TaxTMI 
TaxTMI 
1957 (5) TMI 9
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....ree minor sons. A partnership was entered into between the assessee and her three major sons for the purpose of carrying on the business of the Spinning and Weaving Mills and the agency firm at Hinganghat. The three minor sons of the assessee were admitted to the benefits of the partnership. The genuineness of the partnership was not disputed. The only question which arose for the consideration of the Tribunal was whether the income falling to the share of the three minor sons was liable to be included in the total income of the assessee. On a construction of section 16(3)(a)(ii) of the Act, the Tribunal held that the income falling to the shares of the three minor sons of the assessee was liable to be included in her total income. The assessee thereupon applied to the Tribunal for a reference to the High Court of Judicature at Nagpur of the question of law arising out of its order under section 66(1) of the Act and the Tribunal submitted a statement of case referring the following question of law for the determination of the High Court : "Whether on a true construction of the provisions of section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, the income of the three minor son....
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....e Act from the High Court and that is how Civil Appeal No. 25 of 1955 is before us. The common question of law which we have to determine in these appeals is whether the word "individual" in section 16(3)(a)(ii) of the Act includes also a female and 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 that partnership. Section 16(3) of the Act provides : "In computing the total income of any individual for the purpose of assessment, there shall be included-- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly-- (i) from the membership of the wife in a firm of which her husband is a partner ; (ii) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner ; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart ; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such in....
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.... beings who in the context would be comprised within that category. The revenue urges before us that the word "individual" as used qua human beings is capable of including within its connotation a male as well as a female of the species and having regard to the context in which the word has been used in section 16(3), it should be construed as meaning a male of the species when used in juxtaposition with "a wife" and as meaning both a male and a female when used in juxtaposition with "minor child" so that when section 16(3) talks of "such individual" in sub-clauses (ii) and (iv) of clause (a) thereof it refers to both a male and a female of the species so as to include within its compass not only a father of the minor child but also a mother. The assessees, on the other hand, contend that the word "individual" used in section 16(3) is not used in its generic sense but is used in a restricted and narrower sense as connoting only human being and if it is thus restricted there is ample justification for restricting it still further to the male of the species when regarded in the context of section 16(3). Sub-clauses (i) to (iv) of clause (a) are specific cases where the income of ....
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....ction of a statute firmly established in England as far back as 1584 when Heydon's case was decided that '.......for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered :-- 1st. what was the common law before the making of the Act, 2nd. what was the mischief and defect for which the common law did not provide, 3rd. what remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. the true reason of the remedy ; and then the office of all judges is always to make such construction as shall supress the mischief, and advance the remedy, and to supress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.' In In re Mayfair Property Co. Lindley, M. R., in 1898 found the rule 'as necessary now as it was when Lord Coke reported Heydon's case'. In Eastman Photographic Materials Co. v. Comptroller General of Patents, Designs and Trade Marks the Earl of Halsbu....
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....ction 16(3) talk of "any individual" whose total income has got to be computed for the purpose of assessment and the words "such individual" used in section 16(3)(a) have reference only to that individual. That individual must be an assessee and it is in the computation of his total income for the purpose of assessment that the income of the persons mentioned in clauses (a) and (b) have got to be included. Sub-clause (a) refers to two distinct sets of persons bearing a relationship with "such individual", the assessee. One is a wife and the other is a minor child. The case of the wife is dealt with in sub-clauses (i) and (iii) and the case of a minor child is dealt in sub-clauses (ii) and (iv). Sub-clauses (i) and (iii) use the word "her husband" or "the husband" in place of the words "such individual" with reference to the income derived by the wife in the circumstances therein mentioned, though, it may be observed that the user of the words "such individual" would not have made the slightest difference to the position. Sub-clauses (ii) and (iv) which deal with a "minor child" use the words "such individual" in relation to the minor child whose income under the circumstances there....
