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Shreekunwardevi Daga Vs. L.G. Trivedi, Income-tax Officer, A-ward, Wardha and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Application Nos. 277 and 278 of 1967
Judge
Reported in[1972]85ITR451(Bom); 1971MhLJ729
ActsIncome Tax Act 1961 - Sections 64 and 64(1); Constitution of India - Articles 14 and 19(1)
AppellantShreekunwardevi Daga
RespondentL.G. Trivedi, Income-tax Officer, A-ward, Wardha and ors.
Appellant AdvocateC.K. Daphtary, Adv.
Respondent AdvocateR.M. Hajarnavis, Adv.
Excerpt:
direct taxation - assessment - sections 64 (i) and 64 (ii) of income tax act, 1961 and articles 14 and 19 (1) of constitution of india - assessment under provisions of sections 64 (i) and 64 (ii) challenged as unconstitutional - sections 64 (i) and 64 (ii) are valid as it is within legislative competence of central legislature and does not infringe any of fundamental rights guaranteed under articles 14 and 19 - assessment and notices of demand issued not to be quashed. - - this argument has a good deal of force. the question was answered in the affirmative and it was held that sub-section 3 (a) (i) and (ii) of section 16 of the income-tax act, 1922, was well within the competence of the federal legislature. and where any such income arising in any succeeding year shall not be.....padhye, j.1. these two petitions raise common question of law and are dealt with together. these petitions challenge the orders of assessments for the assessment year 1962-63, i.e., account year ending diwali 1961, and the consequent notices of demand of income-tax dated february 13, 1967. the liability of the petitioners in both the petitions arises on account of their being partners in the firm known as m/s. r. b. bansilal abirchand and their minor children being admitted to the benefits of the partnership. 2. hiralal daga, husband of the petitioner, shreekunwardevi, was a partner, holding 1/7th share and dwarkadas daga, husband of the petitioner, radhadevi, was a partner, holding 1/7th share in the partnership firm, m/s. r. b. bansilal abirchand, constituted under the partnership deed,.....
Judgment:

Padhye, J.

1. These two petitions raise common question of law and are dealt with together. These petitions challenge the orders of assessments for the assessment year 1962-63, i.e., account year ending Diwali 1961, and the consequent notices of demand of income-tax dated February 13, 1967. The liability of the petitioners in both the petitions arises on account of their being partners in the firm known as M/s. R. B. Bansilal Abirchand and their minor children being admitted to the benefits of the partnership.

2. Hiralal Daga, husband of the petitioner, Shreekunwardevi, was a partner, holding 1/7th share and Dwarkadas Daga, husband of the petitioner, Radhadevi, was a partner, holding 1/7th share in the partnership firm, M/s. R. B. Bansilal Abirchand, constituted under the partnership deed, dated May 15, 1955. It is alleged in both the petitions that there was an understanding between the parties that the death of a partner will not dissolve the partnership but the partnership business will be carried on with the legal heirs of the deceased partner as partners in place of the deceased partner, the minor being deemed to have been admitted to the benefits of the partnership. The understanding has also been incorporated in the subsequent partnership deed dated December 16, 1957.

3. Dwarkadas Daga died on November 4, 1957, leaving behind him a widow, Radhadevi Daga, petitioner and three minor daughters, viz., (i) Kusumkumari, (ii) Kumudkumari and (iii) Kalakumari. Hiralal Daga died on August 27, 1958, leaving behind him a widow, Shreekunwardevi, petitioner, and two minor sons : (i) Krishnakumar, (ii) Kishorekumar and two minor daughters : (i) Shobakumari and (ii) Nirmalakumari. These were the legal heirs of Dwarkadas and Hiralal under the Hindu Succession Act, which came into force with effect from June 17, 1956, and became absolute owners of their respective shares.

4. As a result of the operation of the Hindu Succession Act and the understanding already existing and embodied in the partnership deed, dated December 16, 1957, these heirs of the two deceased became partners of were admitted to the benefits of the partnership.

