(1) This is a petition under Art. 226 of the Constitution of India for issuance of a Writ in the nature of certiorari or other appropriate writ, order or direction for quashing and setting aside the notice issued under sub-section (2) of Section 13 of the Expenditure Tax Act, 1957 (Act 29 of 1957) (hereinafter referred to as the Act) by the 1st respondent. The petitioners further pray for issuance of an appropriate writ, order or direction restraining the respondents, their officers, servants and agents from taking any further step or proceedings under the Act against the petitioners in respect of the expenditure incurred by the late Maharaja of Morvi. The three petitioners before us are the Executors appointed by the late Maharaja in his. Will of 31st October 1953 and a codicil dated 9th February 1956. The Will had been probated by the petitioners on 28th August 1958. After the filing of this petition the second petitioner died and Mr. Palkhiwala, counsel for the petitioners, requested that his name be removed. No objection to it has been raised by counsel for the respondents. We, therefore, direct that the name of the 2nd petitioner be removed.
(2) The first respondent to this petition is mentioned as S. Narayanan, 1st Expenditure-tax Officer, D. I. Ward, having his office at Aayakar Building, Queens Road, Bombay 1. It has been stated before us that Mr. S. Narayanan is not now the Expenditure Tax Officer but Mr. G. N. Sharma is the 1st Expenditure Tax Officer. The name of Shri G. N. Sharma shall therefore be substituted in place of Shri S. Narayanan.
(3) The second respondent is the Union of India. Mr. Palkhiwala, at the commencement of the arguments, stated that though in the petition relief has been claimed against the 2nd respondent, the petitioners do not now seek any relief against the second respondent but prayers made are restricted only as against the 1st respondent. The following facts give rise to this petition:
(4) The late Maharaja of Morvi died testate on 17th August 1957. The three original petitioners were appointed by him in his will as the Executors of his estate. The probate of the will and the codicil were granted to them by this Court on 28th August 1958. On 17th September 1957 the President granted assent to the Expenditure Tax Act (Act 29 of 1957) enacted by the Parliament of India. By virtue of sub-section (3) of Section 1, the Act came into force on the 1st day of April 1958. The Act provides for levy of tax on expenditure. We will advert to the relevant provisions of the Act later. Suffice it to say at this stage that the Act imposes on individuals and Hindu undivided family for every financial year commencing on and from 1st April 1958 expenditure tax at the rate specified in the Schedule in respect of the expenditure incurred by him or by it in the respective previous years. In shot the effect of coming into force of this Act is that an individual or a Hindu undivided family is rendered liable to pay expenditure tax in respect of his or its expenditure incurred in the previous year, i.e the financial year 1957-58 and subsequent years. Section 13 relates to return of expenditure Sub-section (2) of Section 13 provides:
'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 person for the previous year mentioned in the notice.'
Purporting to act under this provision of sub-s (2) of Section 13 the 1st Expenditure Tax Officer Mr. S. Narauyanan, handed over a notice to the petitioner's attorneys who had appeared before him in connection with the income-tax assessment of the deceased. The notice required the Executors of the late Maharaja of Morvi to furnish the expenditure-tax return relating to the expenditure incurred by the late Maharaja during the financial year 1957-58, i.e., the expenditure incurred by him from 1st April 1957 to the date of his death, 17th August 1957. On receiving the said notice the petitioners contended that the Act did not apply to the late Maharaja inasmuch as he had died prior to the date on which the Act came into force. Correspondence in this matter ensued between the petitioners and the Central Board of Revenue. The contentions raised by the petitioners have, however, not been accepted by the Department view letter dated 19th November 1959 addressed by the Deputy Secretary to the Government of India to the attorneys of the petitioners. The petitioners, therefore, have moved this Court by this petition seeking the aforesaid reliefs.
(5) Mr. Palkhiwala contends that the notice issued by the 1st Expenditure Tax Officer under sub-section (2) of Section 13 of the Act is without jurisdiction inasmuch as the Act has no application to the case of the petitioner. The Act is prospective in operation, i.e., it affects the persons, who were in existence at the time the Act came into force. The late Maharaja of Morvi had died prior to the date the Act came into force and, therefore the expenditure incurred by him during the financial year 1957-58 is not assessable to tax under the Act. He also referred us to a decision - Commissioner, of Income-tax,. Bombay v. D. N. Mehta reported in : 3ITR147(Bom) .
