of article 248 of the Constitution read with entry 97 of List I of the Seventh Schedule of the Constitution. Entry 86 reads as follows: 86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of an Act like the Government of India Act, 1935, should not be cut down by a narrow and technical construction, but, considering the magnitude of the subjects with which it purports to deal in very few words, it should be given a larger and liberal interpretation... Again in the case of Under v. Provinces v. Atiqa Begum [1940] F.C.R. 110, 134 Gwyer C.J. observed as follows: I think however that none of the items in the Lists is to be read in a narrow or restricted sense, and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. In James v. Commonwealth of Australia [1936] A.C. 578, 614 (P.C.) the Privy Council observed as follows: It is true that a constitution must not be construed in any narrow or pedantic sense. The words used are necessarily general and their full import and true meaning can often be appreciated when considered, as years go on, in relation to the vicissitudes of fact which from time to time emerge. Our Supreme Court in the case of Navinchandra Mafatlal v. Commissioner of Income-tax [1956] 26 I.T.R. 758, 763 (S.C.). o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e created by the acts of parties except by adoption or marriage. A stranger may be affiliated as a member provided permitted. by custom. Again, unlike a a corporation, where its constituents are not the owners of its property, the property held by the Hindu undivided family is the property of the coparceners who have a right to separate and get their shares partitioned. Even during the state of jointness a coparcener has an undivided coparcenary interest in the property. it is true that he cannot have separate enjoyment of the property that would fall in his share until a partition takes place. None the less he, along with other co-sharers, is the owner of the same and has an Undivided coparcenary interest in the property. When it is said that the ownership of the coparcenary property vests in the whole body of coparceners it is not intended to say that someone else as distinct from the constituents of the undivided family is the owner of the same. In the case of a company a shareholder has an interest in the profits alone and has no right in the assets of a company (see Bacha F. Guzdar v. Commissioner of Income-tax [1955] 27 I.T.R. 1 (S.C.) . Similarly in a corporation the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enough to include a group of persons. The cases mentioned above lend support to the view that the expression individual even as used in section 3 of the Income-tax Act includes not only individuals as such but also an association or body of individuals or persons. A Hindu undivided family is, in my judgment, clearly a group or body of persons or individuals and it appears to me that the word individual occurring in entry 86 can comprehend a body of individuals also and consequently a Hindu undivided family. It has been contended that in the Income-tax Act an individual has been considered to be a separate entity from a Hindu undivided family and is assessable as a separate unit altogether. It is then submitted that there is a clear legislative practice to treat an individual as a separate entity from a Hindu undivided family and in view of that legislative practice it must be held that the constitution makers intended to use the word individual in entry 86 in the same restricted sense. In the first place the question of parliamentary practice or legislative history becomes important only when the words used are ambiguous or where. the Act is silent with regard to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess mention of the Hindu undivided family along with the expression individual would not justify the conclusion that there was a consistent legislative practice treating the two as separate units. It is clear that the provision for the Hindu undivided family being taxed as a unit by itself was by way of expediency in order to avoid complications which would have resulted in the constituents of the Hindu undivided family being taxed separately and which would have led to a lot of disputations and considerable difficulty. I am unable to agree that any such legislative practice exists as alleged by the petitioners and I see no reason to hold that a Hindu undivided family is not comprehended in the expression individual occurring in entry 86. It was submitted at the Bar that if it was the intention of the Constituent Assembly to include a Hindu undivided family also as a unit for assessment for the purpose of levy of the wealth-tax they would have mentioned the Hindu undivided family in entry 86 and would not have left it to be speculated later on whether or not the word individuals occurring in that entry comprehends a Hindu undivided family. In my opinion it was not necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the fourteenth amendment is to be treated by judges as though it were a mathematical abstraction, an absolute having no relation to the lives of men. In this connection it would be relevant to notice what the Privy Council has said in the case of James v. Commonwealth of Australia [1936] A.C. 578 (P.C.) , while interpreting the term trade and commerce in section 51 and 92 of the Australian Constitution. It was observed as follows [1936] A.C. 578, 614 (P.C.) : The words used are necessarily general, and their full import and true meaning can often only be appreciated when considered, as the years go on, in relation to the vicissitudes of fact which from time to time emerge. It is not that the meaning of the words changes but the changing circumstances illustrate and illuminate the full import of that meaning...It may be that in 1900 the framers of the Constitution were thinking of border tariffs and restrictions in the ordinary sense, and desired to exclude difficulties of that nature, and to establish what was and still is called 'free trade', and to abolish the barrier of the State boundaries so as to make Australia one single country. Thus they pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned provisions by virtue of entry 86 it is not necessary for me to go into the question whether entry 97 read with article 248 of the Constitution could sustain the impugned provision. But in view of the fact that my brother, Gurtu, has taken the view that it was entry 97 read with article 248 that enabled the Union Parliament to make the impugned provision and I am unable to agree with him on this point, it has become necessary for me to record in short my reasons for the disagreement. It is well known that resort to residuary powers should be the very last refuge. It is only when all the categories in the three lists are absolutely exhausted that one can think of falling back upon a non-descript (vide Subramanyan Chettiar v. Muthuswami Goundan A.I.R. 1941 F.C. 47, 55 ). It is a matter of common knowledge that at the time when the Government of India Act, 1935, was enacted as also when the present Constitution was passed an attempt was made to include in one list or the other all conceivable subjects and an attempt was made to make the lists exhaustive and to avoid a final assignment of residuary powers. In the case of Governor-General in Council v. Province of Madras A.I.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which could not be covered by the existing entries a residuary entry is provided for. In other words nothing was left to the residuary list by design and all sorts of conceivable subjects were included in one list or the other. It is impossible to believe that the Constituent Assembly could not conceive of the idea of imposing a capital levy on a Hindu undivided family because entry 86 itself would show that they had in mind a capital levy on the assets and the provisions of the Income-tax Act show that they also knew that the Hindu undivided family was a unit of assessment. Inasmuch as in my opinion the Constitution-makers were fully aware that a capital levy on a Hindu undivided family could also be a field of legislation they must have provided for it and could not have left it for the exercise of residuary powers. In my judgment, therefore, there is no question of residuary powers being exercised in the present case. If the Constitution-makers wanted to exclude from entry 86 the Hindu undivided family they could have excepted it expressly as agricultural land has been excepted from that entry. In my judgment it is not the umbrella of entry 97 but that of entry 86 which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self-governing Constitution founded upon a written organic instrument, such as the British North America Act, if the text is explicit the text is conclusive, alike in what it directs and what it forbids. When the text is ambiguous, as, for example, when the words establishing two mutually exclusive jurisdictions are wide enough to bring a particular power within either, recourse must be had to the context and scheme of the Act. Again, if the text says nothing expressly, then it is not to be presumed that the Constitution withholds the power altogether. On the contrary, it is to be taken for granted that the power is bestowed in some quarter unless it be extraneous to the statute itself (as, for example,) a power to make laws for some part of His Majesty's Dominions outside of Canada) or otherwise is clearly repugnant to its sense. For whatever belongs to self-government in Canada belongs either to the Dominion or to the provinces within the limits of the British North America Act. What is true of the Canadian Constitution is also true of our Constitution. In our Constitution all the residuary powers have been given to the Union Legislature. Consequently, it is not possible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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