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P.F. Pinto Vs. Commissioner of Wealth-tax, Mysore - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberTax Referred Case No. 2 of 1966
Reported in[1967]65ITR123(KAR); [1967]65ITR123(Karn)
ActsHindu law; Wealth Tax Act, 1957 - Sections 3, 4, 4(1), 5(1) and 27
AppellantP.F. Pinto
RespondentCommissioner of Wealth-tax, Mysore
Appellant AdvocateT. Krishna Rao, Adv.
Respondent AdvocateR.S. Mahendra and ;S.R. Rajasekhara Murthy, Advs.
- constitution of india articles 226 & 227; [s. abdul nazeer, j] writ jurisdiction discretionary power decision making process judicial review held, if the decision is vitiated by mala fides, unreasonableness and arbitrariness, the court must exercise its discretionary power under article 226 of the constitution of india. the said power under article 226 shall be exercised with the great caution and also in furtherance of public interest and not merely on the making out of a legal point. on facts, held, it is clear from the undisputed facts that the leasing of the factory on lease, rehabilitated, operate and transfer scheme is in the interest of the farmers, workers and employees, financial institutions and the state government and also in the public interest. the state.....narayana pai, j. 1. this is a reference under section 27 of the wealth-tax act made by the income-tax appellate tribunal, madras bench, at the instance of the assessee, p. f. pinto. it relates to or arises out of his assessment to wealth-tax for the very first assessment year 1957-58 after the coming into force of the act. the relevant valuation date is march 31, 1957. 2. in his return of his wealth for purpose of taxation, the assessee claimed the status of a hindu undivided family and signed the return in his capacity as karta of the said family. prior to the coming into force of the wealth-tax act, it appears that the assessee was being assessed as an individual under the indian income-tax act. the original assessing authority, the wealth-tax officer, mysore, rejected his claimed. an.....

Narayana Pai, J.

1. This is a reference under section 27 of the Wealth-tax Act made by the Income-tax Appellate Tribunal, Madras Bench, at the instance of the assessee, P. F. Pinto. It relates to or arises out of his assessment to wealth-tax for the very first assessment year 1957-58 after the coming into force of the Act. The relevant valuation date is March 31, 1957.

2. In his return of his wealth for purpose of taxation, the assessee claimed the status of a Hindu undivided family and signed the return in his capacity as karta of the said family. Prior to the coming into force of the Wealth-tax Act, it appears that the assessee was being assessed as an individual under the Indian Income-tax Act. The original assessing authority, the Wealth-tax Officer, Mysore, rejected his claimed. An appeal by him to the Income-tax Appellate Tribunal failed. Thereafter, at his instance, the Tribunal has referred the following question for the opinion of this court :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was not entitled to be assessed in the status of a Hindu undivided family ?'

3. The facts and circumstance of the case, in which, or the basic of which, the above controversy between the assessee and the department arose, where briefly these :

4. The assessee is an Indian Christian professing the Roman Catholic faith. His ancestor were originally Hindus and later converted to Christianity. They are described as Konkani-speaking Roman Catholics. The ancestor of the assessee were at one time residents of South Kanara. It appears that the assessee's grandfather's grandfather migrated to Cough and settled down their. On the information available, the first or almost the first person to acquire property in Coors appears to have been the assessee's paternal grandfather called Salvador. He acquired certain property and developed it as a coffee estate. He left behind him three daughters and two sons - Mathias and Xavier. Xavier died unmarried and without leaving any issue. The assessee, Pinto, is the son of Mathias.

5. During the lifetime of Mathias, some time after the death of Salvador, one of the daughters of appears to have laid claim to a share in the property left by Salvador. That claim was resisted by Mathias on the plea that this family was governed, not by the provision of the Indian Succession Act, but by the Hindu law which their ancestors were following before their conversion to Christianity. The dispute, however, did not result in any decision by court but was settled by mean of a compromise by which some property was made over to the sister.

