The Commissioner Of Income-Tax, Madhya Pradesh And Bhopal v. Sodra Devi

THE SUPREME COURT REPORTS THE COMMISSIONER OF INCOME-TAX; MADHYA PRADESH AND BHOPAL SODRA DEVI (with connected appeal) (BHAGWATI, S. K. DAS and J. L. KAPUR JJ.) Income-tax-Computation of total lncome-'individual', Mean-ing of-Indian Income-tax Act, 1922 (X of 1922), as amended by the Indian Income-tax (Amendment) Act, 1937 (IV of 1937), s. 16(3) . The common question of Jaw for determination in these two appeals was whether the word 'individual' in s. 16(3) of the Indian Income-tax Act, 1922, as amended by Act IV of 1937, includes a female and whether the income of minor sons from a partnership, to the benefits of which they were admitted, was liable to be included in computing the total income of the mother who was a member of the partnership. Held, (Per Bhagwati and Kapur JJ., S. K. Das J. dissenting} that the question must be answered in the negative. The word 'individual' oc«urring in s. 16(3) of the Indian Income-tax Act, as amended by Act IV of 1937, means only a male and does not include a female. Shrimati Chanda Devi v. The Commissioner of Income-tax, (1950) 18 J.T.R. 1944 and Musta Quima Begum, In re, 1(953) 23 I.T.R. 345, disapproved. . Where the Legislature uses ambiguous language in enacting a statute, as. it has undoubtedly done in the instant case, recourse must necessarily be had, for a clarification of such ambiguity, to the pre-existing state of the Jaw in order to see what defect or mischief therein was being sought to be remedied, the remedy that was prescribed by the statute and the reason for it. Bengal Immunity Company Limited v. The State of Bihar, (1955) 2 S.C.R. 603, Thomson v. Lord C/anmorris, (1900) I Cb. D. 718 and Eastman Photographic Materials Company v. Comptroller General of Patents, Designs and Trade Marks, (1898) A.C. 571, relied on. A reference to the Income-Tax Enquiry Report, 1936, and the Statement of objects and reasons that led to the passing of the Indian Income-tax (Amendment) Act -IV of 1937 makes it clear beyond doubt that the mischief the Legislature was seeking to remedy was one that resulted from a husband entering into a 1957 May 17 1957 The Commissioner of Income-tax, MadhFtJ Pardesh and Bhopal v. Sodra Devi Bhagwati J. nominal partnership with his wife or a father admitting his minor children to the benefits of a partnership, and the possibility of a mother doing so was not even thought of. · Per S. K. Das J.-There is no ambiguity in s. 16(3) of the Indian Income-Tax Act, as amended by Act JV of 1937, and, read in the context of the other provisions of the Act and construed as a whole, it clearly indicates that the Legislature used the word 'individual' in that sub-section in its ordinary connotation to mean both a male and a fema1e person. Even if, on the assumption that there is ambiguity in the phraseology used in the sub-section, reference is made to the Income-Tax Enquiry Report, 1936, and the Statement of objects and reasons of the Amending Act IV of 1937 for the limited purpose for which it is permissible to do so, they disclose nothing concerning the policy adopted by the Legislature or the object the statute was intended to accomplish that makes any other meaning inevitable. The recommendations made by the Report were not fully accepted by the Legislature and it cannot be a reliable guide and the use of the word 'parent' in the Statement clearly shows that the mischief envisaged was not confined to the father alone. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 322 and 25 of 1955. Appeal from the judgment and order dated April 13, 1954, of the Nagpur High Court in Miscellaneous Civil Case No. 71 of 1956 and appeal from the judgment and order dated August 26, 1952, of the Punjab High Court in Civil Reference No. 11 of 1952. C. K. Daphtary, Solicitor-General of India, G. N. Joshi and R. H. Dhebar, for the appellant in C.A. No. 322 of 1955 and respondent in C.A. No. 25 of 1955. 1957 1954 , 1957 R. J. Kolah, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the respondent in C.A. No. 322 of 1955. G. S. Pathak and M. L. Kapur, for the appellant in C.A. No. 25 of 1955. 1957. May 17. The Judgment of Bhagwati and The Judgment of Bhagwati and J. L. Kapur JJ. was delivered by Bhagwati J. S. K. Das J. derlivered a separate judgment. BHAGWATI J.