5. Vithaldas Daga, one of the partners, retired from the partnership on August 20, 1959. Subsequently, Sodradevi Daga, another partner, died on October 5, 1959. At every change, either by death or retirement, the shares of the partners were affected and fresh partnership deeds were executed. Last of such partnership deed relevant for the assessment in question is dated October 29, 1959. So far as the present petitions are concerned, the shares of the involved partners were as under :

Heirs of Hiralal Daga(a) (i) Shreekunwardevi 1/75(ii) Krishnakumar 6/75(iii) Kishorekumar 6/75(iv) Shobakumari 1/75(v) Nirmalakumari 1/75Heirs of Dwarkadas Daga(b) (i) Radhadevi 1/20(ii) Kusumkumari 1/20(iii) Kumudkumari 1/20(iv) Kalakumari 1/20

6. In the assessments of the petitioners for the assessment year 1962-63, the Income-tax Officer included in their total income the income of minor sons and/or daughters of the petitioners which accrued to these minors from their admission to the benefits of the partnership in the firms, M/s. R. B. Bansilal Abirchand, in which the parties are also partner. On such assessments being made, the Income-tax Officer issued demand notices to the petitioners. Before the Income-tax Officer, the petitioners had challenged the constitutional validity of the provisions of section 64(ii) of the Income-tax Act, 1961, but the Income-tax Officer held that the was not competent to go into that question. He, However, observed that the challenge to the validity of section 64(ii) was also not tenable because of the decision of the Supreme Court in Balaji v. Income-tax Officer, in which the provision of section 16 (3) (a) (i) and (ii) of the Income-tax Act, 1922, were challenged as being ultra vires on the ground of incompetency of the legislature to enact that law and also on the ground of its violating the provisions of articles 14 and 19 of the Constitution.

7. The petitioners in the two cases are challenging the said assessment orders and the demand notices in pursuance thereof on constitutional grounds.

8. We first take up for consideration the contention regarding the legislative competence to enact section 64(ii) of the Act. By this provision, in assessing the total income of the father or mother of a minor who is admitted to the benefits of a partnership in which the father or the mother or both are partners, the income of the father or the mother as the case may be and the father or the mother is subjected to the tax on such total income. In other words, the father or the mother is taxed not only for his or her income but also for the income of the minor child or children who have been admitted to the benefits of the partnership. It is contended that the legislature under entry No. 82 of List I of the Seventh Schedule to the Constitution, which reads : 'Taxes on income other than agricultural income' is competent to make a law for levying a tax on the income of a person and not on the income of another person, may be that other person is his or her child. It was urged that this question was raised before the Supreme Court in Balaji v. Income-tax Officer, and in earlier cases but was expressly left open and was res integra. It is urged that under the entry No. 82, legislation could only be made for charging a person to income-tax in relation to his income only and not on the income of another. This argument has a good deal of force. Similar argument was advanced in Balaji's case. On behalf of the income-tax department, it was urged as in the aforesaid case, that the entry authorises the taxing of an income and, therefore, nothing prevented the legislature from imposing the incidence of the tax on a person other than the person whose income was to be assessed. An alternative argument was advanced in Balaji's case, making a distinction between the taxability of the income and the machinery for its collection. If these contentions on behalf of the department had been accepted, then nothing more was required to be gone into and the legislative competency had to be upheld. If, however, these contentions were not accepted, it had further to be seen whether the assessee's contention could be accepted. These contentions, however, were not gone into by the Supreme Court in Sardar Baldev Singh v. Commissioner of Income-tax and in Balaji v. Income-tax Officer were left open though in the Madras High Court in Amina Umma v. Income-tax officer, the contention raised on behalf of the petitioners is right but it is not correct to say that the question regarding the legislative competence has not been decided at all in Balaji's case. The point of view which urged, as above, by the assessee and the department was not gone into in view of the fact that the Supreme Court considered that the competency could be upheld on another aspect. The Supreme Court was there considering the validity of section 16 (3) (a) (i) and (ii) of the Act of 1922, which is to a large extent similar to section 64(ii) of the Act of 1961. In Sardar Baldev Singh's case, it was held that entry 54 in the Government of India Act, which is identical to entry No. 82 in the Constitution, can sustain a law made to prevent the evasion of tax. The question posed was, whether section 16 (3) (a) (i) and (ii) is a provision made by the legislature to prevent evasion of tax. The question was answered in the affirmative and it was held that sub-section 3 (a) (i) and (ii) of section 16 of the Income-tax Act, 1922, was well within the competence of the federal legislature. This decision, therefore, concludes the matter so far as the legislative competence is concerned since the same reasoning would be applicable to a provision, such as section 64(ii), made under entry No. 82 of the Constitution. We are bound by the decision of the Supreme Court. We, therefore, hold that the Central legislature had the competence to enact section 64(ii) of the Act of 1961.