6. In 1950, a daughter of one of the daughters of Salvador filed Suit No. 327 of 1950 before the Subordinate Judge's Court, Mangalore, against the assessee claiming a share in the property left by Salvador. Some other members of the family were also parties to the suit. The claim by the plaintiff was once again on the strength of the provisions of the Indian Succession Act; the plea of the principal contesting defendant, the present assessee, was the same as before, viz., that the Indian succession Act did not apply to this family but that they were governed by the provision of Hindu law. The plea was upheld by the subordinate judge.

7. It is on the strength of the said decision that the assessee appears to have claimed the status of a Hindu undivided family for purposes of assessment under the Wealth-tax Act.

8. The assessing authority, the Wealth-tax Officer, in rejecting the assessee's claim, stated his reasons very briefly as follows :

'The assessee is a Christian who is governed by his personal law of Christianity. Therefore, he cannot become a Hindu undivided family merely by the fact that for settling in Coors, he is governed by the Hindu customs of law. A person is always governed by the personal law and, as the assessee is a Christian, there is no question of applying any Hindu law'.

9. The discussion of the matter was a little more detailed in the order of the Appellate Assistant Commissioner. He expressed the view that a Hindu undivided family is an institution peculiar to Hindu society and that, although it may so happen in South India by force of custom that the Hindu law of succession is appealed to certain persons, they do not or an not thereby constitute themselves into a Hindu undivided family under the Mitakshara law.

10. By the time the Income-tax Appellate Tribunal came to hear the assessee's second appeal, an appeal presented by the plaintiff in the above mentioned Original Suit No. 327 of 1950 to this court, viz., Regular Appeal No. 91 of 1957, had been decided by this court. By its judgment in that appeal pronounced on 13th July, 1964, this court confirmed the view taken by the sub ordinates judge. The reason why it was claimed by the assessee that the Indian Succession Act did not apply was that by virtue of a notification made by the Governor-General in council under section 332 of the Succession Act of 1865, all native Christians in the Province of Coors were exempted from the provision of the said Act retrospectively from the date of the commencement of the Act itself; rejecting various arguments stated against the applicability or availability of the said notification, this court held that the parties to the litigation, the descendants of Salvador mentioned above, clearly came within the expression 'native Christians in the Province of Coors' and that, therefore, at no point of time were they governed by the Indian Succession Act of 1865. The position continues to be the same under the Secession Act of 1925 - vide section 3(3) of the said Act. Consequently, this court accept the defendants (present assessee's) contention that the parties were governed by the Hindu law so far as succession to property was concerned.

11. Referring to the said decision of this court, the Income-tax Appellate Tribunal took the view that the rule or rules of Hindu law which applied to the parties were only the rules relations to what they call succession to property, but that neither by reason of any legal inference flowing from the decision of this court nor upon any other fact placed before the assessing authorities could it be said that Salvador or his descendants or his family were governed by what the Tribunal calls the Hindu Joint family Law.

12. In essence, what the assessee question or challenges is the correctness of the statement of the legal position made by the Tribunal as summarized above. The contention on his behalf is that, once it was held that the Indian Succession Act was at no point of time applicable to or deemed to have been applied to Salvador or his family or his descendant and once this court un helped the contention that they continued to be governed by the Hindu law relating to right in respect of, or power over, the property, the inevitable conclusion is that the male descendants of Salvador did constitute them selves into an undivided family holding property government by the principles of Hindu law applicable to Mitakshara coparcenary.

13. In support of this position, reliance is placed principally on the famous case of Abraham v. Abraham, decided by the Judicial Committee of the Privy Council in England, and on a decision of Bench of the Madras High Court in Tellis v. Saldanha.

14. The passages from the judgment of the Privy council, of-quoted and depended upon, are at pages 241-42 and 243 of the report. They are :

'..... upon the conversion of Hindu to Christianity, the Hindoo law ceases to have any continuing obligatory force upon the convert. He may renounce the old law by which he was bound, as he has renounced his old religion, or, if he thinks if the may aside by the old law notwithstanding he has renounced his old religion.... The profession of Christianity releases the convert from the trammels of the Hindu law, but it does not of necessity involves any change of the rights or relations of the convert in matters with which Christianity has no concern, such as his rights and interests in, and his powers over, property. The convert, though not bound as to such matters, either by the Hindu law or by any other positive law, may by his course of conduct after his conversion his shown by what law he intended to be governed as to these matters.'