-These two appeals with certificates under Section 66A(2) of the Indian Income-Tax Act (hereinafter referred to as the Act) raise a common question of law and will be governed by this common judgment. S.C.R. SUPREME COURT REPORTS The facts leading up to these appeals may be shortly 1957 Stated as under. The Commissioner of Income-1ax, M"'/!:,~08[t,';/js" ]v. Sodra Devi Bhagwati !· Prior to October 18, 1944, one Rai Bahadur Narsing-of das Daga (since deceased), his wife Shrimati Sodradevi (the assessee), and his three major and three minor sons constituted a joint and undivided Hindu family. There wa:s a severance of joint status between the erstwhile members of the said joint family on October 18, 1944, and the joint family properties were accordingly partitioned. On such partition, the business of the Spinning and Weaving Mills and agency shop at Hinganghat fell to the share of the assessee and her three major and three minor sons. A partnership was entered into between the assessee and her three major sons for the purpose of carrying on the business of the Spinning and Weaving Mills and the agency firm at Hinganghat. The three minor sons of the assessee were admitted to the benefits of the partnership. The genuineness of the partnership was not disputed. The only question which arose for the consideration of the Tribunal was whether the income falling to the share of the three minor sons was liable to be included in the total income of the assessee. On a construction of s. 16(3)(a)(ii) of the Act, the Tribunal held that the income falling to the shares of the three minor son:> of the assessee was liable to be included in her total income. The assessee thereupon applied to the Tribunal for a reference to the High Court of Judicature at Nagpur of the question of law arising out of its order under s. 66(1) of the Act and the Tribunal submitted a statement of case referring the following question of law for the determination of the High Court : "Whether en a true construction of the provisions of section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, the income of the three minor sons of the assessee is liable to be included in her total income." The High Court heard the reference and came to the conclusion that it was not the intention of the Legis-lature to include in the income of the mother, the income of her minor children arising from the benefit of partnership of a firm in which the mother is a in which the mother is a SUPREME COURT REPORTS 1[9]s[7 ]partner and accordingly answered the referred ques-'f1ie co,,;mi.rsionc" ti on in the negative. The High Court, however. ;1,iI,~:;·r;;;:;h grhanAted the neccessary. ~ertificafte under s. 66A(2)h of and Bhopol t e ct to the omm1ss1oner o Income-tax, Mad ya s 0 drv,D , Pradesh and Bhopal, and hence Civil Appeal No. 322 a el'/ of 1955 before us. RhngwaUJ, One lshwardas Sahni who died on November 7. 99 One lshwardas Sahni who died on November 7. 1946, "was a partner in the firm of Messrs. Ishwardas Sahni & Bros. The firm's accounting year ended on March 31, 1947. The said Ishwardas Sahni left him surviving his widow Damayanti (the assessee) and two minor sons. The , assessee became a partner in the said firm which also admitted her two minor sons to the benefits of the partnership. The Income-tax authorities included the minor sons' shares in the reconstituted firm's profits in computing the income of the asses~ee on the grou1;d that "individual" in s. 16(3)(a )(ii) of the Act meant an individual person of either sex. The Income-tax Appellate Tribunal held that the word "individual" must be taken as referring only to a male assessec wherever that occurred in s. 16(3) and directed the deletion from the asscssce's income of the shares of her minor sons in the rrofits of the firm. At the instance of the Com-misswner of Income-tax, Delhi, the Tribunal referred to the High Court of Punjab at Simla the question of Jaw arising out of its order under s. 66(1) of the Act together with a statement of case. The referred question was :- "Whether the word "individual" in Section 16(3) (a)(ii) of the Income Tax Act, 1922, includes also a female and whether the shares of the two minor sons of Shrimati Damayanti Sahni in the profits of the reconstituted firm of Messrs. Ishwardas Shani and Brothers should be included in the income of Shrirnati Damayanti Sahni in assessing her income, profits and gains." The High Court heard the reference and following the decision given by the High