1. Challenge to the validity of Section 3 of the Wealth Tax Act, 1957, regarding the levy of wealth tax on Hindu undivided families. (Para 1 , 2 )
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1964 Supreme(SC) 330
SUPREME COURT OF INDIA
8th December 1964
P.B. GAJENDRAGADKAR, C.J.I., M. HIDAYATULLAH, J.C. SHAH, S.M. SIKRI AND R.S. BACHAWAT, JJ.
1. Banarasi Dass (In C. As. Nos. 124 and 125 of 1964), 2. Purushottam Dass Tandon (In C.A. No. 126 of 1964), 3. Ram Mohan Das Tandon (In C.A.No. 127 of 1964), 4. Beni Prasad Tandon and Anr. (ln C.A. No. 128 of 1964) and 5. Hari Mohan Das Tandon (In C.A. No. 129 of 1964), Appellants
Versus
1. The Wealth Tax Officer, Spl. Circle, Meerut (In C. As. Nos. 124 and 125 of 1964), 2. The Wealth Tax Officer "B" Ward, Allahabad (In C.A. No. 126 of 1964) and 3. The Wealth, Tax Officer, A Ward, Allahabad (In C. As Nos.127 to 129 of 1964), Respondents.
Civil Appeals Nos. 124 to 129 of 1964.
Advocates appeared
Mr. N. C. Chatterjee Senior Advocate, (Mr. J. P. Agarwala, Advocate, with him), for Appellants (In C. AS. Nos. 124 and 125 of 1964); Mr. A. V. Viswanatha Sastri, Senior Advocate, (Mr. J. P. Goyal, Advocate, with him), for Appellants (In C.A. No. 126 of 1964); Mr. J.P. Goyal, Advocate, for Appellants (In C. As. Nos.127 to 129 of 1964); Mr. S.V. Gupte, Solicitor General of India, (M/s. R. Ganapathy lyer, R.H. Dhebar and B.R.G.K. Achar, Advocates, with him), for Respondents (In all the appeals).
The term "individuals" in Entry 86, List I of the Seventh Schedule to the Constitution of India is broad enough to include groups of individuals forming a unit, such as Hindu undivided families, and must be given the widest possible interpretation.
Headnote:(A) Wealth Tax Act, 1957 - Section 3 - Constitution of India - List I, Entry 86 and Entry 97 - Article 248 - Validity of wealth tax on Hindu undivided families - The term "individuals" in Entry 86 must receive the widest interpretation and is broad enough to include groups of individuals forming a unit, such as Hindu undivided families - Legislative distinctions in other tax statutes do not restrict the meaning of terms used in the Constitution. (Paras 6, 8, 12, 14)
(B) Interpretation of Constitutional Entries - Entries in the Seventh Schedule are to be read in a broad sense, extending to all ancillary or subsidiary matters reasonably comprehended within them; a narrow or restrictive interpretation is to be avoided. (Paras 6, 7)
Facts of the case:
Appellants, being Hindu undivided families, challenged the validity of the charge of wealth tax levied under Section 3 of the Wealth Tax Act, 1957. They contended that the legislative competence of Parliament under Entry 86 of List I of the Seventh Schedule to the Constitution, which refers to taxes on the capital value of assets of "individuals" and "companies," does not extend to groups of individuals such as Hindu undivided families. They further argued that if the tax fell outside Entry 86, it could not be sustained under the residuary powers of Entry 97 or Article 248.
Findings of Court:
The impugned provision is valid as Parliament is competent to legislate in respect of Hindu undivided families under Entry 86 of List I.
Issues: Whether the word "individuals" used in Entry 86, List I of the Seventh Schedule to the Constitution is wide enough to include Hindu undivided families, and whether the levy of wealth tax on such families is ultra vires.
Ratio Decidendi: The court held that words in the Seventh Schedule must be interpreted in a natural and wide manner. The term "individuals" encompasses not only single human beings but also groups of individuals who form a unit and own assets together. The court further ruled that the traditional concepts or legislative history found in other tax laws cannot be used to restrict the meaning of terms used in the Constitution, as the Constitution is an organic document.