(6) Mr. Joshi, on the other hand, contends that on a true construction of S. 3 and s. 18 of the Act the tax has been imposed in respect of the expenditure incurred in the previous year to the assessment year 1958-59 and expenditure incurred in all subsequent years, the person who has incurred the expenditure is liable to pay the tax under Section 3. If he is not alive at the time of assessment, then under Section 18 his Executors, Administrator or other legal representative are liable to pay the expenditure tax out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge. According to him, the question, which we have here to consider did not fall for consideration in the case : 3ITR147(Bom) and that decision, therefore, has no application. He also referred us to the decisions reported in Commr. Of Income-tax v. Mr. Elis V. Reid : AIR1931Bom333 and Union of India v. Madan Gopal Kabra : 25ITR58(SC) .
(7) We find it difficult to accept the contention of Mr. Joshi. It is well-settled principle of law that the moment any law comes into operation every person, who is amenable to that law, is affected by it. But then, here we have been asked to hold that a person, who was not even in existence at the time the Act came into operation, is amenable to the law and his estate is liable to pay the expenditure-tax. In the absence of any express provision in the Act or clear legislative intendment to that effect evidenced in the Act, it would be an unwarranted departure from the normal rule of construction of a Statute.
(8) Mr. Joshi brought to our notice the provisions of clauses (c), (d), (h) and (n) of Section 2, Secs. 3 and 18 of the Act and it is his contention that the combined effect of reading all these sections together is that a person, who was not in existence on the date the Act came into force, but who had incurred expenditure in the previous year relevant to the assessment year is chargeable to tax. Clauses (c), (d), (h) and (n) are clauses of a defining section. Clause (c) defines 'assessee' to mean an individual or a Hindu undivided family by whom expenditure-tax or any other sum of money is payable under this Act, and includes every individual or Hindu undivided family against whom any proceeding under this Act has been taken for the assessment of his expenditure. Clause (d) defines 'assessment year' as the year for which tax is chargeable under Section 3. Clause (h) defines 'expenditure' to mean any sum in money or money's worth spent or disbursed or for the spending or disbursing of which a liability has been incurred by an assessee, and includes any amount which under the provisions of this Act is required to be included in the taxable expenditure. Clause (n) defines 'previous year' and for the relevant period as the definition stood, in relation to any assessment year, means the previous year as defined in clause (11) of section 2 of the Income-tax Act is an assessment were to be made under the said Act for that year. These defining clauses are hardly of any assistance in the matter of deciding the question, which we have to decide. Sub-section (1) of Section 3 is a charging section and it reads:
'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.'
The other provisions of Section 3 are not relevant. Section 18(1) is in the following terms:
18. Taxes of deceased persons payable by legal representative-
(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 in 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 other legal representative as they apply to any person referred to in those sections.'
It is the argument of Mr. Joshi that when these provisions of the two sections are read together, it is clear that the charge imposed by Section 3 is in respect of the expenditure incurred in the relevant previous year of the assessment year 1958-59 and the subsequent years. The person, who incurs the expenditure is, therefore, liable to pay this tax. If the person is alive at the time of the assessment and quantification of the tax, then the tax is levied on him by the procedure prescribed in Sections 13, 14 and 15 of the Act. If, however, he is not alive at the time of the assessment or quantification of the tax, then sub-section (1) of Section 18 empowers the Expenditure Tax authorities to proceed against the executor, administrator or other legal representative and assess the expenditure-tax by following the same procedure prescribed in Section 13, 14 and 15. It is emphasised by Mr. Joshi that sub-section (3) of Section 18 clearly brings out this position.
(9) It is difficult, in our opinion, to sustain the argument of Mr. Joshi on the terms of sub-section (1) of S. 3 and sub-section (1) of Section 18. It is true that the charge under the Act is also in respect of the expenditure incurred in the relevant previous years of the assessment year 1958-59 and to that extent that Act is retrospective in operation. But the charge is not on the estate of any individual or of Hindu undivided family. It is on an individual or on a Hindu undivided family incurring that expenditure and it is for the first time imposed on 1st April 1958. The word 'individual' has not been defined in the Act. In sub-section (1) of the Section 3, it is used in conjunction with 'a Hindu undivided family'. It would, therefore, be reasonable to assume that it means only a human being. Dealing with the word 'individual', the Supreme Court in Commr. Of Income-tax, M. P. And Bhopal v. Sm. Sodra Devi, (S) : 32ITR615(SC) observed:
' . . . . . . 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 Corporation created by a Statute e.g., a University or a Bar Council, or the trustees of a baronetcy trust incorporated by a Baronetcy Act. It would also include a minor or a person of unsound mind. .. . . .'