9. The contention about the legislative competence was further supported by the learned counsel for the revenue on another ground. It is contended that even if the topic about this piece of legislation is not strictly covered by any of the entries in the Union List and, particularly, entry No. 82, even then such a legislation would be valid under the over all and residuary powers of the Central Legislature in view of article 248 and the entry No. 97 of the List I as the subject is not covered by any of the entries either in List II or List III. The contention is not devoid of substance. We, however, do not consider it necessary in this case to go into this important question on the view we have taken earlier about the legislative competence.

10. It was then contended that section 64(ii) is constitutionally invalid as it violated the fundamental rights guaranteed under articles 14 and 19(1) (f) and (g) of the constitution. In Balaji's case also, the constitutional validity of section 16 (3) (a) (i) and (ii) of the 1922 Act was challenged on similar grounds and the said section was held to be valid. The learned counsel for the petitioners, however, contends that section 64(ii) of the 1961 Act is materially different from section 16 (3) (a) (ii) of the 1922 Act, and hence Balaji's case would not be of any assistance in considering the validity of section 64(ii). We reproduce below the two provisions :

Section 16 (3) (a) (ii) :

'16. (3) 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 - ....

(ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner.'

'64. In computing the total income of any individual, there shall be included all such income as arises directly or indirectly - ... (ii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm in which such individual is a partner.'

Then there is an Explanation to this section which reads as under :

'Explanation. - For the purposes of clause (i), the individual in computing whose total income the income referred to in that clause is to be included shall be the husband or wife whose total incomes (excluding the income referred to in that clause) is greater; and, for the purpose of clause (ii), where both the partners are members of the firm in which the minor child is a partners the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause) is grater; and where any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do.'

