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PETITIONER: WELATH TAX OFFICER, CALICUT

       Vs.

RESPONDENT: C. K. MAMMED KAYI (SINCE DECEASED) THROUGH HIS L.RS. T.M.POC

DATE OF JUDGMENT07/04/1981

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR 1269            1981 SCR  (3) 358  1981 SCC  (3)  23        1981 SCALE  (1)620

ACT:      Wealth  Tax  Act,  1957-Section  3-"Individual"-Whether includes Mapilla  Marumakkathayam Tarawad  (Muslim undivided family) governed by Marumakukathayam Act.

HEADNOTE:      The  assessee   who  was   the  Karnavan   of   Mapilla Marumakkathayam Tarawad  registered as impartible within the meaning of section 20(1) of the Mapilla Marumakkathayam Act, 1939 was  assessed to  wealth tax  on the  net wealth of his Tarawad in  the capacity of an individual under section 3 of the Wealth Tax Act.      The  assessee’s  challenge  as  to  the  constitutional validity of  section 3  as being  violative of Article 14 of the Constitution  was rejected  by the  High Court. The High Court, however,  held by  majority, that non-Hindu Undivided Families  like   Mapilla   Marumakkathayam   Tarawads   were altogether outside  the purview  of the  charging section of the Act. The assessment was, therefore, quashed.      In appeal  to this  Court it was contended on behalf of the Revenue  that the  expression "individual"  in section 3 took  in  a  body  or  group  of  individuals  like  Mapilla Marumakkathayam Tarawad for being assessed to wealth tax and that long  legislative  practice  obtaining  in  the  taxing scheme Mapilla  Marumakkathayam Tarawads  have  always  been treated and assessed in the status of "individual".      Allowing the appeal, ^      HELD: 1.  The term "individual" in section 3 includes a group of  individuals like  Mapilla Marumakkathayam Tarawad. The term  "individual" does  not mean only a human being but is wide  enough to  include a  group of  persons  forming  a natural unit. [365 E]      2. The  canon of  construction applicable to Entries in the Legislative Lists of the Constitution would be different from the canon of construction applicable to terms used in a taxing  statute.  While  the  object  of  an  entry  in  the Legislative Lists is to demarcate a wide field by the use of compendious words  the rule  of construction applicable to a taxing statute must ensure that the 359 subject is  not to  be taxed  unless  the  language  of  the

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statute clearly imposes the obligation. [364 B-C]      Russell v. Scott, [1948] A.C. 422, referred to.      3. The  general scheme  of the  Wealth Tax  Act  is  to assess to  tax all  persons who  happen  to  possess  wealth beyond the  statutory limit  and since  the  Act  imposes  a general tax  on the  entire  wealth  of  the  community  the presumption would  be of  equality of  incidence rather than exemption of  a few.  Secondly, the term "individual" can be read in  plural and so read would include a body or group of individuals like  Mapilla Tarawad.  Thirdly  the  two  terms ’individual’ and  ’Hindu Undivided Family’ cannot be said to have been  used in  anti-thesis with  each other. Section 3, the charging  section is  merely concerned  with  specifying different assessable units for the purposes of assessment of wealth and imposition of the levy. [364 E-F]      4. It  is well  settled that the legislature can select persons,  properties,   transactions  and  objects  for  the imposition of  a tax  and for  that purpose classify as many different assessing  units  as  it  could  reasonably  think necessary. This  is how the three assessable units have come to be specified in that section. [364 G]      5.  Specific  mention  of  Hindu  Undivided  Family  in section 3  does not  result in  the exclusion  of a group of individuals who  only form  a unit  by reason of their birth like a Mapilla Marumakkathayam Tarawad from the operation of the scheme. [365 A]      6. The argument that because of the references to wife, daughter and  child of  an individual  in section 4 the term "individual" in  section 3  should be construed as referable to a single human being is without force. Similarly, absence of provisions similar to those applicable to Hindu Undivided Family for  assessing groups  of individuals  who form  non- Hindu  Undivided  Families  cannot  affect  or  control  the charging section. [365 D-E]      7. The  legislative practice  in  the  country  in  the taxing scheme  had always  been to  treat and assess Mapilla Marumakkathayam Tarawad as an "individual".                                                      [365 F]      V. Venugopala  Ravi Varma  Rajah v.  Union of India and Another, 74 I.T.R. 49 referred to.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1543 of 1971.      Appeal by certificate from the Judgment and Order dated 28.10.1965 of the Kerala High Court in O.P.674 of 1958.      B.B. Ahuja and Miss A. Subhashini for the Appellant.      G.C. Sharma, E.D. Helmes, S.P.Nayar and R.S. Sharma for the Respondents. 360      The Judgment of the Court was delivered by      TULZAPURKAR, J.  This appeal, by certificate granted by the Kerala  High Court,  raises the question whether Mapilla Marumakkathayam Tarwads  of North  Malabar-Muslim  undivided families governed  by Marumakkathayam  Act (Madras Act 17 of 1939)-fall  within   the  expression  ’individual’  and  are assessable to tax under s. 3 of the Wealth Tax Act, 1957 ?      The checkered history through which this litigation has passed may  briefly be  indicated in order to appreciate how the aforesaid  question arises for our determination. At the relevant time  deceased respondent  was the  karnavan  of  a Mappilla Marumakkathayam  Tarwad  registered  as  impartible within  the   meaning   of   s.   20(1)   of   the   Mapilla

