1954 (4) TMI 58 - HC - Income Tax

Court clarifies tax law: 'Individual' in Section 16(3)(a)(ii) includes all genders, minors' income not taxable.

Sahodradevi N. Daga Versus Commissioner of Income-Tax, M.P. And Bhopal, Nagpur

Sahodradevi N. Daga Versus Commissioner of Income-Tax, M.P. And Bhopal, Nagpur - [1955] 27 ITR 9 (NAG.) Issues Involved:1. Interpretation of the term 'individual' in Section 16(3)(a)(ii) of the Indian Income-tax Act, 1922.2. Inclusion of the income of minor children in the total income of the mother for tax purposes.3. Legislative intent behind Section 16(3) of the Indian Income-tax Act, 1922.4. Principles of statutory interpretation in the context of taxing statutes.Issue-wise Detailed Analysis:1. Interpretation of the term 'individual' in Section 16(3)(a)(ii) of the Indian Income-tax Act, 1922:The core issue was whether the term 'individual' in Section 16(3)(a)(ii) includes both males and females, or is limited to males. The court noted that the term 'individual' is not defined in the Act or the General Clauses Act. The term 'individual' should be interpreted in the context of the surrounding circumstances and the legislative intent. The court examined various commentaries and judicial precedents, including the decisions in Chorlton v. Lings, The Pharmaceutical Society v. The London and Provincial Supply Association, and Nairn v. University of St. Andrews, which emphasized that ambiguous terms must be interpreted in light of the surrounding circumstances and constitutional principles.2. Inclusion of the income of minor children in the total income of the mother for tax purposes:The court examined whether the income of the minor sons of the assessee should be included in her total income under Section 16(3)(a)(ii). The court noted that the legislative intent behind Section 16(3) was to prevent tax evasion through nominal partnerships and transfers of assets. The court observed that the language of Section 16(3)(a)(ii) was ambiguous, particularly the use of the term 'such individual.' The court concluded that the legislative intent was to prevent tax evasion by male assessees and that the inclusion of the income of minor children in the mother's total income was not intended.3. Legislative intent behind Section 16(3) of the Indian Income-tax Act, 1922:The court referred to the historical context and the legislative intent behind the enactment of Section 16(3). The provision was introduced to counteract tax evasion by male assessees through nominal partnerships and asset transfers to wives and minor children. The court noted that the Enquiry Committee's report and the statement of objects and reasons for the Amending Act of 1937 focused on tax evasion by male assessees. The court concluded that the legislative intent was not to impose additional tax burdens on female assessees by including the income of minor children arising from the benefits of partnership in the mother's total income.4. Principles of statutory interpretation in the context of taxing statutes:The court emphasized the principle that taxing statutes should be interpreted strictly, and any ambiguity should be resolved in favor of the taxpayer. The court referred to the maxim expressio unius est exclusio alterius, which means 'the express mention of one thing implies the exclusion of another.' The court noted that this maxim should be applied with caution and that the intention of the Legislature must be considered. The court also cited the principle that in case of ambiguity, taxing statutes should be construed in favor of the subject and against the imposition of tax.Conclusion:The court concluded that it was not the intention of the Legislature to include the income of minor children arising from the benefits of partnership in the total income of the mother. The court answered the question referred to it in the negative and held that the income of the minor sons of the assessee should not be included in her total income under Section 16(3)(a)(ii) of the Indian Income-tax Act, 1922. The assessee was awarded the costs of the reference, and the respondent was ordered to pay the costs of the paper book.