11. Taxing statutes are not wholly immune from attack on the ground of valuation of article 14 or 19 of the Constitution. (See Kunnathat Thathunni Moopil Nair v. State of Kerala). There is, however, no fundamental right in a citizen not to pay tax or to pay the tax at a particular rate. If there is an authority of law in the sense that there is in the legislature a competence to pass a law relating to tax and if it does not violate any of the guarantees given by Part III of the Constitution, then it is within the authority of the legislature to levy the tax, at any rate or at any slab. As Mr. Hajarnavis, the learned counsel for the revenue puts it, where there is a joint income and a joint enterprise, there is not fundamental right in a person to say that he should not be taxed at a higher slab in comparison to a person who individually does a businesses. It is urged on behalf of the revenue that so far as a partnership and its partners are concerned, it is in fact a concession given to the partners in the matter of the payment of the income-tax. It is put in this way. Four persons doing a joint business either as an unregistered firm or as an association of person are required to pay the income-tax on the net income of the venture taken as one unit and are required to pay the income-tax at a higher slab. If these very four person were to do the business in partnership and the firm is registered under the Income-tax Act, the very income is divided into four parts and each of the partners is liable to pay the income-tax on the income which falls to his share, which would be at a lower slab than the earlier case. This, therefore, is a concession which is given to the partners and this concession could be made subject to certain other conditions their minor children to the benefits of the partnership in which they are partners. If such provisions are made then, it is contended that they do not violate any fundamental rights of the assessees under article 19(1) (f) and (g) of the Constitution. It is not the case of the assessees that upon applications of the provisions of section 64 (i) and (ii) of the Income-tax Act, they would result in confiscation of the property as such. Only income of the minors from the partnership and not his other income is added to the income of the father or the mother, as the case may be, and the income-tax payable on that total income is determined but ultimately the proportionate share of that income-tax is passed on to the minor's share and eventually the burden of the father or the mother is decreased to that extent. The assessees are not wholly deprived of their properties, namely, their total income, even if the share of the income of the minor is taken into consideration while assessing the total income of the father or the mother. In no case, the assessee is deprived of the whole of his income made during a particular year. The fundamental rights guaranteed to a citizen under article 19(1) of the Constitution are always subject to reasonable restrictions which can be put under article 19(6) of the Constitution. The right of the assessee to acquire, hold and dispose of property or to practice any profession or to carry on any occupation or trade or business is not taken away by the provisions contained in section 64 (i) and (ii). It is not that a person cannot do any business without his minor child participating in the trade or businesses along with him. There are many avenues open to the assessee to carry on a profession, trade or business or to earn his income in diverse ways even without the participation of his minor child. There is also no bar to a person carrying on his business in partnership either with strangers or with his adult children. There is no bar even to his carrying on his business in partnership wherein his minor children can be admitted to the benefits of the partnership. A restriction has, however, only been put in the case of minor children who are admitted to the benefits of the partnership whose share of income has to be taken into consideration in making the assessment of the father or the mother, as the case may be. This cannot be called to be an unreasonable restriction on the right of an assessee to acquire, hold and dispose of property, or to carry on any profession, trade or business, particularly when the concession is already shown to such an assessee doing a business of partnership and that concession is withdrawn to a very small extent so far as the partnership and that concession is withdrawn to a very small extent so far as the partners wherein minors are admitted to its benefit are concerned.

12. In Navnit Lal C. Javeri v. Appellate Assistant Commissioner of Income-tax, sections 2 (6A) (e) and 12 (1B) of the Income-tax Act, 1922, as introduced by Finance Act No. 15 of 1955, were challenged on the ground that they violated the fundamental right of the petitioner under article 19(1) (f) and (g) of the Constitution. It was held that no fundamental right of the assessee contravened by the aforesaid provisions and those provisions were valid. Though the provisions with which we are dealing are a little deferent from those considered in the aforesaid case, the same principles would apply in considering the validity of the provisions of section 64 of the Income-tax Act, 1961. Section 16 (3) (a) (i) and (ii) of the Income-tax Act, 1922, was challenged as offending clauses (f) and (g) of article 19(1) of the Constitution of India in S. Srinivasan v. Commissioner of Income-tax. There also as in sections 64(i) and (ii) of the Income-tax Act, 1961, the income of the wife and minor child was added to the income of the husband and the father in a partnership business. It was urged therein that the provisions of sections 16(3)(a)(i) and 16(3)(a)(ii) offend clauses (f) and (g) of article 19(1) of the Constitution. On the authority of Balaji v. Income-tax Officer, it was held that the said provisions did not impose any unreasonable restriction on the fundamental rights of the assessee under article 19(1) (f) and (g) and were consequently valid. We may refer at this stage to Balaji v. Income-tax Officer, in which the provisions of section 16 (3) (a) (i) and (ii) were challenged as violative of articles 13, 14 and 19(1) (f) and (g) of the Constitution. It was argued in that case that as the husband is statutorily made to pay certain amount as a tax on the income of his wife, to that extent he is deprived of his property by the State action and, therefore, his fundamental right under article 19(1)(f) is infringed. It was urged that the impugned statutory provision was an unreasonable restriction on the said right as her husband is compelled to pay the tax on the income of his wife and children who are in law distinct legal persons. It was held on a consideration of several matters that the restrictions which were put were reasonable and fell within the ambit of article 19(6) of the Constitution and the provisions of section 16 (3) (a) (i) and (ii) were constitutionally valid. The Supreme Court has consistently taken the view that the provisions of section 16 (3) (a) (i) and (ii) Income-tax Act, 1922, do to in any way infringe the fundamental rights guaranteed under article 19(1) of the Constitution and constitutionally valid. There is really not much difference between the provisions of section 16 (3) (a) (i) and (ii) of the Income-tax Act, 1922, and section 64 (i) and (ii) of the Income-tax Act, 1961. Whereas under section 16(3) the share of income of the wife or the minor child who was admitted to the benefits of the partnership was added to the income of the husband or the father, under section 64(i) of the 1961 Act, the share of income of the spouse and of the minor children admitted to the benefits of the partnership are added to the income of the father or the mother, as the case may be, for the purpose of making the assessment. The same factors, therefore, which held the provisions of section 16 (3) (a) (i) and (ii) of the Income-tax Act, 1922, valid will be relevant and will govern the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961, and we do not see why different consideration should apply in applying the test to these two provisions. We are, therefore, of the opinion that the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961, do not infringe the fundamental guarantees given under article 19(1) (f) and (g) of the Constitution, nor do they violate any of these fundamental guarantees and are constitutionally valid.

