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PETITIONER: J. N. SHARMA

       Vs.

RESPONDENT: H.H. VIJAYAKUVERBA MAHARANI OF MORVI AND OTHERS

DATE OF JUDGMENT: 17/11/1965

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SUBBARAO, K. SIKRI, S.M.

CITATION:  1966 AIR 1074            1966 SCR  (2) 618

ACT:     Expenditure  Tax Act 1957 (29 of 1957), s.  18--Assessee dying  before  Act  came  into  force--Whether   expenditure incurred  by  deceased  liable to  tax--Liability  of  legal representatives to be assessed.

HEADNOTE:      The  Expenditure Tax Act, 1957 was brought  into  force with  effect from April 1, 1958.  The respondents  executors under the will of M--were served a notice under s. 13(2)- of the Act requiring them to furnish a return in respect of the expenditure  incurred by M between April 1, 1957 and  August 1957  the date of his death.  The respondents objected  that the  Act did not apply to M 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.  The contention was overruled by the Expenditure-tax Officer whereupon the respondents  filed a  writ  petition  in  the  High  Court  praying  that   the proceedings be quashed.  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 the Revenue came to this Court.     HELD : (i) In terms Subs. (1) of s. 18 imposes liability upon the legal representatives of a person who dies, to  pay out  of his estate, expenditure-tax assessed as  payable  by such person, or any sum which would have been payable by him if  he  had not died.  There is nothing  in  the  expression ’where  a person dies’ or in the context in which it  occurs which suggests that it was intended thereby to restrict  the operation of the sub-section to cases of persons dying after the Act was brought into force. [622 C-D]      (ii) In  the  context of the declared  liability  under sub-s.  (1) and the provisions of sub-s. (3) of s. 18  which make  sections  13,  14  and  15  ,of  the  Expenditure  Tax

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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 a.-, to render the estate of a deceased person  liable  to  be assessed to  expenditure  tax  merely because  he had died before that date in which this Act  was brought into force. [625 D-E]       Ellis Reid v. Commissioner of Income-tax, 5 I.T.C. 100 :I.L.R.  55 Bom. 312 and Income-tax Commissioner  Bombay  v. D.N. Mehta, 3 LT.R. 147, considered.       The  judgment of the High Court had therefore  to  set aside. [625 HI

JUDGMENT:       CIVIL APPELLATE JURISDICTION : Civil Appeal No. 841 of 1964. 619      Appeal  from the judgment and order dated  October  12, 1961 of the Bombay High Court in Misc.  Application No.  379 of 1959.      A. V. Viswanatha Sastri, N. D. Karkhanis, R. H.  Dhebar and R . N. Sachthey, for the appellants.      N. A. Palkhivala, 0. P. Malhotra, J. B. Dadachanji, for the respondents.      The Judgment of the Court was delivered by      Shah,  J.  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.      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.      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 late 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

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Court, this appeal has been preferred. 620     Section  2(c)  of  the Expenditure-tax Act  29  of  1957 defines  an  assessee as meaning an individual  or  a  Hindu undivided family by whom expenditure-tax or any other sum of money   is  payable  under  the  Act,  and  includes   every individual  or  Hindu  undivided  family  against  whom  any proceeding  under the Act has been taken for the  assessment of  his expenditure.  "Assessment year" under the Act  means the  year  for  which  tax is chargeable  under  s.  3,  and "previous  year"  is defined in relation to  any  assessment year as meaning the previous year as defined in cl. (II)  of S. 2 of the Income-tax Act if an assessment were to be  made under the said Act for that year.  The relevant part of s. 3 which is the charging section provides.                   "(1)  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:" Section 13 deals with returns of expenditure for the purpose of assessment of tax.  It provides :     "(1)  Every person whose expenditure for the  previous6s year  was  of  such an amount as to  render  him  liable  to expenditure-tax  under this Act shall, before the  thirtieth day of June of the corresponding assessment year, furnish to the Expenditure-tax Officer a return in the prescribed  form and  verified  in the prescribed manner  setting  forth  his expenditure for the previous year.      (2)  If  the Expenditure-tax Officer is of the  opinion that  the expenditure of any person for any year is of  such an amount as to render him liable to expenditure-tax,  then, notwithstanding  anything contained in sub-section  (1),  he may  serve  a  notice upon such a person  requiring  him  to furnish within such period, not being less than thirty days, as  may  be  specified  in  the  notice,  a  return  in  the prescribed  form and verified in the prescribed  manner  and setting  forth such other particulars as may be required  in the  notice relating to the expenditure of such persons  for the previous year mentioned in the notice. (3).................................. 621 Section  14  enables  a  return to be made,  if  it  is  not furnished within the time allowed, or to be modified, at any time  before  the assessment is made.   Section  15  confers power  upon the Expenditure-tax Officer to assess  tax.   If the  Officer is satisfied without requiring the presence  of the  assessee  or production by him of any evidence  that  a return made under s. 13 or s. 14 is correct and complete, he must  assess  the taxable expenditure of  the  assessee  and determine the amount payable by him as expenditure-tax.   If the  Expenditure-tax  Officer is not so  satisfied,  he  may serve  a  notice  on the assessee requiring  him  either  to attend  in  person or to produce any evidence on  which  the assessee  may rely in support of his return.  By sub-s.  (3) of  S.  15  the Expenditure-tax  Officer  is  authorised  to determine  the taxable expenditure of the assessee  and  the amount payable by him as expenditure-tax.  By sub-s. (5) the Expenditure-tax Officer is authorised to make the assessment to  the  best of his judgment and to  determine  the  amount payable  by  the person as expenditure-tax on the  basis  of