15. The position so stated is that so far as the rights in property are concerned with which the Christian religion has no concern, it was open to converts to retain the Hindu law relies relating to rights and powers in respect of property or to renounce them. In this case, according to the argument, the clear decision of this court is that the familiar counties to be governed by the Hindu law which applied to them before their conversion and their is no case or proof of any abandonment or renunciation of that law at any time after the conversion, right down to the day of litigation which terminated in R. A. No. 91 of 1957 on the file of this court.

16. In Tellis v. Saldanha, the litigation was between one brother and the wide and daughter of another brother brother as to right in respect of property held by both the brothers together. They were, like the present assessee, Roman Catholic Christians, residents of the District of South Kanara. The High Court held that till the passing of the Indian Success act of 1865, the parties were governed so far as their properties were concerned by the rules of Hindu law, that the two brothers, therefore, had held the properties as members of a joint Hindu family but that on the coming into force of the Indian Succession Act, the applicability of the Hindu law relies based upon the doctrine of right by birth and devolution by survivorship ceased. But what is clearly held in that decision is that, but for the passing of the Indian Succession Act, which changed the law so far as the Indian Christians were concerned, the Konkani-speaking Roman Catholic Christians who were originally Hindus, would have continued to be governed by the Hindu law of property inclusive of the doctrine of right by birth applicable to enjoyment and devolution of coparcenary property.

17. On a similar question which came before the Bombay High court in Francs Ghosal v. Gabri Ghosal, the Bombay High Court went further and held that even after the coming into force of the Succession act, the provision there of would apply only to property which was heritable in the ordinary sense of the term but not to property which, by reason of the application of the Hindu law rules, could devote by survivorship. It is, however, not necessary to go so far for our present purpose. It is enough to note that, according to both the High Court, the rules of Hindu law retained by the Indian Christians on the principles stated by the Privy Council in Abraham v. Abraham, include the rules peculiarly applicable to Mitakshara coparcenary such as the doctrine of right by birth and devolution by survivorship.

18. It has, however, been argued on behalf of the department that the retention of the rules of Hindu law need not necessarily be so extensive as that and that it is possible both on principle and on authority to hold that only the rules relating to what may be strictly described as succession or inheritance were retained but that the peculiar doctrine of right by birth and devaluation by survivorship applicable to coparcenary property need not have been retained.

19. In support of the said proposition reliance was particularly placed on a passage occurring in the judgment of the Privy Council in Abraham v. Abraham and on the view taken by some of the later decisions of the Bombay High Court in regard to catch Memons and Kojas. The passage relied upon occurs at pages 244 and 245 of 9 Moore's Indian Appeals and reads as follows :

'Their Lordship collect from the evidence that the class known in Indian as 'native Christians', using the term in its wide and extended sense as embracing all native converted to Christianity, has subordinate divisions forming again distinct classes, of which some adhere to the Hindu customs and usage as to property; other retain those customs and usages in a modified form; and other again have wholly abandoned those customs and usage, and adopted different rules and law as to their property'.

20. The difference between one sub class and other referred to by their Lordships in this passage no doubt supports the view the rules of Hindu law might have been in some cases retained with modifications but not in their entirely. But there same passage supports the view that there were some sub-classes which had remained or adhered to Hindu customs and usages as to property. The decision of Tellis v. Saldanha mentioned above is sufficient to established that the class of Christians to which the present assessee and his ancestors belong was a class which had continued to adhere to the entire set of rules of Hindu law relating to property, that is to say, both the rules as to success and also the rules based on the doctrine of right by birth and devaluation by survivorship applicable to coparcenary or joint family property.