Even assuming the meaning of the word 'individual' in this wider connotation, it is not possible to include in the word 'individual' a dead human being or non-existing group of persons or corporations. If the Legislature had so intended to impose levy of this tax on individual who were not alive or were not existing at the time of the Act was brought into force, the Legislature could easily have said so. To accept the argument of Mr. Joshi, we will have to read the concluding part of sub-section (1) of Section 3 as reading 'in respect of expenditure incurred by any individual alive or dead, existing or non-existing, or Hindu undivided family in the previous year' In other words we will have to read in sub-section (1) of section 3 the words 'alive or dead, existing or non-existing' after the word 'individual'. That would, in our opinion, amount to re-writing the section which is not open to this Court. The late Raja of Morvi was dead some time before the Act came into force. He could not, therefore, be affected by the provisions of the Act and, consequently, he incurred no liability to pay tax on the expenditure incurred by him during the period 1st April 1957 to 17th August 1957.
(10) It has next to be seen whether sub-section (1) of Section 18 fastens any liability to pay the tax on the assesee. Section 18 relates to tax of deceased person payable by legal representative. We have already said that section 3(I) has not the effect of fastening any liability on the late Raja of Morvi to pay the tax. Even apart from it, the liability of the executor, administrator or other legal representative arises under section 18 (I) when a person liable to pay tax dies. The question that arises is whether to attract the section death of a person by whom the tax is payable, has to occur after the Act has come into force or whether it is attracted even if it had occurred before the Act came into force. It is well-settled principle of construction of statute that it is prospective in operation and not retrospective in operation unless there is an express provision to that effect of a necessary intendment to that effect clearly appears on the Statute. Again, in our opinion, if Mr. Joshi's argument is to be accepted we will have to read in sub-section (1) of Section 18 words 'whether before or after the Act has come into force' after the expression 'where a person dies'. As already stated, that would amount to re-writing the section , which is not open to this Court.
(11) The decision reported in : 3ITR147(Bom) relates to the construction of Section 24-B of the Indian Income-tax Act. In our opinion, by virtue of the analogy in the language of section 24 (b) (1) of the Income-tax Act and that of section 18(1) of the Act in material respects the ratio of the said decision would be of assistance in construing sub-section (1) of section 18. It would, however, be convenient, before we proceed to deal with this case, to refer to the decision in ILR 55 Bom 312: : AIR1931Bom333 , to which Mr. Joshi has invited our attention to bring to our notice the infirmity in the Indian Income-tax Act that led to the introduction of Section 24-B into the Income-tax Act. In that case a notice had been served on the assessee under Section 22(2) of the Income-tax Act requiring him to make a return of his income of the previous year. He, however, died before he made a return. The Income-tax Officer proceeded and made an assessment against the deceased person under Section 23(4) of the Act and the question arose before this Court about the validity of that assessment. It was held by this Court that no assessment could be made against the person who was dead, because there was no provision in the Indian Income-tax Act as it stood then, to do so. At page 318 of the report the learned Chief Justice, after considering the various provisions of the Act, observed:
'It is to be noticed that there is throughout the Act no reference to the decease of a person on whom the tax has been originally charged, and it is very difficult to support the omission to have been unintentional. It must have been present in the mind of the Legislature that whatever privileges the payment of income-tax may confer, the privilege of immortality is not amongst them. Every person liable to pay tax must necessarily die and, in practically every case, before the last instalment has been collected, and the Legislature has not been chosen to make any provisions expressly dealing with assessment of, or recovering payment from the estate of a deceased person.'
To remedy the defect pointed out in that case, Section 24-B has been enacted and introduced into the Income-tax Act on 11th September 1933.
(12) In the case reported in : 3ITR147(Bom) , the assessment year was 1932-33: relevant account year being 1931-32. A notice was served on the original assessee on 20th April 1932 under section 22(2) of the Income-tax Act. On 6th May 1932 she died. After section 24-B had been introduced in the Income-tax act, proceedings thereunder were, started against the legal representative of the deceased-assessee. Sub-section (1) of section 18 of the Expenditure Tax Act and sub-section (I) of section 24-B of the Income-tax Act are as already stated in identical terms except that in Section 24-B the word 'tax' is used while in the sub-section (1) of Section 18, the words 'expenditure tax' are used. Turning back to the decision in this case : 3ITR147(Bom) the legal representatives of the assessee, inter alia, contended that no proceedings could be taken against them because Section 24-B had no application to them inasmuch as the assessee had died prior to the date Section 24-B was brought on the Statute Book. This Court upheld the contention of the legal representatives of the deceased assessee. The learned Chief Justice at page 148 of the report ITR: (at p. 168 of AIR) observed:
'It is, I think, correct to say that section 3 of the principal Act charges the tax upon everyone 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 to 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 Act, 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'.'