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....ship of the wife in a firm of which her husband (or such individual) is a partner ; or (ii) from assets transferred directly or indirectly to the wife by the husband (or such individual) otherwise than for adequate consideration or in connection with an agreement to live apart ; (ai) or (b) : so much of the income of a minor child of such individual as arises directly or indirectly : (i) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner ; or (ii) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration. If these provisions had been enacted in the manner aforesaid it would have been possible to urge, as has been urged before us by the revenue, that clause (a) referred only to a male of the species who only could have a wife and clause (ai) or (b) referred to a male and/or a female of the species. The Legislature, however, chose to adopt a peculiar mode of enactment either for the purpose of economy of words or structural beauty and mixed up both these sets of provisions into the enactment of clause (a) of se....
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....ately go with a male as well as a female of the species, though the word "both" could only be appropriate in relation to a male of the species and not a female who can have a minor child but not both a wife and a minor child. The same want of elegance or propriety can be predicated of this expression also and the use of such expressions both in section 16(3)(a) and section 16(3)(b) raises questions of construction whether what was meant by the Legislature was only a male of the species in both these contexts or a male and/or female of the species, as the case may be, applying one or the other in accordance with the circumstances attendant upon the computation of the total income of "any individual" for the purpose of assessment. We are of opinion that the very manner in which all the four sub-clauses have been grouped together in section 16(3)(a) and the manner in which the expression "for the benefit of his wife, a minor child or both" is used in section 16(3)(b) renders the words "any individual" or "such individual " ambiguous. There is no knowing with certainty as to whether the Legislature meant to enact these provisions with reference only to a male of the species using the....
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....e minor child. This position was pregnant with difficulties for the revenue. There were no doubt genuine cases where a wife or the minor child, as the case may be, was provided with such income on bona fide severance of joint status between the erstwhile members of a joint and undivided Hindu family and where after such partition the adult member of the family entered into a bona fide partnership admitting the minors to the benefits of the partnership. There were, on the other hand, innumerable cases where such severance of joint status was resorted to mainly with a view to evade a higher incidence of income-tax. There were also cases where husbands and fathers provided shares for their wives and minor sons and thus evaded payment of income-tax in regard to their shares in the profits of such partnerships. This evil was so rampant that the Income-tax Enquiry Report, 1936, recognised the same and made the following recommendations for remedying the situation (vide pages 19 and 20 of the Report). "CHAPTER III : ASSESSEES. Section I : Individuals. (a) Wife's income. Our attention has been drawn to the extent to which taxation is avoided by nominal partnerships between husband ....
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....members was farthest from the thoughts of the Enquiry Committee and was nowhere sought to be remedied. Having regard to the circumstances which prevailed at the time when the Enquiry Committee made its report, the only mischief which they sought to remedy by their recommendations was the one resulting from the male assessees indulging in such tactics for the evasion of income-tax by creating nominal partnerships between themselves and their wives on the one hand and themselves and their minor children on the other. These recommendations were duly considered by the Government and as a result thereof Act IV of 1937 was enacted introducing section 16(3) in the Act. What was intended to be done by the Legislature in enacting this amendment may be gleaned to a certain extent from the statement of objects and reasons appended to the Bill which eventually became the amending Act. Though it is not legitimate to refer to the statement of objects and reasons as an aid to the construction or for ascertaining the meaning of any particular word used in the Act or statute (See Aswani Kumar Ghose v. Arabinda Bose), nevertheless, this Court, in State of West Bengal v. Subodh Gopal Bose referred ....
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....e within their connotation the male as well as the female of the species taken by themselves, these words in the context could only have been meant as restricted to the male and not including the female of the species. If these words are used as referring only to the male of the species the whole of the section 16(3)(a) can be read harmoniously in the manner above comprehending within its scope all the four cases specified in sub-clauses (i) to (iv) thereof and so also section 16(3)(b). We are therefore of opinion that the words "any individuals and "such individual" occurring in section 16(3) and section 16(3)(a) of the Act are restricted in their connotation to mean only the male of the species and do not include the female of the species, even though by a disjunctive reading of the expression "the wife" or " a minor child" of "such individual" in section 16(3)(a) and the expression "by such individual for the benefit of his wife or a minor child or both" in section 16(3)(b), it may be possible in the particular instances of the mothers being connected with the minor children in the manner suggested by the revenue to include the mothers also within the connotation of these words.....
