Case: Seth Banarsi Das Etc Vs. Wealth Tax Officer, Special Circle Meerut, Etc

includes capital gain, this Court observed that the said conclusion was reached not because of any legislative practice either in India or in the United States or in the Commonwealth of Australia, but "because such was the normal concept and connotation of the ordinary English word "income. Its natural meaning embraces any profit or gain which is actually received".13. Similarly, in Navnital C. Javeri v. K. K.Sen, Civil Appeal No. 45 of 1964, dated 28-10-1964 ; (AIR 1965 SC 1375 ), when this Court had occasion to consider the validity of S. 12(1B) read with S.2 (6A)(e) of the Indian Income-tax Act, 1922 (No. 11 of 1922) as it stood in 1955, the question which was raised for its decision was whether it was competent to Parliament to treat a loan advanced to a shareholder of a company as his income. In answering the said question in favour of the impugned provision, this Court observed that "though Parliament cannot choose to tax as income an item which in no rational sense can be regarded as a citizens income, it would, nevertheless be competent to Parliament to levy a tax on a loan received by the shareholder if it was satisfied that the said loan could rationally be construed as his income. In considering this question, however, it would be inappropriate to apply the test traditionally prescribed by the Income-tax Act as such". Therefore, we do not think that the legislative history in the matter of the denotation of the word "individuals" on which the appellants rely, can really afford any material assistance in construing the word "individuals in Entry 86.14. Reverting then to Entry, 86, the question which we have to ask ourselves is whether on a fair and reasonable construction, the word "individuals" in the context of the Entry can legitimately be narrowed down to individuals as such and not to include groups of individuals. If the object of making the Entry is to enable Parliament to levy taxes on the capital value of the assets, how can it be said to be reasonable to introduce a limitation on the denotation of the word "individuals" and to say that taxes could not be levied on the capital value of the assets which belong to groups of individuals. If the individuals constitute themselves into a group and such group owns capital assets, it is not easy to understand why the value of such assets should not be included within the legislative field covered by Entry 86. The Constitution-makers were fully aware that the Hindu citizens of this country normally form Hindu undivided families and if the object was to leavy taxes on the capital value of the assets, it is inconceivable that the word "individuals" was introduced in the Entry with the object of exceeding (excluding ?) from its scope such a large and extensive area which would be covered by Hindu undivided families. We are, therefore, satisfied that the impugned section is valid because Parliament was competent to legislate in respect of Hindu undivided families under Entry 86.15. This question has been considered by several High Courts and the reported decisions show consensus in judicial opinion in favour of the construction of Entry 86 which we have adopted (vide Mahavirprasad Badridas v. M. S. Yagnik, 1959-37 ITR 191 (Bombay High Courts decision); Subramanyam v. Addl. Wealth Tax Andh Pra 75) (Andhra Pradesh High Courts decision - Single Judge Bench); Ramabhadra Raju v. Union of India, 1962-45 ITR 118 : (AIR 1961 Andh Pra 355) (Andhra Pradesh High Courts decision - Division Bench): Sarjerao Appisaheb Shitole v. Wealth Tax Officer, A-Ward, Belaaum, 1964-52 ITR 504 (Madras High Courts decision). We ought to add that these reported decisions show that the validity of the impugned provision was challenged before the High Courts on ground that the Hindu undivided family is an association and as such, the capital value of its assets could not be taxed under Entry 86. That naturally raised the question about the true legal character and status of Hindu undivided family, and the contention that they were associations has been rejected. Since that argument has not been pressed before us, we have not thought it necessary to consider it.16. Before we part with these appeals, we may refer to an earlier decision of this Court in which the word "individual" fell to be considered. In commissioner of Income-tax, M. P. and Bhopal v. Sodra Dev, 1957-32 ITR 615 : ((S) AIR 1957 SC 832 ), the question which arose for the decision of this Court had relation to the construction of S. 16 (3) of the Indian Income-tax : Act, 1922. That sub-section provides that in computing the total income of any individual for the purpose of assessment, there shall be included the items specified in clauses (a) and (b). What is the denotation of the word "individual" was one of the points which had to be considered in that case. According to the majority decision, though the word "individual" is narrower than the word "assessee", it does not mean only a human being, but is wide enough to include a group of persons forming a unit. "It has been held", observed Bhagwati, J., who spoke for the majority," that the word "individual" includes a corporation created by a statute, e.g., a university or a bar council, or the trustees of a baronetcy trust incorporated by a Baronetcy Act. It would also include a minor or a person of unsound mind". We are referring to this case only for the purpose of showing that the word "individual" was interpreted by this Court as including a group of persons forming a unit.17. Since we have come to the conclusion that Entry 86 covers cases of Hindu undivided families, it follows that the impugned provision is valid under the said Entry itself. That being so, it is unnecessary to consider whether the validity of the impugned provisions can be sustained under Entry 97 or under Art. 248 of the Constitution.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. The appellants no doubt contrast Entry 86 with Entry 82 and contend that the said contrast brings out an element of limitation or restriction which should be imported in construing Entry 86. Entry 82 refers to taxes or income other than agricultural income. The argument is that the power to levy taxes on income is not conditioned by reference to individuals or companies; it is an unlimited extensive power. In contrast with this Entry, it is urged that limitation is introduced by Entry 86, because it seeks to confer power to levy taxes on the capital value of the assets of individuals and companies. The assessee are indicated by this Entry, and that that itself introduces an element of limitation. The appellants attempt to place their case alternatively by emphasising the fact that the word "individuals" in the context cannot mean companies, because companies are separately and distinctly mentioned; that again, it is said, introduces an element of limitation on the denotation of the word "individuals" "Individuals, therefore, must mean individuals and cannot mean groups of individuals, that is the main contention raised by the appellants. We are not impressed by this argument. It is true that Entry 82 does not refer to the assessee, and that is natural because what it purports to do is to recognise the