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) 329
SUPREME COURT OF INDIA
P.B.Gajendragadkar, C.J.I., J.C.Shah, M.Hidayatullah, R.S.Bachawat, S.M.Sikri, JJ.
Banarasi Das: Purushottam Dass Tandon, Ram Mohan Das Tandon, Beni Prasad Tandon., Hari Mohan Das Tandon
Versus
Wealth Tax Officer, Spl.Circle, Meerut: Wealth Tax Officer "b" Ward, Allahabad, The Wealth Tax Officer, A Ward, Allahabad
Case No. : 124 , 125 of 1964
Date of Decision : 12/8/64
Advocates Appeared: Achar B.R.G.K. : Agarwala J.P. : Chatterjee N.C. : Dhebar B.H. : Goyal J.P. : Gupta S.V. : Iyer B.Ganapathy : Sastri A.V.Viswanatha
Advocates:
A.V.VISHWANATHA SASTRI, B.Ganapathy Iyer, B.R.G.K.Achar, J.P.AGARWAL, J.P.GOYAL, N.C.CHATTERJI, R.H.Dhebar, S.V.Gupta
A.V.VISHWANATHA SASTRI, B.Ganapathy Iyer, B.R.G.K.Achar, J.P.AGARWAL, J.P.GOYAL, N.C.CHATTERJI, R.H.Dhebar, S.V.Gupta
The term 'individuals' in Entry 86 of List 1 of the Seventh Schedule to the Constitution of India is wide enough to include groups of individuals forming a unit, such as Hindu undivided families, for the purpose of levying wealth tax.
Headnote:(A) Wealth-Tax Act, 1957 - Section 3 - Constitution of India - List 1, Entry 86, Entry 97 and Article 248 - Validity of wealth tax on Hindu undivided families - Whether the term 'individuals' in Entry 86 of List 1 includes Hindu undivided families - Entries in the Seventh Schedule must receive the widest interpretation; general words should extend to all ancillary or subsidiary matters reasonably comprehended within them (Paras 6, 7) - The term 'individuals' is wide enough to include groups of individuals who form a unit and own assets together, such as Hindu undivided families (Paras 10, 14) - Legislative history or distinctions made in other tax statutes cannot restrict the interpretation of terms used in the Constitution (Paras 12, 13).
(B) Interpretation of Constitutional Entries - Words used in the Seventh Schedule should be interpreted in a natural way and given the widest possible meaning to describe the area of legislative competence; it is unreasonable to approach the task of interpretation in a narrow or restrictive manner (Paras 6, 7).
Facts of the case:
Appellants, constituting Hindu undivided families, challenged the validity of Section 3 of the Wealth-Tax Act, 1957, which levies wealth tax on the net wealth of individuals, Hindu undivided families, and companies. They contended that the power to tax the capital value of assets under Entry 86 of List 1 of the Seventh Schedule applies only to individuals and companies, not to groups of individuals. They further argued that if the tax fell outside Entry 86, it could not be sustained under Entry 97 or Article 248 of the Constitution.
Findings of Court:
The court found that the term 'individuals' in Entry 86 is broad enough to encompass groups of individuals forming a unit, including Hindu undivided families. It held that there is no rational justification to exclude such families from the scope of wealth tax and that the legislative competence of Parliament extends to such levies.
Issues: Whether Section 3 of the Wealth-Tax Act, 1957, is ultra vires the Constitution, specifically whether the legislative competence to levy wealth tax on Hindu undivided families is covered under Entry 86, Entry 97 of List 1, or Article 248 of the Constitution.
Ratio Decidendi: The court ruled that Constitutional entries must be interpreted broadly and naturally. The term 'individuals' in Entry 86 of List 1 includes groups of individuals who form a unit. Legislative distinctions in other statutes, such as the Income-tax Act, do not limit the meaning of terms in the Constitution. Consequently, Parliament is competent to legislate in respect of Hindu undivided families under Entry 86.
Result: Appeals fail and are dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Whether the term individuals in Entry 86, List 1, Constitution of India includes Hindu undivided families or if such levy is ultra vires. (Para 4 , 5 )
3. Entries in the Seventh Schedule require the widest interpretation; the term individuals naturally encompasses groups of individuals forming a unit, such as Hindu undivided families. (Para 6 , 7 , 8 , 9 , 10 , 14 , 16 )
4. The term individuals in Entry 86, List 1, Constitution of India is wide enough to include groups of individuals forming a unit, including Hindu undivided families. (Para 14 )
5. Appeals dismissed and the impugned provision of the Wealth-Tax Act, 1957 upheld as valid. (Para 17 , 18 )
6. How should 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, avoiding narrow or restrictive constructions. (Para 6 , 7 )
7. Does the term individuals in Entry 86, List 1, 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. (Para 8 , 10 , 14 , 16 )
8. Does the distinction between individuals and Hindu undivided families in tax statutes limit the meaning of individuals in the Constitution?
No. Legislative practice or distinctions made in statutes for convenience do not restrict the construction of words in an organic document like the Constitution, which requires a natural and wide interpretation. (Para 12 , 13 )
P.B.GAJENDRAGADKAR, C.J.I.
(1) THE common question of law which this group of six appeals raises for our decision is whether section 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 appellants 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 in List 1 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 1 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 net 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 1 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. Article 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 inasmuch 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 1 as well as those enumerated in Lists II and III. Since wealth tax is a matter which is specifically enumerated in Entry 86