13. Then remains the last attack on the validity of the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961, on the ground of its being violative of the fundamental rights guaranteed under article 14 of this Constitution. The attack in this respect is manifold. It is urged that the provisions of section 64 (i) and (ii) with which we are dealing read with the Explanation to that section are vague inasmuch as it cannot be anticipated as to who will have to pay the tax in a particular year, namely, the father or the mother of the minor children who have been admitted to the benefits of the partnership. It is then urged that though classification is permissible, the classification made in this case is not reasonable and has no nexus with the object sought to be achieved. It is further argued that there could be several categories or the sub-classifications where the father or the mother and the minor children are involved in a partnership. There may be cases where the father or the mother invests his or her own money in the business through the minor children and simply admits them to the benefits of the partnership with a view to show reduced profits and to minimise the income-tax payable. There may be cases where there is a genuine partition between the father, the mother and the minor children in which the minor gets a real share in the property which is invested in the partnership along with the father or the mother to which partnership the minor is admitted, in which case the income of the father, the mother and the minor children would be separate. There may also be a third category of cases where the minor children may have separate properties without reference to their father or mother, for example, they may get certain property by transfer from other or by way of gift or in any other manner in which the father and the mother has no connection whatsoever. It is argued that there is no reason in applying the same law to all these categories. It is urged that if the object of making the provision is to provide for evasion of the tax in the case of a father who take advantage of his minor children for the purposes of redacting the tax liability, then in the case of category No. 1 there may be some possibility of a father attempting to evade the tax liability in which case he could be roped in but in case of category No. 2 such a possibility is much less and in the category No. 3 the possibility is nil. Yet it is urged that all these three categories are painted with the same brush and treated alike, though they are differently situated. Such a classification, it is urged, is highly unreasonable and unfair which includes the last two categories also. In the said provision no connection can be established with the object sought to be achieved which is the prevention of the evasion of tax which is non-existent in cases of categories Nos. 2 and 3. It is argued that if the evil of the evasion of tax is to be remedied, as the object of the Act is to strike at the evasion of the tax, then the remedy for that purpose should be commensurate or proportionate with that object and should not be excessive. It is said that in the case of the first category there may arise a presumption of evasion, the case of the first category there may arise a presumption of evasion, but in the second category, there is only a likelihood of evasion while in but in the second category, there is only a likelihood of evasion while in the case of the third category, there is only a likelihood of evasion and these there stand on different footing. It is, therefore, urged that so far as categories Nos. 2 and 3 are concerned, the remedy adopted is too excessive, and, therefore, unreasonable and the provisions of section 64 (i) and (ii) of the 1961 Act are bad and violative of article 14 of the Constitution. The argument is attractive and has got considerable force. Where it is crystal clear that the funds of the minor children which are invested in the partnership are absolutely independent of their parents and do not flow from or come out of the funds of their parents, it does stand to reason why the total income of the father or the mother should be clubbed with any share on income of the minor children in the partnership to the benefits of which they are admitted, when the share of income of the adult children or of the stranger partners is not so added. But, then it is not always eyes to find out whether the funds of the minor children which are invested in the partnership belong exclusively to the minor children prod to find out whether the investments of the minors have any connections with their parents or whether they are exclusively the minor's funds. It cannot also be forgotten that whether funds are the exclusive funds of the minor or not, the minor children are invariably under the control of their parents and it is the parents who manage the whole affair and the minor children neither have any hand nor any voice in the carrying on of the business, nor in earning the income. In fact it is the parents who earn for their minor children though the funds may be technically belonging to the minor children. Such is not the case with strangers or the adult children because they also participate in the business and help in making an income. They may at their own will retire from the partnership. They may at their own will invest as much amounts as they want in the partnership or withdraw their investments from the partnership at any time. Such is not the case with the minor children and it is the parents who decide the course of action to be taken on behalf of the minor children. It is for this reason that the partnership income of the minor children is sought to be linked up with the income of their fathers and mother. There is no volition to the minors. Major partner considers his own interest. Before entering into partnership, he tries to find out whether it will be profitable for him to enter into a partnership and whether it would be advantageous for him to do so. In the case of a minor he has no choice and the choice is made by his parents and the parents may admit their children to the benefits of the partnership irrespective of whether the partnership would be a prospering concern or a struggling concern. This fate of the minor children would depend upon the adventure of the parents is such cases. This would be so even if the funds may belongs to the minors exclusively, either by way of succession or otherwise. It is not unlikely that the parents may use the funds belonging to their children to their advantage to the maximum possible and even by inflating those funds for reducing the tax liability. There may be cases where taking advantage of the control over the property of the minors the parents would try to exaggerate the value of that property and then put the same into partnership so that the share of income of the minors could be increased while that of the parents proportionately reduced, with the result that income-tax payable on the total income of the parents would be reduced and subsequently the income falling to the share of the minor would be diverted to their advantage. We do not say that this would in every case be done. There are also honest and innocent people who would not resort to such dirty tactics but the possibility of there being some unscrupulous person who would resort to such tactics cannot be excluded. No doubt, however fool-proof the provision is sought to be made, there could be found some loopholes and every attempt would be made to get out of the effect of the provision, and to evade the tax liability. This is particularly so in income-tax matters and it is said there is nothing immoral about it. That does not, however, mean that the holes should not be tries to be plugged and if attempts are made in that direction to strike at the evasion of the tax, as far as it could be done, then it cannot be said that the law so made is violative of the fundamental rights, such as article 14 of the Constitution.

