The karta of a Hindu undivided family is not a "dependent" within the meaning of S. 2 (g) (ii) of the Expenditure-tax Act, 1957, and expenditure incurred by him out of his separate estate for his personal requirements is not includible in the taxable expenditure of the family.

Headnote:
EXPENDITURE-TAX ACT, 1957 - SECTIONS 2(G), 2(H), 3, 4, 5, 6 - HINDU UNDIVIDED FAMILY - EXPENDITURE INCURRED BY KARTA OUT OF SEPARATE ESTATE - EXPENDITURE INCURRED OUT OF TRUST ESTATE - WHETHER INCLUDIBLE IN TAXABLE EXPENDITURE - INTERPRETATION OF STATUTORY PROVISIONS.
Fact of the Case:

Surendra, the karta of a Hindu undivided family, executed three deeds settling certain assets in favor of his children Darshan, Ranna, and Rajeshri. He also had two sons and a daughter from his second wife, Pratima. The family maintained separate books of account for the two sets of properties and income received therefrom. Surendra also possessed separate property. The Expenditure Tax Officer brought to tax the aggregate of the following heads of expenditure less the basic allowance of Rs. 30,000/-: Rs. 11,504/- Expenditure of the Hindu undivided family; Rs. 10,321/- Expenditure for the minors out of the separate properties; Rs. 28,683/- Expenditure incurred by Surendra out of his separate property.
Finding of the Court:

The High Court answered the two questions in favor of the assessee. The Supreme Court held that the expenditure incurred by Surendra out of his separate estate was not includible in the taxable expenditure of the Hindu undivided family, in the absence of a finding that expenditure was incurred either for the obligation of the family, or for the personal requirements of the other coparceners or members of the family, which would have been incurred by the family if it was not incurred by Surendra. The amount of Rs. 10,321 consisted of two components - expenditure incurred out of the trust estate of the children of Surendra, and tout of their personal estate. The Court held that if the expenditure was incurred by the trustees, the case would fall within the terms of S. 4 (i), and if it was incurred by or on behalf of the children after it was received from the trustees, the case would fall within the terms of CL (ii).
Issues: 1. Whether the expenditure incurred by Surendra out of his separate estate was includible in the taxable expenditure of the Hindu undivided family? 2. Whether the expenditure incurred out of the trust estate of the children of Surendra was includible in the taxable expenditure of the Hindu undivided family?
Ratio Decidendi: 1. The karta of a Hindu undivided family is not a "dependent" within the meaning of S. 2 (g) (ii) of the Act. 2. Expenditure incurred by a coparcener or other member of the Hindu undivided family out of his separate property is liable to be included in the taxable expenditure of the family, only if it is incurred in respect of the obligations of the family, or for the personal requirements of the coparceners or other members of the family, which if not incurred would have been incurred by the family. 3. Expenditure incurred by the karta out of his separate estate for his personal requirements will not be included even if the family would have been liable to incur that expenditure if it had not been incurred. 4. Expenditure incurred by the trustees from the trust estate for the education, maintenance, advancement in life, or for religious ceremonies of the children would be deemed to be incurred by a person other than the assessee-the Hindu undivided family, for the dependents to discharge obligation which the family was bound to discharge. 5. Expenditure incurred by a dependent for his own purposes or benefits out of any gift, donation or settlement on trust or out of any other source made or created by the Hindu undivided family, falls within the terms of S. 4 (ii).
Final Decision: The Supreme Court modified the order of the High Court. The answer to the first question for each year was in the negative. The answer to the second question was in the affirmative. However, the amount of Rs. 10,321 in respect of the assessment year 1958-59 was not the amount spent by the trustees. The Tribunal was directed to make appropriate adjustments in declaring the liability of the assessee to pay tax in respect of the expenditure incurred from the trust estate by the trustees after making the permissible deductions under Ss. 5 and 6 of the Act.

Judgement

SHAH, J. :- One Surendra had by his wife Rameshchandrika (who died in 1947) three children -Darshan, Ranna and Rajeshri. By his second wife Pratima he had two sons and one daughter. Surendra, his wife Pratima and his children formed a Hindu undivided family. Surendra executed three deeds settling certain assets belonging to the Hindu undivided family in favour of his children Darshan, Ranna and Rajeshri, and appointed trustees to manage the assets and to collect the income arising therefrom. The three children also owned some property which they had inherited from their mother. Separate books of account were maintained in respect of the two sets of properties and come received therefrom. Surendra was also possessed of separate property. Expenditure for the education of the three children was it appears defrayed out of the income received from the trust estates.

2. In a proceeding for assessment of tax under the Expenditure-tax Act, 1957, of the Hindu undivided family for the assessment year 1958-59 the Expenditure Tax Officer brought to tax Rs. 20,508/- being the aggregate of the following heads of expenditure less the basic allowance of Rs. 30,000/-.

Rs. 11,504/- Expenditure of the Hindu undivided family;

Rs. 10,321/- Expenditure for the minors out of the separate properties,

Rs. 28,683/- Expenditure incurred by Surendra out of his separate property.

The order of the Tax Officer was confirmed by the Appellate Assistant Commissioner and the Appellate Tribunal.

3. The Tribunal referred to the High Court of Gujarat under S. 25 (1) of the Act three questions, out of which only two survive for consideration:

"1. Whether on the facts of the case, in computing the taxable expenditure of the assessee H. U. F. the sum of Rs. 28, 683/- being the expenditure incurred by Shri Surendra, the Karta of the H. U. F. out of his own self-acquired and separate property was includible in law ?

2. Whether on the facts of the case in computing the taxable expenditure of the assessee H. U. F. the sum of Rs. 10,321/- being the amount spent by the trustees was includible in law ?"

The High Court answered the two questions in favour of the assessee. Appeal No. 2523 of 1966 arises out of that order.

4. The relevant provisions of the Act may be briefly noticed. Clause (c) of S. 2 defines an "assessee" as meaning "an individual of a Hindu undivided family by whom expenditure-tax or any other sum of money is payable under this Act, and includes every individual or Hindu undivided family against whom any proceeding under this Act has been taken for the assessment of his expenditure". Section 2 (g) defines "dependent" as meaning

"(i) where the assessee is an individual, his or her spouse or child wholly or mainly dependent on the assessee for support and maintenance; (ii) where the assessee is a Hindu undivided family-(a) every coparcener other than the karta; and (b) any other member of the family who under any law or order or decree of a court, is entitled to maintenance from the joint family property." Section 2 (h) defines "expenditure" as meaning "any sum in money or money s worth, spent or disbursed or for the spending or disbursing of which a liability has been incurred by an assessee, and includes any amount which under the provisions of this Act is required to be included in the taxable expenditure" Section 3 which imposes the charge of expenditure-tax provides:

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, 1958, a tax (hereinafter referred to as expenditure-tax) at the rate or rates specified in the Schedule in respect of the expenditure incurred by any individual or Hindu undivided family in the previous year:

Provided * * * *".Section 4 deals with the amount to be included in the taxable expenditure. The section as applicable to the year of assessment 1958-59 read as follows :

"Unless otherwise provided in Section 5, the following amounts shall be i

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