1959 (3) TMI 62 - HC - Wealth-tax

Court holds Union Parliament can tax Hindu undivided families under Entry No. 86. 'Individuals' include HUFs. Dismissed with costs.

Mahavirprasad Badridas Versus M.S. Yagnik, Second Wealth-Tax

Mahavirprasad Badridas Versus M.S. Yagnik, Second Wealth-Tax - AIR 1960 Bom 191, 1959 37 ITR 191 Bom Issues Involved:1. Competence of the Union Parliament to enact the Wealth-tax Act, 1957, specifically regarding its application to Hindu undivided families.2. Interpretation of Entry No. 86 in List I of the Seventh Schedule to the Constitution of India.3. Interpretation of the term 'individuals' within the context of Entry No. 86.4. Legislative practice and its relevance to statutory interpretation.5. Applicability of Article 248 and Entry No. 97 in List I of the Seventh Schedule to the Constitution as residual powers for taxation.Detailed Analysis:1. Competence of the Union Parliament to Enact the Wealth-tax Act, 1957:The petitioner challenged the competence of the Union Parliament to levy wealth-tax on Hindu undivided families under the Wealth-tax Act, 1957. The petitioner, as the karta of a Hindu undivided family, received a notice to furnish a return of the net wealth of his family. He claimed that Section 3 of the Wealth-tax Act, which imposes wealth-tax on Hindu undivided families, was ultra vires the Union Parliament.2. Interpretation of Entry No. 86 in List I of the Seventh Schedule to the Constitution of India:Entry No. 86 reads: 'Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies.' The petitioner argued that this entry only authorized the Union Parliament to impose taxes on individuals and companies, not on Hindu undivided families. The court examined whether a Hindu undivided family could be considered within the scope of 'individuals' as used in Entry No. 86.3. Interpretation of the Term 'Individuals' within the Context of Entry No. 86:The court noted that a Hindu undivided family is an association of male Hindus lineally descended from a common ancestor and includes their wives and unmarried daughters. The family property is owned by the coparceners, and while the family remains undivided, no individual member can claim a specific share. The court rejected the argument that a Hindu undivided family is a corporation or a juridical entity distinct from its members. The court held that the term 'individuals' in Entry No. 86 could include a body of individuals such as a Hindu undivided family.4. Legislative Practice and Its Relevance to Statutory Interpretation:The petitioner argued that the legislative practice in taxing statutes, such as the Indian Income-tax Act, distinguished between 'individuals' and 'Hindu undivided families.' However, the court found no settled legislative practice supporting the contention that 'individuals' in taxing statutes only referred to single human beings. The court noted that there was no unanimity of judicial opinion on the interpretation of 'individuals' in the Indian Income-tax Act, and thus, the term could include associations or bodies of individuals.5. Applicability of Article 248 and Entry No. 97 in List I of the Seventh Schedule to the Constitution as Residual Powers for Taxation:The Attorney-General argued that even if Entry No. 86 did not authorize the Union Parliament to levy wealth-tax on Hindu undivided families, the Parliament had residual powers under Article 248 and Entry No. 97. Article 248 grants the Union Parliament exclusive power to legislate on matters not enumerated in the Concurrent or State Lists, including imposing taxes not mentioned in those lists. Entry No. 97 covers any other matter not enumerated in List II or List III, including any tax not mentioned in those lists. The court, however, did not find it necessary to express an opinion on this argument, as it held that the term 'individuals' in Entry No. 86 included Hindu undivided families.Conclusion:The court dismissed the petition, holding that the Union Parliament was competent to levy wealth-tax on Hindu undivided families under Entry No. 86 in List I of the Seventh Schedule to the Constitution. The term 'individuals' was interpreted to include Hindu undivided families, and no settled legislative practice or judicial consensus supported a narrower interpretation. The petition was dismissed with costs, and the court did not need to address the residual powers argument under Article 248 and Entry No. 97.