14. It may be that while making such a law it might affect a few innocent persons, but that is inevitable, and cannot be wholly avoided, but that is offset to a large extent by the beneficial results that flow therefrom to the public, namely, the prevention of evasion of income-tax. The meaning scope and effect of article 14, which is the equal protection clause of the Constitution, has been explained by the Supreme Court in a series of decisions and has been reiterated in Mohd. Quareshi v. State of Bihar. Their Lordships say that :

'It is now well established that while article 14 forbids class legislation it does not forbid reasonable classification for the purposes of legislation and that in order to pass the test of permissible classification two conditions must be fulfilled, namely, (i) the classification must be founded on an intelligible differential which distinguishes persons or things that are groped together from others left out of the group, and (ii) such differential must have a rational relation to the object sought to be achieved by the statue in question.'

15. Section 64 of the Income-tax Act, 1961, as in section 16 (3) of the 1922 Act, makes a reasonable classification between several person or groups and this group which is envisaged in section 64 is different from the group or groups which are left out of that group. Such a grouping of the minor's income with that of the parents has a definite object, namely, to prevent the evasion of tax. In a proportionately large number of cases the minor has no independent income and when the minors are admitted to the benefits of the partnership the investment is mostly that of the father or the mother. There may be a few cases and in comparison they are negligible, where the minor may have exclusive funds independently of the funds is still there. One such source of independent funds to the minors would be by way of succession under the Hindu Succession Act so far as Hindu families are concerned, but in such cases also there can also be a possibility of attempts to reduce the tax.