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Marumakkathayam Act (Madras Act 17 of 1939). He was assessed to wealth  tax for  the assessment  year 1957-58  on the net wealth of  his Tarwad  considered as an individual under s.3 of the  Wealth Tax  Act,  1957  and  on  completion  of  the assessment a demand notice dated July 16, 1958 was served on him for  payment. On  September 10,  1958 he  filed  a  writ petition being  O.P. No.  674 of  1958 seeking  to quash the said assessment  and the  demand notice  on  the  ground  of unconstitutionality of  the Wealth  Tax Act  No. 27  of 1957 (hereinafter called  ’the Act’).  Four other  writ petitions were also filed by the karnavans of Hindu undivided families of Malabar and Cochin governed by the Madras Marumakkathayam Act No.  22 of 1923 challenging the constitutionality of the Act. Since  common questions of law arose for determination, the High  Court disposed  of the  writ petitions by a common judgment. The constitutionality of the Act was challenged on two grounds-(a)  that the  Parliament was  not competent  to include a Hindu undivided family in the charging s. 3 of the Act in view of Entry 86 in List I of the Seventh Schedule of the Constitution  and (b)  that the charging s. 3 of the Act was violative of Art. 14 of the Constitution. The High Court repelled  the  first  ground  of  challenge  and  held  that Parliament was competent to include a Hindu undivided family in s.  3 of  the Act  as constituting  a body  or  group  of individuals coming  within the  term ’individuals’  in Entry 86, but  accepted the  latter ground  of  challenge  by  its judgment rendered  on July  1, 1951.  It took  the view that there was discrimination as between Hindu undivided families and  Muslim   Mapilla  Tarwads  which  were  also  undivided families and,  therefore, the  charging section in so far as it governed  undivided families was hit by Art. 14. The High Court  observed   that  the   Department   had   failed   to substantiate its contention that Muslim Mapilla Tarwads 361 were so  insignificant in  number that their existence could be ignored  in the  context of the attack under Art. 14. The Department carried  the matter  in appeal  to this Court. By its judgment  dated February  17, 1964, this Court set aside the judgment  and orders  of the High Court and remanded the cases to  the High Court to consider whether Art. 14 applied to the  cases or not after giving the parties opportunity of putting forward  their respective  cases supported  by facts and figures.  In doing  so, this  Court observed that on the question raised  under Art. 14 the High Court seemed to take the view  that it was for the State to show that Art. 14 was not applicable,  that this  was not  correct and that it was for the  party who  came forward  with the  application that equality before  the law  or equal  protection of  laws  was being denied to him to adduce facts to prove such denial.      On  remand,   out  of  the  two  contentions  initially formulated by  the  assesses,  the  first  relating  to  the constitutionality of the Act in relation to Entry 86 in List I had  in the  meantime been  squarely dealt  with and over- ruled by  this Court  in the  case of Banarsi Dass v. Wealth Tax Officer  and, therefore,  the same  was not  pressed and only the  second contention  regarding the  validity of  the charging s.  3 as  being violative  of Art.  14  was  argued before the High Court. Each one of the three learned Judges, who heard  the matter  ultimately rejected the challenge and held that  s. 3  was not  violative of Art. 14, but each one did so  for  different  reasons  and  in  that  process  the majority reached  the conclusion  that  non-Hindu  undivided families  like   Mapilla   Marumakkathayam   Tarwads,   were altogether outside  the purview  of the  charging s.  3  and hence assessment  made and  the demand  notice served on the