21. The decisions of the Bombay High Court relating to Cutchi Memons and Khojas will not, therefore be of any assistance in this case to depart from the clear legal position applicable to the class of Roman Catholics to which The parties, with whom we are concerned, being. Those cases are cited not so much as rulings having a direct bearing on the question now before us, but as ruling having supporting the arguments on principle that there is a possibility of only the rules as to succession having been retained without the possibilities of the rules relating to coparcenary property also having been retained. Those cases are discussed in detail in decision of Kumaraswamy Sastri J. in S. Hajee Aboo Bucker Sait v. E. Hajee Aboo Bucker Sait. In the said decision, after discussing all the leading cases of the Bombay High Court bearing on the question, his Lordship express the view that it is neither logical nor probable that distinction of the type made by the Bombay decision had in fact been made even by Cutchi Memons and Khojas. Indeed, so far as the Hindu law of Mitakshara School is concerned, the use of such words as 'succession' or 'inheritance' may be inaccurate. The idea of devaluation of property and the transference of rights there, which are peculiar to Mitakshara law, are quite different from the pure Roman law theory of inheritance or succession. The only words which accurately express the idea are those used by Mitakshara itself, viz., daya and dayavibhaga, the former of which is further divided into two categories of apratibandha day and sapratibandha daya, which John D. Mayne, the learned author of the Treatise on Hindu Law, transacted as unobstructed heritage and obstructed heritage. The former occurs in cases where the son or grandson of the holder acquire a right by birth in his father's or grandfather's property; the latter occurs in cases generally of collateral succession. We have, in another judgment recently pronounced in T. R. C. No. 3 of 1966, pointed out that in the original theory of Mitakshara, the doctrine of right by birth is not limited to kramagatha property only but also to father's self-acquired property subject to the doctrine of pitru prasada. Even in regard to cases of what may be regarded as pure self-acquire property, the principle of Hindu law is clear that when sons succeed to self-acquired property of their sons and will together hold it as joint family property of themselves and their sons. Hence even if one should hold in this case, or it is possible to hold in this own self acquired properties or that even in the case of Mathias, in addition to properties inherited from Salvador, he had his own self acquisitions, there can be no doubt whatever that in the hands of the present assessee both those categories of property would be impressed with the character of ancestral property subject to right by birth of his sons and, therefore, joint family property of himself and his sons.

22. Nevertheless, the question is whether the expression 'Hindu undivided family' occurring in the charging section 3 of the Wealth-tax Act refers only to undivided families of persons who are Hindus by religion or also takes in other families like those of the parties now before who, though they have ceased to profess Hindu religion, continue to be governed by the Hindu law applicable to property.

23. Section 3 reads as follows :

'3. Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter 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.'

24. The word 'company' has since become in operative, because of a provision of the Finance Act of 1960, which exempted companies from liability to wealth-tax.

25. The question so raised is one of interpretation. There are some cases in which it an argument that the charging section of the Wealth-tax Act, to the extent it impose a liability on Hindu undivided families, is violative of the fundamental rights guaranteed under articles 14 of the Constitute. As the bulk of the discussion in those decisions relates to the question under articles 14, they are not of much assistance cousin this case. The cases referred to are : Mammad Keyi v. Wealth-tax Officer, Rajah Sir Mother Chettiar v. Wealth-tax Officer, Vysyaraju Badri Narayanamurthy v. Commissioner of Wealth-tax, Sarjerao Appasaheb Shitole v. Wealth-tax Officer, and Mammad Keyi v. Wealth-tax Officer.

26. We shall presently make a more detailed reference to the decision of this court mentioned above. So far as the other cases are concerned, it will be enough to say that it was either a matter of decision by courts or concession at the Bar that the expression 'Hindu undivided family' in sections 3 of the Wealth-tax Act referred only to undivided families of persons professing Hindu religion or to families of persons professing Hindu religions and governed by the Hindu Mitakshara law. This view necessarily raised the further question whether the term 'individual' occurring in section 3 of the act means only a single human being or a group or association of individual including undivided families which form one class have been subjected to discriminate treatment by giving a certain larger benefit limited to Hindu undivided families while depriving other undivided families of that benefit.

27. We are not concerned in this case with the questions relating it article 14 of the constitution but only with the question of interpretation.

28. We think that the interpretation above suggested, viz., the expression 'Hindu undivided family is limited to Mitakshara families or families of persons professing Hindu religion governed by Mitakshara families or families of person professing Hindu religion governed by Mitakshara law, is the correct view to take not only for the reason that the same view was taken in the decision of this court referred to above but also upon principle.

