Welath Tax Officer, Calicut Vs. C. K.
Mammed Kayi [1981] INSC 88 (7 April 1981)
TULZAPURKAR, V.D.
TULZAPURKAR, V.D.
VENKATARAMIAH, E.S. (J)
CITATION: 1981 AIR 1269 1981 SCR (3) 358 1981
SCC (3) 23 1981 SCALE (1)620
ACT:
Wealth Tax Act, 1957-Section 3-"Individual"-Whether
includes Mapilla Marumakkathayam Tarawad (Muslim undivided family) governed by
Marumakukathayam Act.
HEADNOTE:
The assessee who was the Karnavan of Mapilla
Marumakkathayam Tarawad registered as impartible within the meaning of section
20(1) of the Mapilla Marumakkathayam Act, 1939 was assessed to wealth tax on
the net wealth of his Tarawad in the capacity of an individual under section 3
of the Wealth Tax Act.
The assessee's challenge as to the
constitutional validity of section 3 as being violative of Article 14 of the
Constitution was rejected by the High Court. The High Court, however, held by
majority, that non-Hindu Undivided Families like Mapilla Marumakkathayam
Tarawads were altogether outside the purview of the charging section of the
Act. The assessment was, therefore, quashed.
In appeal to this Court it was contended on
behalf of the Revenue that the expression "individual" in section 3
took in a body or group of individuals like Mapilla Marumakkathayam Tarawad for
being assessed to wealth tax and that long legislative practice obtaining in
the taxing scheme Mapilla Marumakkathayam Tarawads have always been treated and
assessed in the status of "individual".
Allowing the appeal,
HELD: 1. The term "individual" in
section 3 includes a group of individuals like Mapilla Marumakkathayam Tarawad.
The term "individual" does not mean
only a human being but is wide enough to include a group of persons forming a
natural unit. [365 E]
2. The canon of construction applicable to
Entries in the Legislative Lists of the Constitution would be different from
the canon of construction applicable to terms used in a taxing statute. While
the object of an entry in the Legislative Lists is to demarcate a wide field by
the use of compendious words the rule of construction applicable to a taxing
statute must ensure that the 359 subject is not to be taxed unless the language
of the statute clearly imposes the obligation. [364 B-C] Russell v. Scott,
[1948] A.C. 422, referred to.
3. The general scheme of the Wealth Tax Act
is to assess to tax all persons who happen to possess wealth beyond the
statutory limit and since the Act imposes a general tax on the entire wealth of
the community the presumption would be of equality of incidence rather than exemption
of a few. Secondly, the term "individual" can be read in plural and
so read would include a body or group of individuals like Mapilla Tarawad.
Thirdly the two terms 'individual' and 'Hindu Undivided Family' cannot be said
to have been used in anti-thesis with each other. Section 3, the charging
section is merely concerned with specifying different assessable units for the
purposes of assessment of wealth and imposition of the levy. [364 E-F]
4. It is well settled that the legislature
can select persons, properties, transactions and objects for the imposition of
a tax and for that purpose classify as many different assessing units as it
could reasonably think necessary. This is how the three assessable units have
come to be specified in that section. [364 G]
5. Specific mention of Hindu Undivided Family
in section 3 does not result in the exclusion of a group of individuals who
only form a unit by reason of their birth like a Mapilla Marumakkathayam
Tarawad from the operation of the scheme. [365 A]
6. The argument that because of the
references to wife, daughter and child of an individual in section 4 the term
"individual" in section 3 should be construed as referable to a
single human being is without force. Similarly, absence of provisions similar to
those applicable to Hindu Undivided Family for assessing groups of individuals
who form non- Hindu Undivided Families cannot affect or control the charging
section. [365 D-E]
7. The legislative practice in the country in
the taxing scheme had always been to treat and assess Mapilla Marumakkathayam
Tarawad as an "individual".
[365 F] V. Venugopala Ravi Varma Rajah v.
Union of India and Another, 74 I.T.R. 49 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1543 of 1971.
Appeal by certificate from the Judgment and
Order dated 28.10.1965 of the Kerala High Court in O.P.674 of 1958.
B.B. Ahuja and Miss A. Subhashini for the
Appellant.
G.C. Sharma, E.D. Helmes, S.P.Nayar and R.S.
Sharma for the Respondents.
360 The Judgment of the Court was delivered
by TULZAPURKAR, J. This appeal, by certificate granted by the Kerala High
Court, raises the question whether Mapilla Marumakkathayam Tarwads of North
Malabar-Muslim undivided families governed by Marumakkathayam Act (Madras Act
17 of 1939)-fall within the expression 'individual' and are assessable to tax
under s. 3 of the Wealth Tax Act, 1957 ? The checkered history through which
this litigation has passed may briefly be indicated in order to appreciate how
the aforesaid question arises for our determination. At the relevant time
deceased respondent was the karnavan of a Mappilla Marumakkathayam Tarwad
registered as impartible within the meaning of s. 20(1) of the Mapilla
Marumakkathayam Act (Madras Act 17 of 1939). He was assessed to wealth tax for
the assessment year 1957-58 on the net wealth of his Tarwad considered as an
individual under s.3 of the Wealth Tax Act, 1957 and on completion of the
assessment a demand notice dated July 16, 1958 was served on him for payment.