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deceased respondent  deserved to  be quashed.  Justice  Velu Pillai took  the view  that the  legislative  entries  in  a constitution were  to be  widely and liberally construed but not the provisions of a taxing statute, that though the term ’individuals’ in  Entry 86  of List I would be comprehensive enough to  include a  body  or  group  of  individuals  like undivided  Hindu   families  similar   construction  of  the expression ’individual’  in s. 3 of the Wealth Tax Act so as to  include   non-Hindu  undivided   families  like  Mapilla Marumakkathayam Tarwads  was not  warranted, that  the  term ’individual’ in s. 3 of Act occurred in anti-thesis with the terms ’Hindu undivided family’ and if all undivided families were  included  in  the  terms  ’individual’  there  was  no necessity to  mention Hindu  undivided family  as a distinct taxing unit. 362 He,  therefore,   came  to  the  conclusion  that  non-Hindu undivided families were not covered by the term ’individual’ and were, therefore outside the charging section of the Act, but their  exclusion  from  the  charging  section  did  not attract the vice of discrimination under Art. 14 inasmuch as it had  been established  that there  were only  22  Mapilla Marumakkathayam Tarwads  in the  whole country  and as  such constituted an  insignificant or  microscopic  minority  and their exclusion  from the  charging  provision  was  neither deliberate nor material and, therefore, s. 3 did not violate Art. 14.  Justice V.P.  Gopalan Nambiyar,  however, took the view that  the expression  ’individual’ in  s.3 of  the  Act properly read  included a  group  of  individuals  who  were members of  a Mapilla  Marumakkathayam Tarwad but since such interpretation of  the term ’individual’ led to differential treatment to  such non-Hindu  undivided families as compared to Hindu  undivided families including Hindu Marumakkathayam Tarwads and would be violative of Art. 14 he would read down that expression  so as  to exclude  Mapilla  Marumakkathayam Tarwads and on reading down the expression as aforesaid s. 3 avoided the  vice of  discrimination under  Art. 14. Justice T.S. Krishnamoorthy  Iyer, however,  took the  view that the expression ’individual’  in s.3 of the Act included group of individuals who  were members  of a  Mapilla Marumakkathayam Tarwad as,  according to him, the specific mention of ’Hindu undivided families’  as a  separate assessable entity in the charging section  could not restrict the meaning of the term ’individual’ and, therefore, Mapilla Marumakkathayam Tarwads were assessable  under s.3  of the  Act and  that even after inclusion of such group of individuals within the expression ’individual’ the  charging s.3  of the Act was not violative of Art.  14 of  the Constitution.  He took the view that the equality clause permitted the legislature a wider discretion to  classify   persons,  properties   or  transactions  into different categories  and tax  them  differently  under  its power of taxation, that a Hindu Marumakkathayam Tarwad and a Mapilla Marumakkathayam  Tarwad were  not similarly situate, that the classification made by the legislature was rational and, therefore,  the Act  which provided  for lower limit of exemption to  individual and  higher limit  of exemption  to Hindu  undivided   family  could   not  amount   to  hostile discrimination against group of individuals constituting the Mapilla Marumakkathayam  Tarwad. In  his view  there was  no substance in  the challenge to s. 3 of the Act under Art. 14 and the  writ petition  was liable to be dismissed. However, in accordance  with the  view of  the majority  that Mapilla Marumakkathayam Tarwads  were outside the purview of s. 3 of the Act the writ petition was allowed and the assess 363