29. In the ordinary circumstances and in view of the legislative history, particularly, with reference to taxing states like the Indian Income-tax Act, there would never have been any doubt that the expression 'Hindu undivided family' is limited to Mitakshara Hindu families. The whole discussion on the lines mentioned above arose by reason of and in connection with the interpretation of Entry No. 86 of the First List of the Seventh Schedule to the Constitution which is the source of power of parliament to legislate on the topic of wealth-tax. That entry No. 86 reads :

'Taxes on the capital value of the assets, exclusive of agricultural land of individuals and companies; taxes on the capital of companies.'

30. The argument pressed before the courts was that the competence of parliament to make a law imposing wealth-tax was limited to such imposition against companies and individuals and not the power to impose wealth tax on Hindu undivided families. The answer made was that the expression 'Hindu undivided family' must be taken to be comprehended within the meaning of the word 'individuals' occurring in the entry mentioned above. That answer was ultimately accepted as correct by the supreme Court in Banarsi Dass v. Wealth-tax Officer. In accepting the position that the expression 'individuals' occurring in Entry No. 86 must be taken to comprehend 'Hindu undivided families' also, their Lordship applied the principles stated in United Provinces v. Mst. Atiqa Begum, that the legislative entries must receive the widest interpretation and also that in an organic document like the constitution it will be wrong to import limited on the basic of contrast and juxtaposition of words.

31. It is clear, therefore, from the decision that the extended meaning assigned to the word 'individuals' occurring in the legislative Entry No. 86 of the First list proceeded upon the general principle of Interpretation applicable specially to the interpretation of the constitution and legislative entries. Argument was advanced before their Lordship that if regard be had to the legislative history in this country, particularly in relation to taxing statutes like the Indian Income-tax Act, the word 'individual' has always been used in contradistinction to Hindu undivided families firms and other association of individuals. Their Lordships, while accepting the position that such was the effect of the legislative history in regard to taxation, observed as follows at page 1391 of the Report :

'Assuming that the legislative history in the matter of tax legislation support the distinction between individuals and Hindu undivided families, we do not see how the said consideration can have a material bearing on the construction of the word 'individuals' in Entry No. 86. The tax legislation may, for convenience or other valid reasons, have made a distinction between individuals and Hindu undivided families; but it would not be legitimate to suggest that the word 'individual' occurring in an organic documents like the Constitution must necessarily receive the same construction.'

32. It would follow from this that the same extended meaning as was given by their Lordship to Entry No. 86 of the First List need not necessarily be given to the word 'individual' occurring in section 3 of the wealth tax Act. It is open to a taxation statute to select persons or classes or categories of persons for purposes of taxation; it is also open to it, - without of course violating any of the fundamental rights, - to leave, out of the category of assessable persons or groups of persons who do not an the description of the category selected for taxation.

33. Prima facie, therefore, it is not necessary to give such extended meaning as to hold that it would comprise groups of individuals also if they are so associated together as to form one integrated unit.

34. Apart from this general prima facie effect following upon the discussion on principle, there is a further reason why the term in the context of the statute cannot be given the extended meaning.

35. If the term 'individual' is to be regarded as comprehending groups of individual it would undoubtedly comprehended Hindu undivided families also. If so, it was necessary to state or set out separately the category called the Hindu undivided family. The fact that at us actually stated would mean that it is not included in the expression 'individual' occurring being it which would mean that the extended earning to be given to the expression Individual must be restricted to a group exclusive of Hindu undivided families. It is not a correct rule of interpretation to take an extended meaning and then truncate it in such manner. Hence, by the very antithesis it will have to be held that the expression 'individual' occurring in section 3 means only a single individual.

36. That the charging section also does not propose to include within its charge any groups other than Hindu undivided families is also apparent from the provisions of sections 4(1)(b), 4(2) and 5(1)(ii). The former read :

'4. (1) In computing the net wealth of an individual there shall be included, as belonging to that individual - ....

(b) where the assessee is a partner in a firm or member of an association of persons, the value of his interest in the firm or association determined in the prescribed manner. 4. (2) In making any rules with reference to the valuation of the interest referred to in clause (b) of sub-section (1), the Board shall have regard to the law for the time being in force relating to the manner in which account are to be settled between the partners of a firm and members of an association on the dissolution of a firm or association, as the case may be.'

