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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 ..... slation is beyond its power and this contention 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e joint Hindu family is not a corporation, it is difficult to say that it is in substance 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 famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seventh Schedule to the Constitution does not deal with the topic of taxation on wealth 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of Hindu undivided families were concerned and that entry 86 incorporated 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution which says that the Parliament has the exclusive power to make any law with respect to any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred on the Parliament were expressly enumerated, I find no justification for holding that the powers are limitless or that "the matters" should be so expanded 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 treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption that the framers of the Constitution intended to provide for the levy of such tax on Hindu undivided families and that such assumed intention should be brought in aid to widen the meaning of the word "individual". 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint Hindu families, who had entered into a partnership having equal share and had formed a registered firm styled Jai Dayal Madan Gopal. The facts as stated in the report are that this registered firm consisting of two 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Rai Sahib Ram Ratan Das are partners in their individual capacity in the nine unregistered firms styled Jai Dayal Madan Gopal." At other places also in the judgment Lala Jai Dayal and Lala Ram Ratan Das are mentioned as partners who joined the firm Jaidayal Madan Gopal in their individual 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 ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council case was followed by the Calcutta High Court in Kaniram Hazarimull v. Commissioner of Income-tax [1955] 27 I.T.R. 294 (Cal). The same view was taken by the Supreme Court in Kshetra Mohan-Sannyasi Charan Sadhukhan v. Commissioner of Excess Profits Tax [1953] 24 I.T.R. 488, 492 (S.C.). 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 "indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion about the exact meaning of the word individual and it has been held that a company or a co-operative society is also an individual. As mentioned above, where several persons forming a group become a corporate body the position is different. A company which is a juristic person or a co-operative society which is also an entity brought into existence by 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and right and to which they owe certain obligations and which collective existence is a concept different from each of those individuals. In fact if the reasoning adopted by the learned judge be accepted the liability to tax would fall on associations or individuals as such jointly, which is not even claimed by the department. In Subramanian's case [1960] 40 I.T.R. 567 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd with the disappearance of the last male member of the family, but, as already pointed out, the existence of coparcenary is not essential for the existence of a joint Hindu family. When the learned Chief Justice observed that a family is an association of people he evidently did not mean to say that it was a voluntary association or that it was an association which resulted in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J., in the C.P. Motor Spirit case [1938] S.T.C. 1, 35 (F.C.), remarked: "The attempt to avoid a final assignment of residuary powers by an exhaustive enumeration of legislative subjects as made the Indian Constitution Act unique among federal constitutions in the length and details of its legislative lists In Subramanyan Chettiar v. Muthuswami Goundan A.I.R. 1941 F.C. 47 Sulaiman J. also held that the 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This entry reads: " 82. Taxes on income other than agricultural income." Whose income would be the subject-matter of the imposition is not indicated in this entry. The term "income" is as wide as one may possibly make it. The only limit set in the entry is that the subject-matter of the tax should be income and that agricultural income should be, excluded. There is no mention of the person whose income may be liable to tax. If the framers of the Constitution thought of providing for the imposition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions. All of them have been filed on behalf of Hindu undivided families against whom Proceedings for assessment of wealth-tax (hereinafter referred to as the tax) have either been completed or are pending. The question raised is that section 3 of the Wealth-tax Act (hereinafter referred to as the Act) is ultra vires the Powers of the Union Parliament in so, far as it authorises the levy of the tax on the net wealth of a Hindu undivided family. No other question is involved in these petitions. Section 3 of the Act reads as follows: "3. Subject 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be construed in any narrow and pedantic sense. In the case of British Coal Corporation v. King [1935] A.C. 500; A.I.R. 1935 P.C. 158, while interpreting the Canadian Constitution, their Lordships of the Privy Council observed that: "In interpreting a constituent or organic statute, that construction most beneficial