16. Taking all these factors into consideration if the minors of all the categories are grouped together so as to reduce the chances of evasion of tax to a minimum, it cannot be said that unlike or dissimilar persons have been grouped together and are treated alike. In the larger interests of the public it was necessary to group them together in order to achieve the object. It cannot be expected that for finding out the tax liability the authority should hold elaborate enquiries for finding out whether the funds alleged to be of the minors are part of the funds of their parents or their independent or exclusive funds and the source from which they derived them and the nature and extent of those funds. Such a requirement would not be in the general interest and is likely to defeat the very object of the Act.

17. In Balaji's case their Lordship of the Supreme Court have considered a similar question while testing the validity of section 16 (3) (a) (i) and (ii) of the Income-tax Act, 1922. The reasons would proprio vigore apply in testing the validity of section 64 (i) and (ii) of the Income-tax Act, 1961. Difference no doubt there is between section 16 (3) (a) (i) and (ii) and section 64 (i) and (ii) in some respects, but that difference is not either appreciable of fundamental so as to make the decision of the Supreme Court inapplicable to the present case. Under section 16 the income of the minor children was to be added to the total income of the father who was a partner, but not of the mother as per the decision of the Supreme Court in Commissioner of the Income-tax v. Sodra Devi. In section 64, the share of income of the minors can be added to the total income of the mother also in certain circumstance. That does not, in our opinion, make any difference in applying the principles.

18. It is urged that the Explanation to section 64 is vague and the minor is unable to know to whose income his income will be added, whether to the father's or to the mother's and he has always to be alert for that purpose. We do not think that the Explanation is vague as contended. We do not think that the Explanation is vague as contended. In the first place it is immaterial for the minors to know to whose total income his income is added because he will be only made liable for the tax on his income. In the second place, the Explanation makes a provision to whose income the income of the minor from partnership is to be added. It is to be added to the income of that parent whose income is large and once it is so added, it will continue to be added every year to the income of that parent unless in a particular year the Income-tax Officer sees reason to add it to the income of the other parent for which he has to give his reasons in writing. The question that the minor has to be alert does nor arise because the minor in fact has no voice, but it is the parents who look after the affairs of the minor children. We do not think that, therefore, the Explanation is either vague or arbitrary and invalid on that ground. Since the provisions of section 16 and section 64 of the respective Acts are almost similar without any substantial difference, in our opinion, the decision in Balaji's case is binding on us even with respect to the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961.

19. It is urged on behalf of the assessee that Balaji's case can no longer be considered to be a good law in view of the decision of the Supreme Court in what is known as the bank nationalisation case : Rustom Cawasji Cooper v. Union of India. We do not think that the authority of Balaji's case is shaken by the decision in the bank nationalisation case. It is urged on the authority of the bank nationalisation case that in order to find out the object of the Act the impact of it on any particular class of persons is to be seen and it is to be found out whether it is necessary to achieve that object and if it is so necessary, then alone it could be said that there is a nexus between the classification and the object sought to be achieved. Reference was made to paragraphs 56 to 60 of the said case.

20. We do not think that this decision bears out the contention of the learned counsel for the assessee.

21. It was further urged that the authority of Balaji's case is further impaired because of the prevalent circumstances and the social changes that have occurred since then as also the legislative changes. It is urged that the validity of section 16 (3)(a)(i) and (ii) of the old Act was upheld because it was dealing with only a father who had the full control over his wife and the minor children, taking into consideration the social and economic position of women in India at the time when the enactment was made. The Supreme Court in that case, while dealing with this question, observed as under :

'There is a greater scope for fraudulent evasion by constituting a fictitious partnership along with one's wife and minor children than in a case of separate income of the spouses derived from different sources. That apart, the present social and economic position of women in India as compared with their compeers in America, even as it existed in 1931, is so low that it would be inappropriate to apply the decision made in America to a similar case arising in India. A wife in India, particularly if she be illiterate - a large majority of them are illiterate - would ordinarily be in economic matters a tool in the hands of her husband. Many things are done in her name without her knowledge of the same. When the legislature of this country which is assumed to know the conditions of the spread fraudulent device in the matter of evasion of taxes, made a law to prevent the said fraud, it is difficult for this court, in the absence of any counter-balancing circumstances, to hold, on the analogy drawn from American decisions, that the need for such a law is not in existence.'