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such assessment.  Section 18 provides      "(1)  Where a person dies, his executor,  administrator or other legal representative shall be liable to pay out  of the estate of the deceased person to the extent to which the estate is capable of meeting the charge, the expenditure-tax assessed  as payable by such person, or any sum which  would have been payable by him under this Act if he had not died.       (2) Where  a  person dies without having  furnished  a return  under the provisions of section 13 or  after  having furnished  a  return which the Expenditure-tax  Officer  has reason  to  believe  to  be  incorrect  or  incomplete,  the Expenditure-tax  Officer  may  make  an  assessment  of  the expenditure of such person and determine the expenditure-tax payable  by the person on the basis of such assessment,  and for  this  purpose  may, by the, issue  of  the  appropriate notice  which would have had to be served upon the  deceased person  if  he  had survived,  require  from  the  executor, administrator or other legal representative of the  deceased person any accounts, documents or other evidence which might under  the provisions of section 15 have been required  from the,deceased   person. (3)  The provisions of section 13, section 14 and section   15 shall apply to an executor, administrator or- 622 other  legal  representative  as they apply  to  any  person referred to in those sections.".     Power  of  the  Parliament  to  enact  legislation   for assessing  tax against the representatives of a  person  who died before the date on which the Act was brought into force and for collecting it from his estate is not challenged.  It is  however submitted that the Parliament has failed to  set up effective machinery for assessing tax against the  estate of  a person who died during the previous year  relevant  to the  assessment  year  1958-59 so as to  render  his  estate liable under the Act.      In  terms, sub-s. (1) of S. 18, imposes liability  upon the  legal representatives of a person who dies, to pay  out of  his estate, expenditure-tax assessed as payable by  such person, or any sum "which would have been payable by him  if he had not died.  There is nothing in the expression  "Where a  person dies" or in the context in which it  occurs  which suggests  that  it  was intended  thereby  to  restrict  the operation of the sub-section to cases of persons dying after the  Act  was brought into force.  Sub-section (2)  sets  up machinery  for assessing liability to tax where  the  person liable  to pay tax has died before submitting a  return,  or after  submitting  a return, but before  the  assessment  is completed.   It  confers  powers  upon  the  Expenditure-tax Officer exercisable against the legal representatives  which but  for  death  of  the  person  liable,  would  have  been exercised  under  s. 13 (2) and s. 15 against  such  person. Sub-section  (3) which makes the provisions of ss. 13, 14  & 15 applicable to legal representatives as they apply to  any person referred to in those sections clearly indicates  that the legal representatives of a person who had died are under the  same obligations as the deceased was to make  a  return under  s. 13(1), and that the Tax Officer is  invested  with power to call for return from the legal representative of  a deceased  person  and  to  assess,  which  could  have  been exercised  against  that person, if he had  not  died.   The scheme  of  s.  18 is that by sub-s. (1)  liability  of  the estate  of a person who dies, to satisfy ’the tax  liability if  his expenditure in the previous year exceeds the  amount which renders him liable to the expenditure-tax, is  declar- ed, and by sub-ss. (2) & (3) the Expenditure-tax Officer  is