On September 10, 1958 he filed a writ petition being O.P. No. 674 of 1958
seeking to quash the said assessment and the demand notice on the ground of
unconstitutionality of the Wealth Tax Act No. 27 of 1957 (hereinafter called
'the Act'). Four other writ petitions were also filed by the karnavans of Hindu
undivided families of Malabar and Cochin governed by the Madras Marumakkathayam
Act No. 22 of 1923 challenging the constitutionality of the Act. Since common
questions of law arose for determination, the High Court disposed of the writ
petitions by a common judgment. The constitutionality of the Act was challenged
on two grounds-(a) that the Parliament was not competent to include a Hindu
undivided family in the charging s. 3 of the Act in view of Entry 86 in List I
of the Seventh Schedule of the Constitution and (b) that the charging s. 3 of
the Act was violative of Art. 14 of the Constitution. The High Court repelled
the first ground of challenge and held that Parliament was competent to include
a Hindu undivided family in s. 3 of the Act as constituting a body or group of
individuals coming within the term 'individuals' in Entry 86, but accepted the
latter ground of challenge by its judgment rendered on July 1, 1951. It took
the view that there was discrimination as between Hindu undivided families and
Muslim Mapilla Tarwads which were also undivided families and, therefore, the
charging section in so far as it governed undivided families was hit by Art.
14. The High Court observed that the Department had failed to substantiate its contention
that Muslim Mapilla Tarwads 361 were so insignificant in number that their
existence could be ignored in the context of the attack under Art. 14. The
Department carried the matter in appeal to this Court. By its judgment dated
February 17, 1964, this Court set aside the judgment and orders of the High
Court and remanded the cases to the High Court to consider whether Art. 14
applied to the cases or not after giving the parties opportunity of putting
forward their respective cases supported by facts and figures. In doing so,
this Court observed that on the question raised under Art. 14 the High Court
seemed to take the view that it was for the State to show that Art. 14 was not
applicable, that this was not correct and that it was for the party who came
forward with the application that equality before the law or equal protection
of laws was being denied to him to adduce facts to prove such denial.
On remand, out of the two contentions
initially formulated by the assesses, the first relating to the
constitutionality of the Act in relation to Entry 86 in List I had in the
meantime been squarely dealt with and over- ruled by this Court in the case of
Banarsi Dass v. Wealth Tax Officer and, therefore, the same was not pressed and
only the second contention regarding the validity of the charging s. 3 as being
violative of Art. 14 were argued before the High Court. Each one of the three
learned Judges, who heard the matter ultimately rejected the challenge and held
that s. 3 was not violative of Art. 14, but each one did so for different
reasons and in that process the majority reached the conclusion that non-Hindu
undivided families like Mapilla Marumakkathayam Tarwads, were altogether
outside the purview of the charging s. 3 and hence assessment made and the
demand notice served on the deceased respondent deserved to be quashed. Justice
Velu Pillai took the view that the legislative entries in a constitution were
to be widely and liberally construed but not the provisions of a taxing
statute, that though the term 'individuals' in Entry 86 of List I would be
comprehensive enough to include a body or group of individuals like undivided
Hindu families similar construction of the expression 'individual' in s. 3 of
the Wealth Tax Act so as to include non-Hindu undivided families like Mapilla
Marumakkathayam Tarwads was not warranted, that the term 'individual' in s. 3
of Act occurred in anti-thesis with the terms 'Hindu undivided family' and if
all undivided families were included in the terms 'individual' there was no
necessity to mention Hindu undivided family as a distinct taxing unit.
362 He, therefore, came to the conclusion
that non-Hindu undivided families were not covered by the term 'individual' and
were, therefore outside the charging section of the Act, but their exclusion
from the charging section did not attract the vice of discrimination under Art.