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....o fathom the mind of the draftsman when he used one particular expression in preference to the other and not much help can be derived from the ratio adopted by the learned Judges of the High Court of Allahabad in the decision just referred to. It is also significant to observe that the learned Judges considered that the language of the section does not create any real difficulty and therefore did not think it worth their while to refer to the Income-tax Enquiry Report, 1936, and the passage therefrom which we have quoted above. Suffice it to say that we do not concur with the reasoning adopted by the learned Judges of the High Court of Allahabad and are of the opinion that the decision just referred to in so far as it militates against the reasoning adopted by us herein is incorrect. The later case of Musta Quima Begum, In re, decided by the same High Court merely follows the judgment in Chanda Devi's case and is subject to the same criticism as above. The decision of the High Court of Punjab in Commissioner of Income-tax, Delhi v. Damayanti Sahni, is the one under appeal before us in Civil Appeal No. 25 of 1955. The learned Judges there followed the decision of the High Court ....
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....nce to a consideration of sub-section (3) of section 16 of the Act and state at the very outset that, to my great regret, I have come to a conclusion different from that of my learned brethren. I shall presently read the sub-section ; but before I do so, it will help the exposition which follows if I explain in a few words the standpoint from which I have approached the question. Speaking generally, the expression "construction" includes two things : first, the meaning of the words ; and, secondly, their legal effect or the effect which is to be given to them by the Courts. As in the case of documents, so in the case of statutes also, they should be construed in a manner which carries out the intention of the Legislature. It may be reasonably asked--how is the intention of the Legislature to be discovered ? The answer is that the intention must first be gathered from the words of the statute itself. If the words are unambiguous or plain, they will indicate the intention with which the statute was passed and the object to be attained by it ; in other words, the intention is best declared by the words themselves, and the words of a statute are to be interpreted as bearing their ordin....
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....ome of any individual for the purpose of assessment, there shall be included-- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly-- (i) from the membership of the wife in a firm of which her husband is a partner ; (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner ; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart ; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration ; and (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both." I have already stated that the sub-section must be read as a whole and in the context of the other provisions of the Act, particularly section 316 of which it is a part ; it is only then that we shall arrive at i....
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....tances where the application of this rule or presumption is impossible. The same words may often receive a different interpretation in different parts of the same Act, for words used with reference to one set of circumstances "may convey an intention quite different from what the self-same set of words used with reference to another set of circumstances would or might have produced." (Edinburgh Street Tramways Co. v. Torbain, per Lord Blackburn). The classic example of the same word having a somewhat different meaning in the same section is provided by Offences against the Person Act, 1861, section 57 of which deals with bigamy and enacts : "Whosoever, being married, shall marry any other person during the life of the former husband or wife............shall be guilty of felony." It is obvious that the word "marry" is used in two different senses in the same section. There is another classic example in article 31 of our Constitution where the word "law" in clause (3) of the said article has been used in different senses. This is referred to in a decision of this Court in State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Daybhanga. The word "individual" is not defined in the....
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....fect the rate of tax applicable to the chargeable portion of the total income ; secondly, in several cases reliefs are given or calculations made with reference to the total income. Sub-section (3) of section 16 appears ex facie to be directed towards preventing an individual's attempt to avoid or reduce the incidence of tax by transferring the assets to his wife or a minor child or admitting the wife as a partner or admitting a minor child to the benefits of partnership in a firm in which such individual is a partner. I agree that the sub-section creates, to some extent, an artificial liability to tax by including the income of A in the income of B, and must therefore be strictly construed ; that merely means that the words of the sub-section must be given their strictly natural meaning, and there should be no attempt at artificial stretching one way or the other. What then is the proper construction of the sub-section ? It naturally falls into three inter-connected parts. The first part controls both clause (a) and clause (b), and states that "in computing the total income of any individual for the purpose of assessment, there shall be included so much of the income, etc." as i....