Court of Allahabad in Shrimati Chanda Devi v. The Commissioner of Income-tax('), answered the referred question in the aflirmati\'e. S.C.R. The assessee obtained the requisite certificate under s. 66(A) of the Act from the High Court and that is how Civil Appeal No. 25 of 1955 is before us. 1957 The Commissioner of Income-tax, Madhya Pradesh and Bhopal ·V. Sodra Devi Bhagwati J. The common question of law which · we have to determine in these appeals is whether the word "individual" in s. 16(3)(a)(ii) of the Act includes also a female and the income of the minor sons derived from a partnership to the benefits of which they have been admitted is hable to be included in the income of the mother who is a member of that partnership. Section 16(3) of the Act provides : "In computing the total income of any individual for the purpose of assessment, there shall be included-( a) so much of the income of a wife or minor child of such individual as arises directly or indirectly: (i) from the membership of the wife in a firm of which her husband is a partner; (ii) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate con-sideration ; and (b) so much of the income of any person or asso- ciation of persons as arises from assets · transferred otherwise than for adequate consideration to the per-son or association by such individual for the benefit of his wife or a minor child or both." Section 3 ·of the Act may also be referred to in this context and it rims as follows : Section 3. Charge of Income Tax : 1957 [ 1958 ] "Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the pre· vious year of every individual, Hindu undivided family, company and local authority, and of every firm 1957 The c.;;;;;;;issio11cr and other association of persons or the partners of the of j,•come-tax,h firm or the members of the association individually." M"a,,':/'0 Bf;a;:,•,s The same description of the assessee is also to be v. . found in s. 4A, which deals with residence in the tax-Sodra Dm able territories, s. 48 dealing with refund and s. 58 Bhacwa11 J. dealing with the charge of super-tax. The same description of the assessee is also to be found in s. 4A, which deals with residence in the tax-able territories, s. 48 dealing with refund and s. 58 dealing with the charge of super-tax. The word assessee is wide enough to cover not only an "individual" but also a Hindu undivided family, company and local authority and every firm and other association of persons or the partners of the firm or the members of the association individually. Whereas the word "individual" is narrower in its connotatiOn being one of the units for the purposes of taxation than the word "assessee", the word "individual" has not been defined in the Act and there is authority for the proposition that the word "individual" does not mean only a human being but is wide enough to include a group of persons forming a unit. It has been held that the word "individual" includes a Corpora-tion created by a statute, e.g., a University or a Bar Council, or the trustees of a baronetcy trust incorpo-rated by a Baronetcy Act. It would also include a minor or a person of unsound mind. If this is the connotation of the word "individual" it follows that when s. 16(3) talks of an "individual" it is only in a restricted sense that the word has been used. The section only talks of "individual" capable of having a wife or minor child or both. It therefore necessarily excludes from its purview a group of persons forming a unit or a corporation created by a statute and is confined only to human beings who in the context would be comprised within that category. The Revenue urges before us that the word "indi-vidual" as used qua human beings is capable of in-cluding within its connotation a male as well as a female of the species and having regard to the context in which the word has been used in s. 16(3), it should be construed as meaning a male of the species when used in juxtaposition with "a wife" and as meaning both a male and a female when used in juxtaposition with "minor child" so that when s. 16(3) talks of "such individual" in sub-els. (ii) and (iv) of cl. (a) 1957 thereof it refers to both a male and a female of the The Commissio11e1 species so as to include within its compass not only a t[ j,,[[11]]co~e-'d,xl father of the minor child but also a mother. ~n'Jah:;ar' j,,[[11]]co~e-'d,xl ~n'Jah:;ar' 200,203 725 603,632 1957