14 inasmuch as it had been established that there were only 22 Mapilla
Marumakkathayam Tarwads in the whole country and as such constituted an
insignificant or microscopic minority and their exclusion from the charging
provision was neither deliberate nor material and, therefore, s. 3 did not
violate Art. 14. Justice V.P. Gopalan Nambiyar, however, took the view that the
expression 'individual' in s.3 of the Act properly read included a group of
individuals who were members of a Mapilla Marumakkathayam Tarwad but since such
interpretation of the term 'individual' led to differential treatment to such
non-Hindu undivided families as compared to Hindu undivided families including
Hindu Marumakkathayam Tarwads and would be violative of Art. 14 he would read
down that expression so as to exclude Mapilla Marumakkathayam Tarwads and on
reading down the expression as aforesaid s. 3 avoided the vice of discrimination
under Art. 14. Justice T.S. Krishnamoorthy Iyer, however, took the view that
the expression 'individual' in s.3 of the Act included group of individuals who
were members of a Mapilla Marumakkathayam Tarwad as, according to him, the
specific mention of 'Hindu undivided families' as a separate assessable entity
in the charging section could not restrict the meaning of the term 'individual'
and, therefore, Mapilla Marumakkathayam Tarwads were assessable under s.3 of
the Act and that even after inclusion of such group of individuals within the
expression 'individual' the charging s.3 of the Act was not violative of Art.
14 of the Constitution. He took the view that the equality clause permitted the
legislature a wider discretion to classify persons, properties or transactions
into different categories and tax them differently under its power of taxation,
that a Hindu Marumakkathayam Tarwad and a Mapilla Marumakkathayam Tarwad were
not similarly situate, that the classification made by the legislature was
rational and, therefore, the Act which provided for lower limit of exemption to
individual and higher limit of exemption to Hindu undivided family could not
amount to hostile discrimination against group of individuals constituting the
Mapilla Marumakkathayam Tarwad. In his view there was no substance in the
challenge to s. 3 of the Act under Art. 14 and the writ petition was liable to
be dismissed. However, in accordance with the view of the majority that Mapilla
Marumakkathayam Tarwads were outside the purview of s. 3 of the Act the writ
petition was allowed and the assess 363 ment made and demand notice served on
the deceased respondent were quashed. In other words, though all the learned
Judges repelled the challenge to the charging section based on Art. 14 of the
Constitution, the majority reached that conclusion by holding that Mapilla
Marumakkathayam Tarwads were outside the purview of s. 3 of the Act. It is this
latter view which is being challenged before us by the Department in this
appeal.
Counsel for the Revenue urged two contentions
in support of the appeal. In the first place he supported the construction
placed by Krishnamoorthy Iyer, J., on the expression 'individual' in s. 3 of
the Act that it took in a body or group of individuals like a Mapilla Marumakkathayam
Tarwad for being assessed to wealth tax. Secondly, he urged that such
construction was in accord with the long legislative practice obtaining in the
taxing scheme in the country under which Mapilla Marumakkathayam Tarwads have
always been treated and assessed in the status of individual-a legislative
practice that has been judicially noted by this Court in the case of V.
Venugopala Ravi Varma Rajah v. Union of India and Another. On the other hand,
counsel for the respondent assessee canvassed for our acceptance the view taken
by Velu Pillai, J., that the expression 'individual' in s. 3 did not cover
non-Hindu undivided families like Mapilla Marumakkathayam Tarwads and these
were, therefore, outside the purview of the charging provision. He attempted to
strengthen that view by contending that the expression 'individual' in s. 3
meant a single individual as a human being and according to him this was clear
from the fact that references to 'wife', 'daughter' and 'child' of an
individual occur in s. 4 of the Act. He further pointed out that under s. 5(1)
(ii) wealth tax was not payable by an assessee in respect of his interest in
the coparcenary property of any Hindu undivided family of which he is a member
but there was no corresponding exclusion of the interest of the assessee in the
property of a non-Hindu undivided family like a Mapilla Marumakkathayam Tarwad
from the incidence of the tax and this also suggested that the term
'individual' in s. 3 was not intended to include a Mapilla Marumakkathayam
Tarwad.
Section 3 of the Act at the material time ran
thus:
"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 364
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." It cannot be disputed that the
canon of construction applicable to Entries in the three Legislative Lists
occurring in a Constitution would be different from the canon of construction
that would apply to terms or expressions used in a taxing statute. The object
of an Entry in any Legislative List is to demarcate as wide a Legislative field
as possible by the use of compendious words or expressions while the rule of
construction applicable to a taxing statute must ensure that "the subject
is not to be taxed unless the language of the statute clearly imposes the
obligation" (per Lord Simonds in Russell v. Scott. It is, therefore, clear
that because the expression 'individuals occurring in Entry 86 of List I of the
Seventh Schedule to the Constitution takes within its ambit a Hindu undivided
family, it would not automatically follow that the term 'individual' occurring
in s. 3 of the Wealth Tax Act 1957 would include a non-Hindu undivided family
like a Mapilla Marumakkathayam Tarwad, but the question will have to be
considered in the light of the scheme of the Wealth Tax Act itself. The
enactment is intended to provide for the levy of wealth-tax; the general scheme
thereof is to assess all persons who happen to possess or earn wealth beyond a
particular limit fixed by the statute to wealth-tax and since the Act imposes a
general tax on the entire wealth of the community the presumption would be of
equality of incidence rather than exemption of a few. Secondly, the term
'individual' under s. 13 (2) of the General Clauses Act, 1897 can be read in
plural and as such would include a body or group of individuals like a Mapilla
Tarwad. Thirdly, there is no warrant for suggesting that the two terms
'individual' and 'Hindu undivided family' have been used in anti-thesis with
each other, for s. 3 being the charging provision is merely concerned with
specifying different assessable units for purposes of assessment of wealth and
imposition of the levy;
it cannot be disputed that the Legislature
can select persons, properties, transactions and objects for the imposition of
a levy and for that purpose classify as many different assessing units as it
could reasonably think necessary and this is how three assessable units namely,
'individual', 'Hindu undivided family' and 'company' (which was later omitted)
have come to be specified in s. 3. In our view the specific 365 mention of
Hindu undivided family in the section does not result in the exclusion of group
of individuals who only form a unit by reason of their birth like a Mapilla
Tarwad from the operation of the section. It is difficult to accept the
argument that if term 'individual' was intended to include joint families or
undivided families it was redundant to specify Hindu undivided families.