Result: Appeals dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the term individuals in Entry 86, List I of the Constitution includes Hindu undivided families or if such levy requires residuary powers. (Para 4 , 5 )
3. Entries in the Seventh Schedule require the widest interpretation; the term individuals naturally encompasses groups of individuals forming a unit, including Hindu undivided families. (Para 6 , 7 , 8 , 9 , 10 , 14 , 16 )
4. The term individuals in Entry 86, List I of the Constitution is wide enough to include groups of individuals, such as Hindu undivided families. (Para 14 )
5. Appeals dismissed; the impugned provision of the Wealth Tax Act is held valid under Entry 86, List I of the Constitution. (Para 17 , 18 )
6. How should the entries in the Seventh Schedule of the Constitution be interpreted?
Entries must receive the widest interpretation. General words should extend to all ancillary or subsidiary matters reasonably comprehended within them, and the court should avoid narrow or restrictive constructions when determining legislative competence. (Para 6 , 7 )
7. Does the term individuals in Entry 86, List I of the Constitution include Hindu undivided families?
Yes, the term individuals is wide enough to include groups of individuals who form a unit and own assets together, such as Hindu undivided families, as the word does not exclusively mean a single human being. (Para 8 , 10 , 14 , 16 )
8. Does a distinction between individuals and Hindu undivided families in tax statutes limit the interpretation of the same terms in the Constitution?
No. Legislative practice or traditional concepts in tax law cannot introduce restrictions on the interpretation of terms in an organic document like the Constitution, which must be interpreted according to the natural meaning of the words. (Para 11 , 12 , 13 )
Judgment
GAJENDRAGADKAR, C.J.I. : The common question of law which this group of six appeals raises for our decision is whether S. 3 of the Wealth Tax Act, 1957 (No. 27 of 1957) (hereinafter called the Act ) in so far as it purports to levy a charge of wealth tax in respect of the net wealth of a Hindu undivided family at the specified rate, is valid. The respective appellants in these appeals who constitute Hindu undivided families were charged under S. 3 and they challenged the validity of the said charge on the ground that the said section was ultra vires. The writ petitions filed by these appellant; were heard by a Special Bench of the Allahabad High Court consisting of Gurtu, Upadhya and Jagdish Sahai, JJ. Gurtu and Jagdish Sahai, JJ. have rejected the appellants contention and have upheld the validity of the impugned provision. According to Jagdish Sahai, J., the impugned section is intra vires, because Parliament had legislative competence to enact the ; said provision under Entry 86, List I of the Seventh " Schedule to the Constitution. Gurtu, J. who agreed with the said conclusion, however, sustained the impugned provision under Entry 97 in List I read with Art. 248 of the Constitution. Upadhya, J. .held that neither of the said provisions conferred legislative competence on Parliament to enact the impugned provision, and so, he came to the conclusion that, the said provision was ultra vires and the charge levied against the appellants was, therefore, invalid. In accordance with the majority decision, the writ petitions filed by the respective appellants were dismissed. The appellants then applied for and obtained certificates from the said High Court, and it is with the certificates issued in their favour that they have come to this Court in appeal.
2. The Act was passed in 1957 to provide for the levy of wealth tax. Section 3 of the Act provides that 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 referred to as wealth tax) in respect of the act wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule. The three Constitutional provisions relevant to the decision of the point raised before us in these appeals may now be set out.
3. Entry 86 in List I deals with taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies. Entry 97 in the said List refers to any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists. Art. 248 reads thus : ----
"(1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists;;
4. The appellants contend that the word "individuals" used in Entry 86 cannot take in Hindu undivided families. The taxes which Parliament is empowered to levy under this Entry can be levied only on individuals and not on groups of individuals, and on companies. A Hindu undivided family consists of different coparceners who are, no doubt, individuals, but in asmuch as the impugned provision purports to levy wealth tax on the capital value of the assets of the Hindu undivided families as such, the tax is not levied on individuals, but on groups of individuals, and, therefore, is outside the scope of Entry 86. The appellants further urge that if the Hindu undivided families are outside the scope of Entry 86, they cannot be subjected to the levy of wealth tax under Entry 97, because entry 97 refers to matters other than those specified in Entries 1 to 96 in List I as well as those enumerated in Lists II and III. Since, wealth tax is a matter which is specifically enumerated in Entry 86 of List 1, Entry 97 ca
