Obul Reddi, J.
1. These three appeals (W. As. Nos. 67, 68 and 69 of 1964) have been referred to the Full Bench by a Division Bench of this court, consisting of Manohar Pershad C.J. and Mohd. Mirza., as they were of the opinion that an important question relating to 'interpretation ofsection 2(g) and Section 4(ii) of the Expenditure-tax Act (XXIX of 1967) is involved.' The appeals arise from the judgment of Jaganmohan Reddy J. (as he then was) dismissing Writ Petitions Nos. 712 to 714 of 1962 filed under Article 226 of the Constitution by Prince Alam Jah Bahadur, hereinafter referred to as the assessee, for the issue of a writ of prohibition or other appropriate writ or order directing the Expenditure-tax Officer (respondent) to forbear from taking or continuing any action in pursuance of the notice dated May 5, 1962, issued under Section 16(a) of the Expenditure-tax Act, 1957, hereinafter referred to as the Act, for the expenditure assessment year 1959-60.
2. The relevant facts necessary for appreciating the question referred to the Full Bench are the following: The assesee the eldest son of Nizam VII, filed expenditure-tax returns under the Act for the assessment years 1959-60, 1960-61 and 1961-62 and the respondent completed the expenditure-tax assessments on March 27, 1961, December 22, 1963, and January 25, 1962, respectively, determining the assessee's taxable expenditure for the three years at Rs. 2,34,864, Rs. 1,66,687 and Rs. 2,30,384, and the assessee also paid the tax demands in full. Subsequently, the respondent issued a notice dated May 5, 1962, under Section 16 of the Act calling upon the assessee to file supplemental returns of expenditure for the three years in question on the ground that the respondent had reason to believe that the assessee's expenditure had escaped assessment or that he has been under-assessed. As the assessee was not aware of the reasons which prompted the respondent to reopen the assessment, he filed supplemental returns of expenditure on July 16, 1962, declaring the same figures as shown earlier in the original returns. A date was fixed by the respondent for hearing the assessee or his representative and, at the time of hearing, the assessee was informed that the three assessments have been reopened for the purpose of including the expenditure incurred by his wife, Princess Durre Shahwar, hereinafter referred to as the Princess, under Section 4(ii) of the Act, as amended by Section 24 of the Finance Act, 1959. The assessee was called upon to file his objections on or before July 25, 1962, failing which the respondent threatened to complete the assessments by including in the assessment of taxable expenditure, the expenditure incurred by his (assessee's) wife. It is contended by the assessee that this action under Section 16(a) of the Act is arbitrary and illegal and the fact that the Princess is the wife of the assessee and she has to be considered as his dependant within the meaning of Section 2(g) of the Act was known to the respondent and was also informed of it. There have been no omissions or failure on the part of the assessee to disclose fully and truly all material facts nor has the respondent come into possession of any information warranting that any expenditure has escaped taxation. Apart from want of jurisdiction, Section 4(ii) of the Act, it is contended by the assessee, is ultra vires of the Constitution, as it is discriminatory in character, offending Article 14 of the Constitution. It is also the case of the assessee that his wife, the Princess, lives in London and visits India for a very brief period every year and has her sources of income and property and any expenditure incurred is from out of the monies exclusively belonging to her. The Princess too had filed her own returns for the expenditure incurred by her from out of her own income and the respondent's action in reopening the assessments, so as to include in the assessee's assessment his wife's expenditure, will cause hardship to him. If she is assessed separately on the returns filed by her, she will be entitled to deductions which will not be taken into account if the assessee is to be assessed by adding his wife's expenditure to the expenditure of the assessee, Another contention is that the amendment made by Section 24 of the Finance Act, 1959, brought about an unreasonable discrimination as between two units of the assessee, viz., the individual and Hindu undivided family, inasmuch as in the case of an individual, expenditure incurred by any dependent of such individual has to be included in the assessment of the individuals, without regard to any other consideration, while in the case of a Hindu undivided family, expenditure by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee alone has to be included. This according to the assessee constitutes discrimination. The assessee's wife did not incur any expenditure from out of the income or property transferred directly or indirectly by the assessee and even so under the amended Section 4(ii), expenditure has to be included in the assessee's assessment and tax levied on him, whereas in the case of a Hindu undivided family, no such expenditure of the dependant has to be included in the assessment of the family. The provisions of the Act are also challenged on the ground that they constitute an unreasonable restriction 'on a person's right to hold and enjoy property, and, consequently, violate Articles 19 and 31 of the Constitution.