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ment  made   and  demand   notice  served  on  the  deceased respondent were  quashed. In  other words,  though  all  the learned  Judges  repelled  the  challenge  to  the  charging section based  on Art.  14 of the Constitution, the majority reached   that    conclusion   by   holding   that   Mapilla Marumakkathayam Tarwads  were outside the purview of s. 3 of the Act.  It is  this latter  view which is being challenged before us by the Department in this appeal.      Counsel  for  the  Revenue  urged  two  contentions  in support of  the appeal.  In the first place he supported the construction placed  by  Krishnamoorthy  Iyer,  J.,  on  the expression ’individual’ in s. 3 of the Act that it took in a body or  group of individuals like a Mapilla Marumakkathayam Tarwad for  being assessed to wealth tax. Secondly, he urged that  such   construction  was   in  accord  with  the  long legislative practice  obtaining in  the taxing scheme in the country under  which Mapilla  Marumakkathayam  Tarwads  have always  been   treated  and   assessed  in   the  status  of individual-a legislative  practice that  has been judicially noted by  this Court in the case of V. Venugopala Ravi Varma Rajah v.  Union of  India and  Another. On  the other  hand, counsel  for  the  respondent  assessee  canvassed  for  our acceptance the  view taken  by Velu  Pillai,  J.,  that  the expression ’individual’  in s.  3 did  not  cover  non-Hindu undivided families  like Mapilla Marumakkathayam Tarwads and these were,  therefore, outside  the purview of the charging provision.  He   attempted  to   strengthen  that   view  by contending that  the expression ’individual’ in s. 3 meant a single individual as a human being and according to him this was  clear   from  the   fact  that  references  to  ’wife’, ’daughter’ and ’child’ of an individual occur in s. 4 of the Act. He  further pointed  out that under s. 5(1) (ii) wealth tax was  not payable  by  an  assessee  in  respect  of  his interest in  the coparcenary property of any Hindu undivided family  of   which  he   is  a   member  but  there  was  no corresponding exclusion  of the  interest of the assessee in the property  of a non-Hindu undivided family like a Mapilla Marumakkathayam Tarwad  from the  incidence of  the tax  and this also  suggested that  the term ’individual’ in s. 3 was not intended to include a Mapilla Marumakkathayam Tarwad.      Section 3 of the Act at the material time ran thus:           "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 364      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."      It cannot  be disputed  that the  canon of construction applicable  to   Entries  in  the  three  Legislative  Lists occurring in  a Constitution  would be  different  from  the canon  of   construction  that   would  apply  to  terms  or expressions used in a taxing statute. The object of an Entry in  any   Legislative  List   is  to  demarcate  as  wide  a Legislative field  as possible  by the  use  of  compendious words  or   expressions  while   the  rule  of  construction applicable to a taxing statute must ensure that "the subject is not  to be  taxed unless  the  language  of  the  statute clearly imposes the obligation" (per Lord Simonds in Russell v.  Scott.   It  is,   therefore,  clear  that  because  the expression ’individuals  occurring in  Entry 86 of List I of the Seventh  Schedule to  the Constitution  takes within its ambit a  Hindu undivided  family, it would not automatically