to the widest possible amplitude of its powers must be adopted." In In re C.P. Motor Spirit Act A.I.R. 1939 F.C. their Lordships of the Federal Court emphasised the importance of very liberally interpreting the Constitution and observed that A.I.R. 1939 F.C. 1, 31: "...the 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 mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cannot be comprehended in the word "individuals". It is true that in a sense and for some limited purposes a Hindu undivided family is a juristic person and a sort of a corporate body on whose behalf contracts can be entered into and enforced (see Shanker Lal v. Toshan Pal Singh A.I.R. 1934 All. 553. But does that alter its essential nature and make it a corporation and not a group of persons or individuals? A joint Hindu family is a creature of law and consists of males lineally descended from a common male ancestor together with their wives and unmarried daughters. Unlike a corporation it cannot be 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sarwan Kumar [1945] 13 I.T.R. 361 (All.), held that a Hindu undivided family is an association of persons and is distinct from artificial associations. In the case of Commissioner of Income-tax v. Salem, District Urban Bank Ltd. [1940] 8 I.T.R. 269 (Mad.) a Full Bench of the Madras High Court held that a co-operative central bank in Madras was an association of individuals within the meaning of section 3 of the Income-tax Act. In the case of Commissioner of Income-tax v. Sodra Devi [1957] 32 I.T.R. 615 (S.C.) their Lordships of the Supreme Court held that the word "individual" does not mean only a human being but is wide 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on a Hindu undivided family. Apart from it is there any legislative practice to always treat the word, "individual" as a separate and distinct unit from a Hindu undivided family in taxing statutes? It is true that in section 3 of the Income-tax Act the word "individual" has been treated as a separate unit of assessment from a Hindu undivided family but it has not been brought to our notice that the same was the position in the Income-tax Act of 1860 or 1886. Other taxing statutes have also not been placed before us to show that there was any such legislative practice as alleged by the petitions. The mere fact that in the Income-tax Act of 1922 there is express 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming consequences resulting from the pervasive industrialization of life find the Commerce Clause appropriate, for instance, for national regulation of an aircraft flight wholly within a single State. Such exertion of power by the national government over what might seem a purely local transaction would, as a matter of abstract law, have been as unimaginable to Marshall as to Jefferson precisely because neither could have foreseen the present conquest of the air by man. But law, whether derived from acts of Congress or the Constitution, is not an abstraction. The Constitution cannot be applied in disregard of the external circumstances in which men live and move and have their being. Therefore, neither the first 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cularise, for if that were done the subject-matter or the field of legislation might have been narrowed down within the restrictions imposed by the particular words. The Bombay High Court in the case of Mahavirprasad Badri Das v. Yagnik [1959] 37 I.T.R. 191 (Bom) and the Andhra Pradesh High Court in the case of Subramanian v. Wealth-tax Officer [1960] 40 I.T.R. 567 (A.P.). have held that the Union Legislature was competent to provide for the imposition of a capital levy on a Hindu undivided family. For the reasons given in this judgment I am in respectful agreement with the views expressed by the learned judges in the cases mentioned above. In view of my conclusions that the Union legislature could have enacted the impugned 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 reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to leave any subject or field of legislation which, in spite of the exhaustive enumeration of legislature or powers and the best efforts, escaped notice or could not be conceived of by the founding fathers, without either the Union Legislature or the State Legislature having the power to legislate in respect thereof. Again, there is good authority for the proposition that is a case where two construction are possible, one of which will avoid the resort to the residuary power and the other which will necessitate such resort, the former must be preferred (See Manikkasundara v. Nayudu [1946] F.C.R. 67). On the assumption that sometimes new fields of legislation may come into existence which could not be foreseen 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is not the position in our Constitution. While dealing with the Canadian Constitution the Privy Council in the case of Attorney-General for Ontario v. Attorney- General for Canada [1912] A.C. 517 at 581 (P.C.) observed as follows: "Now, there can be no doubt that under this organic instrument the powers distributed between the Dominion on the on hand and the provinces on the other hand cover the whole area of self-government within the whole area of Canada. It would be subversive of the entire scheme and policy of the Act to assume that any point of internal selfgovernment was withheld from Canada." Again, at pages 583-84, it was observed as follows: "In the interpretation of a completely 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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