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invested  with power to require a return to be made  by  the legal  representative of a deceased person whose  estate  is liable  to  pay ’the tax, or to deal with a  return  already made,  and  to determine after assessment the  tax  payable. The  legal representative of the person dying may  therefore be  called upon by the Tax Officer to make a return, and  on the return so made the expenditure- 623 tax  or  any  other  sum  which  would  have  been  declared payable,, if he had not died, may be assessed or determined, and  collected  from the estate in the hands  of  the  legal representative.  If the legal representative fails to make a return,  a best judgment assessment may be made by  the  Tax Officer.     The operative terms of sub-s. (1) of s. 18 are identical with  the terms of s. 24B (1) of the Indian Income-tax  Act, 1922.  Section 24B was added in the Income-tax Act, 1922, by the Income-tax (Second Amendment) Act 18 of 1933 with effect from  September  11,  1933, to remedy  a  lacuna  which  was pointed  out  by  the Bombay High  Court  in  the  machinery provisions of the Income-tax Act insofar as they related  to assessment  of tax against the estate of a person  who  died before   assessment   was  completed.  In  Ellis   Reid   v. Commissioner  of Income-tax(1), the Bombay High  Court  held that  where a person dies after the issue of a notice  under s.  22(2) of the Income-tax Act, 1922, to make a  return  of his  income,  but  before  he  makes  a  return,  assessment proceedings  commenced against him under the Income-tax  Act cannot be continued and his legal representative will not be liable to pay tax which such person may, if he had not died, have  been assessed to pay.  In the view of the  High  Court the  definition  of  "assessee" applies  only  to  a  living person,  the  expression used by the  Legislature  being  "a person  by whom income-tax is payable" and not "a person  by whom or whose estate income-tax is payable’.  With a view to remove  the  defect  pointed out by the High  Court  in  the scheme  of the Act, s. 24B was inserted providing  machinery for assessment of tax against the estate in the hands of the legal  representative of a person liable to pay tax and  for levy and collection of tax from his estate.  The  Parliament adopted  the  scheme  of  s. 24B  with  some  variations  in enacting  ss.  18(1)  & (2) for rendering the  estate  of  a person  who would, if he had not died, have been  liable  to pay  expenditure-tax.  This is not denied.  But counsel  for the  respondent said that s. 18 of the  Expenditure-tax  Act does  not bring within the net of taxation cases of  persons who  died  before the Act was brought into force :  it  only sets up machinery for enforcing liability against the estate of  a  person  dying after the Act is  brought  into  force. Counsel placed strong reliance upon income-tax Commissioner, Bombay v. D. N. Mehta (2) decided by the Bombay High  Court, and  submitted  that  Parliament  having  adopted  the  same phraseology  as was used in I s. 24B (1) of  the  Income-tax Act,  it  may  be  inferred that it  was  intended  to  give legislative recognition to the interpretation of (1) 5 I.T.C. 100 : I.L.R. 55 Bom.  312. (2) 3 I.T.R. 147 624 s.24 insofar as it is applicable to the Expenditure-tax Act. In D.     N. Mehta’s case(1) one Avabai died on May 6,  1932 after  she was served with a notice requiring her to make  a return of her income under s. 22(2) of the Indian Income-tax Act,  1922.   Section  24B was thereafter  inserted  in  the Income-tax  Act on September 11, 1933.  In  proceedings  for assessment  of income-tax against her legal  representatives

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it  was  contended that Avabai had died before the  date  on which  the amendment was made, her estate was not liable  to be  taxed under the machinery incorporated in the Act in  S. 24B.   This  contention found favour with  the  Bombay  High Court  in D. N. Mehtas case(1).  Beaumont, C.J.,  delivering the judgment of the Court observed :                    "..........  that S. 3 of the  Income-tax               Act  charges  the tax upon  every  one  coming               within the purview of the Act who was alive at               the  beginning of the financial year,  but  in               the case of a person dying before  assessment,               that   liability   was  inchoate   only,   and               crystallized into an enforceable liability for               the first time on the passing of the Amendment               Act.   It is therefore not quite  accurate  to               say  that the Amendment Act merely deals  with               machinery;  it does for the first time  impose               an enforceable liability.  The principle which               must always be applied in construing a  taxing               Act is that the Government must show that  the               tax  sought be recovered has been  imposed  in               language which admits of no reasonable  doubt.               The  opening  words  of  each  sub-section  to               Section  24-B : "Where a person dies",  though               the use of the present tense is not altogether               appropriate on any reading of the Art, seem to               me  more  appropriate to future than  to  past               deaths.   If the Legislature had intended  the               Act  to have a retrospective effect, it  would               have  been  very  easy  to  have  said,  "dies               whether  before or after the passing  of  this               Act".   Inconvenience and hardship  might  lie               caused  by  making the tax payable out  of  an               estate which has been distributed on the basis               of the then existing law."     Counsel for the respondent maintained that as with  this judicial interpretation of s. 24B before it, the  Parliament adopted the same phraseology and scheme in enacting s. 18(1) of  the  Expenditure-tax Act, Parliament must be  deemed  to have  intended  to enact the rule laid by  the  Bombay  High Court in its application to the Expenditure-tax Act.  It was open to the Parliament, (1) 3 I.T. R. 147. 625 said  counsel,  to use adequate phraseology  such  as  "dies whether  before  or after the passing of this Act"  and  the Parliament  not  having done so, it must be deemed  to  have accepted the interpretation placed by the Bombay High  Court and to have evinced an intention not to render the estate of the  person, who died before the date on which the  Act  was brought into force, liable to expenditure-tax.     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-ss.  (2)  &  (3) it is  clear  that  the  Parliament intended  to attract the entire charge to tax and  machinery prescribed  by ss. 13 & 15 so as to render the estate  of  a person  dying  before the Act liable to satisfy the  tax  or other  liability which would have been assessed  or  imposed upon him if he had not died.  In the context of the declared liability under sub-s. (1) and the provisions of sub-s.  (3) of  s.  18,  which  make  sections 13,  14  and  15  of  the Expenditure-tax    Act   applicable   to    the    executor,

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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.     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.       The  appeal is therefore allowed and the order  passed by  the High Court is set aside, and the petition  filed  by the  respondents is dismissed with costs in this  Court  and the High Court.                               Appeal allowed. 626