In the context of the argument that the term
'individual' can refer only to a single human being it will be opposite to
refer to what this Court has observed in Commissioner of Income Tax, Madhya
Pradesh and Bhopal v. Sodra Devi. At page 620 of the report this Court has
said:
".... word 'individual' has not been
defined under the Act (Indian Income Tax Act 1922) and there is authority for
the proposition that the word 'individual' does not mean only a human being but
is wide enough to include a group of persons forming a natural unit." The
contention that because there are references to 'wife', 'daughter' and 'child'
of an individual in s. 4 the term 'individual' in s. 3 should be construed as
referable to a single human being cannot obviously be accepted. Similarly
absence of provisions similar to those applicable to Hindu undivided family for
assessing group of individuals who form non-Hindu undivided families
[provisions like s. 5(1) (ii)] cannot affect or control in any manner the
charging section.
On construction, therefore, we are clearly of
the view that the term 'individual' in s. 3 includes a group of individuals
like a Mapilla Tarwad.
Furthermore, we would like to point out that
the aforesaid construction would be in accord with the legislative practice
obtaining in the taxing scheme in the country whereunder Parliament has always
been treating and assessing Mapilla Marumakkathayam Tarwads in the status of
'individual' under the various taxing statutes. In V. Venugopala Ravi Varma
Rajah v. Union of India and Another (supra), a case arising under the
Expenditure Tax Act (29 of 1957), the question for determination was whether s.
3 of that Act was violative of Art. 14 of the Constitution because a Hindu
undivided family (specifically mentioned as a distinct assessing unit) governed
by the Marumakkathayam Law had to pay tax at a higher 366 rate by reason of the
amalgamation of the expenditure of all the members of the family whereas a
Mapilla undivided family was required to pay tax at a lower rate since the
members of such family governed by the Marumakkathayam Law were liable to be
taxed as individuals under the section and this Court answered the question in
the negative. While doing so this Court pointed out how Parliament had been
accustomed in enacting tax laws to make a distinction between a Hindu undivided
family consisting of Hindus and undivided families of Mapillas and how for
purposes of taxing statutes Mapilla Tarwads have always been regarded as
individuals. The relevant observations in this behalf run as follows:
"Under the taxing Acts the scheme of
treating a Hindu Undivided Family has been adopted for a long time, e.g., the
Indian Income-tax Act IX of 1869, Indian Income-tax Act IX of 1870, Indian
Income-tax Act XII of 1871, Act VIII of 1872, Act II of 1886, Act VII of 1918,
Act XI of 1922, Act 43 of 1961 have treated a Hindu Undivided Family as a
distinct taxable entity.
Similarly under the Wealth-tax 27 of 1957 and
the Gift- tax Act 18 of 1958, the Hindu Undivided Family is made a unit of
taxation. Under the Business Profits Tax Act, 21 of 1947 and the Excess Profits
Tax Act, 1940 also the Hindu Undivided Family was made a unit of taxation.
For the purposes of these Acts Mapilla
Tarwads governed by the Marumakkathayam law have been regarded as
individuals." (Emphasis supplied) For all these reasons we hold that the
term 'individual' in s. 3 of the Act includes within its ambit Mapilla
Marumakkathayam Tarwads and they are well within the purview of the taxing
provisions of the enactment. Further, even after their inclusion in the term
'individual' s. 3 of the Act would not be violative of Art. 14 for the same
reasons for which s. 3 of the Expenditure Tax Act, 1957 has been held to be not
so violative by this Court in V. Venugopala's case (supra).
In the result the appeal is allowed but there
will be no order as to costs.
P.B.R. Appeal allowed.
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