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....of the word "individual". Turning now to the sub-clauses numbered (i) to (iv), there can be no doubt from the phraseology used that sub-clauses (i) and (iii) refer only to a male individual, because a female individual cannot have a wife. It is worthy of note, however--and this is very important--that sub-clauses (ii) and (iv) make it equally clear that they are not confined to the male individual only in the manner in which sub-clauses (i) and (iii) are so confined. In sub-clauses (i) and (iii) the word "individual" is not used, and the words used are "her husband" and "the husband". In sub-clauses (ii) and (iv) the words used are "such individual". Why did the Legislature make this difference in phraseology ? If the intention was to confine the entire sub-section to a male individual only nothing could have been easier than to qualify the word "individual" by the adjective "male" in the first part of the sub-section which controls both clauses (a) and (b) ; alternatively, in sub-clauses (ii) and (iv) it would have been easy to use the word "father" instead of "such individual". It is true that a change of language is some, though possibly slight, indication of a change of inten....
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....l throughout the sub-section. All that happens is that in two of the sub-clauses of clause (a), when the Legislature intends that they should be confined to a male individual only, the word "husband" is used to make the intention clear. On the same reasoning, when the Legislature intends in two other sub-clauses that they should apply to either a male or a female, the word "individual" is used to include either of them. I am unable to accept the contention that such an interpretation offends against the rule of harmonious construction. So far as clause (b) of the sub-section is concerned, the word "individual" is again used and that again relates to a male or a female. The last part of the clause reads "by such individual for the benefit of his wife or a minor child or both." Here again the sentence has to be read distributively--that is, when the wife is talked of, the individual can only be a male ; when a minor child is talked of, the individual can be a male or a female ; when both wife and minor child are talked of, the individual can again be a male only. There was some argument before us with regard to the use of the indefinite article "a" before the words "minor child" and ....
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.... Act pro bono publico." Let me now apply these principles in the construction of sub-section (3) of section 16 of the Act. The sub-section was introduced in 1937, and before the enactment of the sub-section, there was no provision for the inclusion of the income of a wife or a minor child in the computation of the total income of an individual. The Income-tax Enquiry Report, 1936, referred to the widespread evil of the evasion of tax by the severance of the joint status amongst members of a joint and undivided Hindu family. The Report said : "Our attention has been drawn to the extent to which taxation is avoided by nominal partnerships between husband and wife and minor children. In some parts of the country, avoidance of taxation by this means has attained very serious dimensions. The obvious remedy for this state of affairs so far as husband and wife are concerned is the aggregation for assessment of their incomes, but such a course would involve aggregation in a quite different class of cases, i.e., where the wife's income arises from sources quite unconnected with the husband. We recommend, therefore, that the income of a wife should be deemed to be, for income-tax pur....
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....w taken by me. There is no presumption that, while remedying an evil, the Legislature may not cast its net very wide so as to remedy the evil in all its aspects. Let me again refer to sub-clauses (i) and (ii) of clause (a) of sub-section (3) of section 16 of the Act. Those two sub-clauses are absolute and unqualified in terms and not subject to any exception. If the wife owns and manages a business and she takes her husband into partnership with her in the business, the result of the partnership would be that the wife's income from the business would be no longer taxable in her hands but would be included in the total income of her husband under the sub-section, even though the husband may be a dormant partner. This clearly shows that the Legislature was not confining itself to the recommendations made in the Income-tax Enquiry Report. What is to be included in the total income of an individual under clause (a) is the income of a wife or minor child arising directly or indirectly "from the membership of the wife" in the firm or "from the admission of the minor to the benefits of partnership" in the firm of which the individual is a partner. The clause covers the share of the profit....
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....en cited before us. There has been a difference of opinion in the High Courts with regard to the interpretation of sub-section (3) of section 16 of the Act. In Chanda Devi v. Commissioner of Income-tax, the Allahabad High Court has taken the view that the minor's income which arises directly or indirectly from the admission of the minor to the benefits of partnership in a firm of which the mother is a partner, can be included in the mother's assessable income under section 16(3)(a)(ii) of the Act. The Allahabad High Court proceeded on the footing that the language of the sub-section did not create any real difficulty and it was not open to it to take the help of the Income-tax Enquiry Report. I have considered this case from both the points of view, and have arrived at the same conclusion at which the Allahabad High Court arrived. It is not necessary to mention the other reasons given by the Allahabad High Court, because they have already been stated by me in an earlier part of this judgment. This decision of the Allahabad High Court was followed by the Punjab High Court in Commissioner of Income-tax, Delhi v. Damayanti Sahni, which has given rise to one of the two appeals before u....