We see no reason why these observations of the learned Chief Justice in construing the expression 'where a person dies' would have no application to the construction of the same expression occurring in sub-section (1) of Section 18 of the Act. It is true that Section 24-B has been introduced in the Statute Book at a later stage and not when the Act itself was enacted. In the instant case section 18 has been incorporated in the Act right from its commencement. On the basis of this difference, Mr. Joshi's argument is that the liability of the executor, administrator or other legal representative to pay the expenditure-tax out of the estate is retroactive and, therefore, the executor, administrator or legal representative is liable to pay tax even if the person, who had incurred the expenditure in the relevant previous year had died before the Act came into force. We are unable to agree that that is the result that follows on the terms of Section 18(1). On the other hand it would not be unreasonable to assume that the Legislature was well aware of the construction put on the clause 'where a person dies' occurring in the section 24-B of the Income-tax Act and that it means where the person dies after the Act has come into operation. If the Legislature was desirous of making the provisions of Section 18(1) applicable to the cases of persons, who were dead before the Act came into operation, then the Legislature would have said so expressly. Nonetheless the Legislature has chosen to use the same expression in enacting sub-section (1) of Section 18. It would, therefore, not be unreasonable to assume that the intention of the Legislature is to make the provisions of this Section prospective in operation that is, governing the cases of person who die after the Act came into operation.
(13) The other decision to which Mr. Joshi drew our attention : 25ITR58(SC) has, in our opinion, hardly any relevance to the question which we have to consider. In that case the assessee was a resident and carried on business in the former Jodhpur State. Jodhpur was then included in Rajasthan, which was specified as a Part B State in the First Schedule to the Constitution of India 1950, which came into force on 26th January 1950. Thereafter the Indian Finance Act of 1950 amended the Indian Income-tax Act in certain respects and made it applicable to the whole of India except the State of Jammu and Kashmir. In May 1950 the respondent was required to file a return of his income for the year ending 31st March 1950. He was later asked to produce his account books. The assessee thereupon filed a petition under Article 226 of the Constitution challenging this action on the ground that his income was not liable to be charged to tax under the provisions of any law validly in force in Rajasthan during the period he earned that income. The contention of the assessee was accepted by the High Court. On appeal to the Supreme Court, the decision of the High Court was reversed. The Supreme Court held that it was competent for the Parliament to authorise levy of tax on income accruing in the territory of Rajasthan in the year 1949-50. It is to be noticed that the assesse, whose income was being brought to tax, was alive on the date the Indian Finance Act of 1950 was enacted. The question, which we have to consider, was not, therefore, the subject-matter of that decision.
(14) Mr. Joshi read to us the following observations of their Lordships at p. 70 (of ITR) ; (at p. 163 of AIR) of the report:
'Nor can it be said, in strictness that the Finance Act, 1950, is retroactive legislation. That Act, as already noticed, purports by Section 2 to charge income-tax and super-tax at specified rates for the year beginning on the 1st day of April 1950. The case is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian Income-tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retrospective legislation, though its operation may affect acts done in the past.'
On the basis of these observations Mr. Joshi argued that this exactly is the position under the Act. The expenditure incurred in the previous year has been brought to tax and in doing so, the Act is not retrospective in operation.
(15) We have not here held that it was not open to the Legislature to bring to tax the expenditure incurred by any individual in the year 1957-58 on the ground that the Act was brought into operation after the completion of that year. The fact that that expenditure has been brought to tax is not sufficient to answer the question as regards the persons, who are liable to pay the tax in respect of the expenditure incurred. We have already stated that the imposition of tax is on a individual or Hindu undivided family. In absence of any provisions and, as already discussed, in our opinion, there is none, it cannot be said that the tax has been imposed on individuals, who were not alive or were not in existence at the time the Act came into operation.
(16) For reasons stated above, in our opinion, the action of the first Expenditure Tax Officer, 1st respondent hereto, in issuing a notice under sub-section (2) of Section 13 of the Act was without jurisdiction and, therefore, void in law. The notice issued by him is, therefore, liable to be quashed.
(17) In the result we set aside the said notice and further direct the 1st respondent not to take any steps or proceedings under the Act against the petitioners in respect of the expenditure incurred by the late Maharaja of Morvi during the period 1st April 1957 to 17th August 1957. The rule is accordingly made absolute against the 1st respondent to the extent stated above. The 1st respondent shall pay the costs of the petitioners.
(18) The rule against the second respondent is discharged. In the circumstances of the case, we do not consider it necessary to make any order as to costs of 2nd respondent.
(19) Order accordingly.