37. The latter reads :

'5. (1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee - ......

(ii) the interest of the assessee in the coparcenary property of any Hindu undivided family of which he is a member.'

38. The former provision distinctly contemplates assessment to wealth-tax, in the hands of an individual, of the value of his interest in an association of persons if he happens to be a members of that association; the latter prohibits the inclusion in the case of an individual assessee of any amount representing the value of his interest in coparcenary property. The latter clearly is complementary to the charge under section 3 in respect of Hindu undivided families, and gives effect to the principle that an item of wealth taxed in the hands of a Hindu undivided family should not once again be made to bear any tax in the hands of an individual member. The same principles read in connection with section 4(1)(b) shows that where the interest of an individual in the property of an association of individual of which he is a member is to bear tax, that interest cannot be made to bear tax as part of the wealth of the association itself.

39. Hence, even on the general scheme and the effect of the Act and in the context of its relevant provision, the only group or association is the Hindu undivided family.

40. It is now necessary to see whether this view taken by us in any manner conflicts with any previous decision of this court. It was pointed out that in the case of Sarjerao Appa Saheb Shitole v. Wealth-tax Officer, this court, while dealing with the argument addressed on behalf of a Hindu undivided family that the section the section is violative of article 14, had expressed the view that non-Hindu joint families or other association of individuals must beheld to have been comprised within the word 'individual' occurring in section 3 and that, therefore, it was not open to argue that only the Hindu undivided families have been singled out for discriminatory treatment. But actually this court did not go into the question because it was observed towards the end of the judgment that the alleged discrimination was, if at all, in favour of the Hindu undivided family and that, therefore, the petitioner before court, namely, the Hindu undivided family, was not an aggrieved person at whose instance this question could be gone into. In that view, the expression of opinion must be regarded as obiter and not necessarily binding. Further, we might point out that several cases of other High court cited before the court in support of the theory that individuals include association of individuals, and referred to in the judgment, are all cases relating either to section 4 of the Indian Income-tax Act, 1922, or Entry 86 of the First List of the Seventh Schedule to the Constitution. The latter, as already stated, is subject to other principles of interpretation mentioned by their Lordship of the Supreme court already referred to. As it the former, the section distinctly contain the expression 'other association of individuals' and every case cited brought a certain groups within the ambit of the expression 'other association of individuals.' Further, the only expression of opinion by this court is that non-Hindu undivided families or other associations are liable to be assessed to tax as 'individuals' without making any categorical statement that they should be dealt with as association of individuals. Therefore, it may well be that the liability to tax mentioned by this court in the said decision is a liability in the light of the provisions of section 4(1)(b) of the Wealth-tax Act, that is to say, wherever there is an association of individuals other than Hindu undivided family holding property liable to wealth-tax then only the interest of several members thereof in that property will attract wealth-tax in their respective hands.

41. In this view the position would be that, although the legal theory stated by the Tribunal in support of its answer that the assessee is not a Hindu undivided family may be wrong the answer will have to be the same on the view we have taken as to the meaning of the words 'Hindu undivided family' occurring in section 3.

42. It is in this view that the learned counsel for the assessee pressed on us the argument that the question as referred does not fully bring out the real point in controversy between the parties and that, therefore, we should act under sub-section (6) of section 27 which reads :

'The High Court or the Supreme Court upon hearing any such case, shall decide the question of law raised therein, and in doing so, may, if it thinks fit, alter the form of the question of law....'

43. The circumstances in which and the extent to which it is open to a High court hearing a tax reference to call for better statements of the case or recast or change the form of question have been discussed elaborately by the Supreme court in the case in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, Kusumben D. Mahadevia v. Commissioner of Income-tax, Zoraster & Co. v. Commissioner of Income-tax, Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. and Keshav Mills Co. Ltd. v. Commissioner of Income-tax.

