Case: J. N. Sharma Vs. H.H. Vijayakuverba Maharani Of Morvi And Others

1. The Expenditure Tax Act 29 of 1957 which received the assent of the President on September 17, 1957, was brought into force on April 1, 1958. The Act provides for levy of tax on expenditure at the rate or rates specified in the Schedule to the Act, for every financial year commencing on and from the first day of April, 1958, in respect of the expenditure incurred by any individual or Hindu undivided family in the previous year.2. His Highness Mahendrasinghji, Ruler of Morvi died on August 17, 1957, having made a will appointing the respondents to this appeal as executors of his estate. The Expenditure-tax Officer issued a notice under S. 13(2) of the Expenditure Tax Act, 1947, requiring the respondents to furnish a return of the expenditure incurred by Mahendrasinghji for the period between April 1, 1957 to August 17, 1957. The respondents submitted that the Act did not apply to Mahendrasinghji because he had died before the date on which the Act came into force, and on that account the respondents as executors of his will were not liable to submit the return demanded. By letter dated November 19, 1959, the Expenditure Tax Officer rejected the contention raised by the respondents.3. The respondents then filed a petition in the High Court of Bombay under Art. 226 of the Constitution praying that the proceedings started by the Expenditure Tax Officer for assessing and levying tax on the expenditure incurred by the Mahendrasinghji during the previous year be quashed and that the Officer be restrained by an injunction from taking further steps or proceedings under the Act. The High Court held that the charge under the Act in respect of expenditure incurred in the relevant previous year to the assessment year 1958-59 was not on the estate of any individual or any Hindu undivided family: it was on the individual or the Hindu undivided family incurring the expenditure, and as it was imposed for the first time on April 1, 1958, unless the unit of assessment was in existence on the date when the Act came into force, no tax could be levied. With certificate granted by the High Court, this appeal has been preferred.

Reasoning:
9. We are unable to agree with this contention. The expression "where a person dies" standing by itself in S. 18 does not suggest that thereby it was intended to refer only to death of the person liable after the Act was brought into force and read with the remaining clauses in the context of sub-sections (2) and (3) it is clear that the Parliament intended to attract the entire charge to tax and machinery prescribed by Ss. 13 and 15 so as to render the estate of a person dying before the Act liable to satisfy the tax or other liability which could have been assessed or imposed upon him if he had not died. In the context of the declared liability under sub-section (1) and the provisions of sub-section (3) of S. 18, which make Ss. 13, 14 and 15 of the Expenditure Tax Act applicable to the executor, administrator or legal representative, as they apply to any person, it would be difficult to hold that the Legislature has not expressed its intention clearly so as to render the estate of a deceased person liable to be assessed to expenditure tax merely because he had died before the date on which the Act was brought into force.10. The argument of inconvenience has no substance. A person who has rendered himself liable to pay tax on the expenditure incurred by him in the previous year may, not being aware of the proposal to enact a statute like the Expenditure Tax Act, part with his estate. But on that account he cannot set up a defence against the levy of the tax that he has parted with the estate. Nor can the legal representative of a deceased person set up a plea that because the estate is distributed, he should not be rendered liable to pay the expenditure tax which has been imposed by the statute.We are unable therefore to agree with the High Court that by enacting S. 18 of the Act the Parliament has not rendered the estate of a person liable to expenditure tax, if such person had died before the date on which the Act was brought into force.