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follow that  the term  ’individual’ occurring in s. 3 of the Wealth Tax  Act 1957  would include  a  non-Hindu  undivided family  like  a  Mapilla  Marumakkathayam  Tarwad,  but  the question will  have to  be considered  in the  light of  the scheme of  the Wealth  Tax  Act  itself.  The  enactment  is intended to  provide for the levy of wealth-tax; the general scheme thereof  is to  assess  all  persons  who  happen  to possess or  earn wealth  beyond a  particular limit fixed by the statute  to wealth-tax  and  since  the  Act  imposes  a general tax  on the  entire  wealth  of  the  community  the presumption would  be of  equality of  incidence rather than exemption of a few. Secondly, the term ’individual’ under s. 13 (2)  of the  General Clauses  Act, 1897  can be  read  in plural and  as  such  would  include  a  body  or  group  of individuals like  a Mapilla  Tarwad. Thirdly,  there  is  no warrant for  suggesting that  the two terms ’individual’ and ’Hindu undivided  family’ have been used in anti-thesis with each other,  for s. 3 being the charging provision is merely concerned with  specifying different  assessable  units  for purposes of assessment of wealth and imposition of the levy; it cannot  be  disputed  that  the  Legislature  can  select persons,  properties,   transactions  and  objects  for  the imposition of  a levy  and for that purpose classify as many different assessing  units  as  it  could  reasonably  think necessary and  this is  how three  assessable units  namely, ’individual’, ’Hindu  undivided family’ and ’company’ (which was later omitted) have come to be specified in s. 3. In our view the specific 365 mention of  Hindu undivided  family in  the section does not result in  the exclusion  of group  of individuals  who only form a  unit by  reason of their birth like a Mapilla Tarwad from the operation of the section. It is difficult to accept the argument  that if  term  ’individual’  was  intended  to include  joint   families  or   undivided  families  it  was redundant to specify Hindu undivided families.      In  the   context  of   the  argument   that  the  term ’individual’ can  refer only to a single human being it will be opposite  to refer  to what  this Court  has observed  in Commissioner of  Income Tax,  Madhya Pradesh  and Bhopal  v. Sodra Devi. At page 620 of the report this Court has said:           ".... word ’individual’ has not been defined under      the Act  (Indian Income  Tax Act  1922)  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      natural unit." The contention  that because there are references to ’wife’, ’daughter’ and  ’child’ of  an individual  in s.  4 the term ’individual’ in  s. 3  should be construed as referable to a single human  being cannot  obviously be accepted. Similarly absence of  provisions similar  to those applicable to Hindu undivided family for assessing group of individuals who form non-Hindu undivided  families [provisions like s. 5(1) (ii)] cannot affect or control in any manner the charging section. On construction,  therefore, we are clearly of the view that the  term   ’individual’  in   s.  3  includes  a  group  of individuals like a Mapilla Tarwad.      Furthermore, we  would  like  to  point  out  that  the aforesaid  construction   would  be   in  accord   with  the legislative practice  obtaining in  the taxing scheme in the country whereunder  Parliament has  always been treating and assessing Mapilla  Marumakkathayam Tarwads  in the status of ’individual’  under  the  various  taxing  statutes.  In  V. Venugopala Ravi  Varma Rajah  v. Union  of India and Another

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(supra), a case arising under the Expenditure Tax Act (29 of 1957), the  question for  determination was  whether s. 3 of that Act  was violative  of  Art.  14  of  the  Constitution because a  Hindu undivided family (specifically mentioned as a distinct  assessing unit)  governed by the Marumakkathayam Law had to pay tax at a higher 366 rate by reason of the amalgamation of the expenditure of all the members of the family whereas a Mapilla undivided family was required to pay tax at a lower rate since the members of such family  governed by the Marumakkathayam Law were liable to be  taxed as individuals under the section and this Court answered the  question in  the negative. While doing so this Court pointed  out how  Parliament had  been  accustomed  in enacting tax  laws to  make a  distinction between  a  Hindu undivided family consisting of Hindus and undivided families of Mapillas  and how for purposes of taxing statutes Mapilla Tarwads  have  always  been  regarded  as  individuals.  The relevant observations in this behalf run as follows:           "Under the  taxing Acts  the scheme  of treating a      Hindu Undivided  Family has  been adopted  for  a  long      time, e.g.,  the Indian  Income-tax  Act  IX  of  1869,      Indian Income-tax Act IX of 1870, Indian Income-tax Act      XII of  1871, Act VIII of 1872, Act II of 1886, Act VII      of 1918,  Act XI of 1922, Act 43 of 1961 have treated a      Hindu Undivided  Family as  a distinct  taxable entity.      Similarly under the Wealth-tax 27 of 1957 and the Gift-      tax Act  18 of 1958, the Hindu Undivided Family is made      a unit of taxation. Under the Business Profits Tax Act,      21 of  1947 and  the Excess  Profits Tax Act, 1940 also      the Hindu Undivided Family was made a unit of taxation.      For the purposes of these Acts Mapilla Tarwads governed      by  the  Marumakkathayam  law  have  been  regarded  as      individuals."                                          (Emphasis supplied)      For  all   these  reasons   we  hold   that  the   term ’individual’ in  s. 3  of the  Act includes within its ambit Mapilla Marumakkathayam Tarwads and they are well within the purview of  the taxing provisions of the enactment. Further, even after  their inclusion in the term ’individual’ s. 3 of the Act  would not  be violative  of Art.  14 for  the  same reasons for  which s. 3 of the Expenditure Tax Act, 1957 has been held  to be  not so  violative  by  this  Court  in  V. Venugopala’s case (supra).      In the  result the  appeal is allowed but there will be no order as to costs. P.B.R.                                       Appeal allowed. 367