44. The general effect of the discussion contained in all these cases is that the jurisdiction of the High Court in matters of this nature is an advisory jurisdiction, that therefore it is limited to the record placed before it for enabling it to answer the questions and that it can express an opinion only on such question as arise out of an appellate order of the Appellate Tribunal. The test whether question does or does not arise out of an order of the Appellate Tribunal is formulated as follows in Commissioner of Income-tax v. Scindia Steam Navigation Co Ltd. :

'(1) When a question is raised before the Appellate Tribunal and is dealt with by it, it is clearly one arising out of its order.

(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and is, therefore, me arising out of its order.

(3) When a question is not raised before the Tribunal But the Tribunal deal with it, that will also be a question arising out of its order.

(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.'

45. In substance, a question can be said to arise out of an order of the Appellate Tribunal only if it is raised by the party before the Tribunal, whether or not it is decided by the Tribunal, or when it is decided whether or not it is raised by either party before it. The further portion regarding recasting questions or hanging the form of the questions is clarified by the Supreme Court by stating that such recasting should be resorted to only is cases where the question it becomes necessary to deal with any ancillary matter or to dispose of incidental questions arising out of the several approaches that may be made before giving the final answer to the main question.

46. Applying these principles to the facts of this case, the first thing to be taken note of is that in the opening paragraph of its appellate order, the Tribunal formulated the question as follows :

'The only point for consideration in this appeal is whether the assessee should be assessed in the status of an individual or a Hindu undivided family.'

47. Thus, the question was not limited to the to the sustainability or otherwise of the claim of the assessee that he has the status of a Hindu undivided family. In the event of an answer against him, the further question did arise whether he was an individual as such or an association of persons and further in the event of his being made liable in his status as an individual, what the extent of his liability would be. The intermediate question mentioned above was necessary or inevitable according to the argument on behalf of the assessee, because the interpretation of the word 'individual' in section 3 was a matter of some doubt. The liability of the assessee to tax or the quantum of such liability in his status as an individual would be or may be, it was pointed out, different from the liability or quantum of his liability if he is to be taxed in his capacity as a Hindu undivided family. The answer on behalf of the department before us to these contentions was that, although the question of the exact status in which the assessee was liable to tax may be regarded as a question within the framework of the question as referred, the quantum of the liability in the event of his being treated as an individual was never raised. It is true that the question in that form as to the quantum of liability was not raised. But by deciding that the assessee was liable to tax as an individual with the result that the entire property returned by him for purpose of taxation on the footing that he was a Hindu undivided family was exposed to tax, the Tribunal must be taken to have decided that even as an individual the entire property in the hands of the assessee was liable to tax. In fact, it was the correct thing to do in their view because while discussing the question of applicability of the Hindu law, they have negatived the idea or right by birth and survivorship and concluded that the entire property was at the relevant time in the hands of a single individual, P. F. Pinto. Our opinion disagreeing with that view of the law expressed by the Tribunal that the entire property was liable to tax in the hands of the assessee even in his status as an individual. The position would, therefore, be one in which the modified or further question raised by the learned counsel on behalf of the assessee may be regarded as a question arising out of the order of the Appellate Tribunal. Even otherwise, the quantum or extent of the liability is a question ancillary to the main question of liability itself.

48. In fact, the opinion of the Supreme Court mentioned in several cases set out above is given statutory effect in sub-section (6) of section 27 of the Wealth-tax Act, which, as already pointed out, expressly empowers the High Court, wherever it thinks fit, to alter the form of the question of law before delivering its judgment upon reference.

49. In that view, we think it is necessary to later the form of the question and to rewrite it as follows :

'On the facts and in the circumstances of the case, in respect of the property returned for assessment, is the assessee liable to be assessed as a Hindu undivided family or as an individual ?'

50. For the reasons fully diseased above, our answer to the question is as follows :

The assessee is not entitled to claim that he should be assessed as a Hindu undivided family. He can only be assessed as an individual, and not as an association of individuals; but such assessment should be, not in respect of the entire property returned by him in his return, for purposes of taxation, but in respect of the value of his interest in the property to be determined as on the relevant valuation date, viz., March 31, 1957.

51. It may be appropriate to observe that the determination of the value of the interest of the assessee as a single individual will involve an ascertainment of the number of persons interested in the joint family property and may expose such other members to tax also in accordance with law.

52. In this reference, the parties will barer their own costs.

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