22. It is urged that these observations which may be very weighty with respect to the provisions of section 16 (3) (a) of the 1922 Act would not still hold good at the time when section 64 has been enacted. It is urged that since the date of the prior enactment there has been a great social and economic upheaval and the status of women in India has considerably on or tools in the hands of their husbands. It is urged that women have become very much enlightened than they were before and, as such, these considerations which prevailed with their Lordships in dealing with section 16 (3) (a) would not be available while dealing with the provisions of section 64 (i) and (ii). Whatever may be said about the women, we do not see any change between then and now so far as the minors are concerned. We are dealing with the case of the minor's income being clubbed with that of the father of the mother. We do not, therefore, see how the decision in Balaji's case cases to be an authority for upholding the validity of section 64 (i) and (ii) of the Income-tax Act, 1961, which, as we said earlier, is not much different from section 16 (3) (a) (i) and (ii) of the 1922 Act. In fact, on the argument advanced on behalf of the assessee, if the women in India have become more advanced than before then the legislature was justified in adding the income of the minor children to the income of their mothers also. We have, however, no material before us to take a different view.

23. It is also urged the Hindu Succession Act has now made a change in the status of the minor children and both males and females of succession get absolute ownership to the property, as in the present case the wife and the sons and daughters of a Hindu succeed to his property on his death and get shares in accordance with the provisions of section 8 of the Hindu Succession Act and become absolute owners of the property which they inherited. It is, therefore, said that in a partnership where a Hindu was a partner, his widow and his children become partners in their own rights and the investment of the children is independent of their mother's property, which was not the case before the passing of the Hindu Succession Act. This also is said to be a factor which would make the decision in Balaji's case inapplicable. We do not think that the Hindu Succession Act makes any difference in the view taken in Balaji's case. Even before the Hindu Succession Act it was possible for the male member of the Hindu family to effect a partition genuinely or fraudulently and to give absolute ownership over that property even to the female members. It was also open then to transfer of make gifts or bequest or sale any property to the wife or any female member in absolute ownership and then form a partnership with those members. Even those cases were covered by section 16 (3) (a) (i) and (ii) of the old Act. Merely because absolute ownerships are now given to the female owners on account of the Hindu Succession Act or because the wife and children get shares in succession, there is no difference in the situation and the decision does not become inapplicable on that ground. In our view, the decision in Balaji's case cannot be side tracked as urged on behalf of the petitioners. The decision in Balaji's case is an authority on all the three grounds raised on behalf of the petitioners for challenging the constitutional validity of section 16 (3) (a) (i) and (ii) of the 1922 Act which would also be an authority for the same purpose with respect to section 64 (i) and (ii) of the 1961 Act. We are also of the view that apart from the decision in Balaji's case the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961, are constitutionally valid as it is within the legislative competence of the central legislature and does not infringe any of the fundamental rights guaranteed under article 14 and article 19(1) (f) and (g) of the Constitution as discussed by us above. We also do not think that Balaji's case can be distinguished as urged on behalf of the assessee. The assessments in the two petitions for the assessment year 1962-63 and the notices of demand dated February 13, 1967, have been challenged by the petitioners only on these grounds. Since we upheld the constitutional validity of the provisions of section 64 (i) and (ii) of the Income-tax Act, 1961, the assessment and the notices of demand are not liable to be quashed as urged on behalf of the petitioners in the two petitions.

24. Accordingly, we dismiss both the Special Civil Applications Nos. 277 and 278 of 1967 with costs. There will, however, be only one set of counsel's fee as common arguments were advanced in the two cases.

25. Applications dismissed.


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