legislative competence of Parliament to levy taxes on income, the only limitation being that the income must be other than agricultural income, since Entry 86 refers to taxes on the capital value of the assets, the Constitution-makers must have thought that it was necessary to specify whose assets should be subject to the taxes contemplated by the Entry, and that explains why individuals and companies are mentioned. Since companies are specifically mentioned along with individuals, it may be permissible to contend that companies in the context are not included in the word." individuals", or it may perhaps be that since Entry 86 wanted to specify that the taxes leviable under it have to be taxes on the capital of the companies, it as thought desirable that companies should be specified as a matter of precaution along with individuals. However, that may be, it is not easy to understand-why the word individuals" cannot take in its sweep groups of individuals like Hindu undivided families. The use of the word "individuals" in the plural is not of any special significance, because under section 13(2) of the General Clauses Act. 1897 (No. 10 of 1897), words in the singular shall include the plural, and vicethe face of it, it is impossible to assume that while thinking if levying taxes on the capital value of assets, Hindu undivided families could possibly have been intended to be left out. We can think of no rational justification for making any such assumption. In this connection, it is significant that on the appellants case, the capital value of the assets of Hindu undivided families would never become the subject-matter of wealth tax. Hindu undivided families, it is urged, are groups of individuals and, therefore, should be outside Entry 86 and individuals who constitute such Hindu undivided families could not be subjected to the levy of the tax, because the body of coparceners who constitute such Hindu undivided families is a fluctuating body and their shares in the capital assets of their respective families are liable to increase or decrease and cannot be definitely predicated for the accounting year as a whole, unless partition is made. Prima facie, such a position appears to be plainly inconsistent with the scheme of entry 86 and it cannot be upheld unless the word "individuals" is reasonably incapable of including groups of individuals.10. It is true that when tax is levied on the capital value of the assets of Hindu undivided families, in a sense the assets of individual coparceners are aggregated, and on the aggregate value a tax is levied; but how the taxes should be levied and at what rate, is a matter for the legislature to decide; that consideration cannot enter into the discussion of the legislative competence of Parliament to enact the law. It is hardly necessary to emphasise that groups of individuals, the capital value of whose assets would be subject to the payment of wealth would naturally be groups of individuals who form a unit and who own the said assets together. The fact that the rights of the individuals constituting the group are liable to be decreased or increased does not make any difference when we are dealing with the question as to whether the word "individuals" is wide enough to include groups of individuals. We do not see anything in the context of Entry 86 which can be said to introduce an element of restriction or limitation while interpreting the word "individuals". Ordinarily, individuals would be treated as such and the capital value of their Separate assets would be taxed;, but if individuals from groups and such groups own capital assets, it is difficult to see why the power to levy taxes on such capital assets should be held to be outside the scope of Entry 86.Assuming that the legislative history in the matter of tax legislation supports the distinction between individuals and Hindu undivided families, we do not see how the said consideration can have a material bearing on the construction of the word "individuals" in Entry 86. The tax legislation may, for convenience or other valid reasons, have made a distinction between individuals  and Hindu undivided families; but it would not be legitimate to suggest that the word" "individuals" occurring in an organic document like the Constitution must necessarily receive the same construction. Take, for instance, the traditional concepts of income as recognised by the tax law. It has been held by this Court in Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City, 1955-1 SCR 829   at p. 837 : (S) AIR 1955 SC 58   at p. 61), that the said traditional concept of income cannot introduce considerations of restriction or limitation in interpreting the word "income" in Entry 54 in List I of the Seventh Schedule tothe Government of India Act, 1935, which corresponds to Entry 82 in List I of the Seventh Schedule to the Constitution. In that case, the validity of the tax levied on capital gains was impeached or the ground that capital gains cannot be regarded as income, and so, Entry 54 did not justify the levy of the tax on capital gains. In rejecting this contention, this Court held that the word "income" occurring in Entry 54 must receive the widest interpretation and could, therefore, be interpreted to include a capital gain. In holding that the word "income" includes capital gain, this Court observed that the said conclusion was reached not because of any legislative practice either in India or in the United States or in the Commonwealth of Australia, but "because such was the normal concept and connotation of the ordinary English word "income. Its natural meaning embraces any profit or gain which is actuallythe object of making the Entry is to enable Parliament to levy taxes on the capital value of the assets, how can it be said to be reasonable to introduce a limitation on the denotation of the word "individuals" and to say that taxes could not be levied on the capital value of the assets which belong to groups of individuals. If the individuals constitute themselves into a group and such group owns capital assets, it is not easy to understand why the value of such assets should not be included within the legislative field covered by Entry 86. The Constitution-makers were fully aware that the Hindu citizens of this country normally form Hindu undivided families and if the object was to leavy taxes on the capital value of the assets, it is inconceivable that the word "individuals" was introduced in the Entry with the object of exceeding (excluding ?) from its scope such a large and extensive area which would be covered by Hindu undivided families. We are, therefore, satisfied that the impugned section is valid because Parliament was competent to legislate in respect of Hindu undivided families under Entryare referring to this case only for the purpose of showing that the word "individual" was interpreted by this Court as including a group of persons forming a unit.17. Since we have come to the conclusion that Entry 86 covers cases of Hindu undivided families, it follows that the impugned provision is valid under the said Entry itself. That being so, it is unnecessary to consider whether the validity of the impugned provisions can be sustained under Entry 97 or under Art. 248 of the Constitution.