3. In the counter filed by the respondent it was averred that it is incumbent under Section 13 of the Act on the assessee to the a return in the prescribed form and verify in the manner prescribed, setting forth his expenditure for the previous year. By virtue of the amendment of Section 2(g) by the Finance Act, 1959, the Princess is admittedly a dependant of the assessee and her expenditure was not shown in the original returns of the assessee, and, therefore, there is reason to believe that the assessee failed to disclose truly and fully all the material facts in respect of the expenditure of his wife, which are necessary for the completion of his assessment. The actual expenditure incurred by his wife was disclosed by her returns and inconsequence of the information available from the returns filed by the Princess, the respondent had reason to believe that expenditure of the assessee chargeable to tax had escaped assessment for the three assessment years in question, and, consequently, the provisions of Section 16 of the Act were invoked for reopening the assessments. The respondent is entitled to issue the impugned notice dated May 5, 1962, if in consequence of the information in his possession he had reason to believe that there was an escapement of assessment of the assessee's total expenditure within 4 years from the year of assessment. It was also averred by the respondent that the contention of the assessee that Section 4(ii) of the Act is ultra vires of the Constitution offending Article 14 is without substance. Section 3 of the Act, the charging section, makes the expenditure incurred by any individual or Hindu undivided family liable to tax at the rate or rates specified in the Schedule. There is no discrimination between one individual assessee and another individual assessee, but the distinction has been made by the legislature for proper and valid grounds between the individual assessee and the assessee who is a Hindu undivided family. The expression 'equal protection of laws' in Article 14 means ' the right to equal treatment in similar circumstances both in the privileges conferred and the liabilities imposed by the laws', Equality before law means law should be equal and should be equally administered and there should be no discrimination in the same class. The power of the State to classify for the purpose of taxation is of wide range and flexibility. The class of persons being different, the distinction cannot be claimed to be discriminatory as to offend Article 14 of the Constitution. The other contention of the assessee, that the provisions of Section 4(ii) read with Section 2(g) of the Act are hit by the provisions of Articles 19 and 31 of the Constitution, is devoid of any merit or substance. There is no fundamental right involved in the circumstances of the case, nor is there any deprivation of the right of the assessee to property.
4. The learned judge negatived all the contentions of the assessee and dismissed his writ petitions. On the first contention, the learned judge held that the respondent was empowered to reopen the assessment under Section 16 of the Act. Regarding the main question under Article 14 turning on the interpretation of Section 4(ii) of the Act, it was held by the learned judge that different kinds of property may be subject to different rates of taxation, but so long as there is a rational basis for classification, Article 14 will not be in the way of such a classification, resulting in an unequal burden on different classes of properties. The learned judge also observed that in a tax legislation, incidence of tax falls on different classes of assessees and for that reason it cannot be said that it is a class legislation without any classification or without having any rational relation to the object sought to be achieved by the enactment. The object of the enactment is to raise taxesand augment it from time to time as and when such exigencies require it and because some classes are taxed higher than others or some are given concessions while others are not, it cannot be said that there has been discrimination within the meaning of Article 14. He also held that the right to hold property is not affected merely because a tax is imposed, and dismissed the three writ petitions.
5. Mr. Narasaraju, appearing for the assessee, has assailed the findings of the learned judge in the main: (1) that the respondent has no jurisdiction to reopen the assessments and the notice dated May 5, 1962, issued by him is without jurisdiction, (2) that the amendment of the definition 'dependant' in Section 2(g) and Section 4(ii) of the Act, as amended by Section 24 of the Finance Act, is ultra vires of the Constitution, (3) that the amendment is beyond the legislative competence, and (4) that the amendment has brought about an unreasonable discrimination as between the two units of the assessees, viz. individuals and Hindu undivided families and, as such, the provisions of Section 4(ii), Clause (ii), are violative of Article 14 of the Constitution. Developing the argument further, Mr. Narasaraju contended that on a proper interpretation of 'dependant', occurring in Section 2(g), it means that the spouse or minor child should be a person wholly or mainly dependent on the assessee for support and maintenance as otherwise there will be no basis for classification between the spouse and the minor child on the one hand and other dependants, which term includes any person wholly or mainly dependent on the assessee for support and maintenance.
6. Before going into the question as to the legislative competence and the effect of the amendments introduced by virtue of Section 24 of the Finance Act, 1959, in the definition of the 'dependant' in Section 2(g) and also the substituted provisions in Section 4(ii), Clause (ii), it may be necessary in the first instance to examine the contention of the learned counsel for the assessee that the respondent had no jurisdiction to reopen the assessments by issuing the notice dated May 5, 1962. Section 16 of the Act deals with expenditure escaping assessment. 'If the Expenditure-tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his expenditure under Section 13 for any assessment year, or to disclose fully and truly all material facts necessary for his assessment for that year, the expenditure chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise' he may reopen at any time within 8 years and serve a notice on the assessee or if under Section 16(b) in consequence of any information in his possession he has reason to believe that notwithstanding that there has been no such omission or failure as is referred to in Clause (a) the expenditure chargeable to tax has escaped assessment for any assessment year, the Expenditure-tax Officer may at any time within four years of the end ofthe assessment year serve a notice on the assessee. In this case, the notice issued by the respondent merely shows that it is issued under Section 16 of the Act. In response to the notice the assessee filed returns disclosing identical items of expenditure which were disclosed earlier in the returns prior to the issue of notice. Mr. Kondaiah appearing for the respondent contended that the fact that the Princess (the wife of the assessee) had spent Rs. 1,74,267, Rs. 4,35,267 and Rs. 3,48,567 in the three respective relevant assessment years was not brought to the notice of the respondent either in the original returns or in the course of the enquiry before the completion of the assessment and, therefore, the assessee had failed to disclose fully and truly all the material facts in respect of the expenditure of his wife which disclosure was necessary for completing or finalising the assessments of the assessee. It is on this ground Mr. Kondaiah contended that the provisions of Section 16(a) are attracted in the instant case.
7. It is unnecessary to go into the question whether the notice is under Section 16(a) or Section 16(b); for, the respondent can issue a notice if he has reason to believe that there has been any omission or failure on the part of the assessee to disclose fully and truly all material facts, or under Section 16(b) if in consequence of any information in his possession he has reason to believe that the expenditure chargeable to tax has escaped assessment for any assessment year or by reason of any under-assessment or assessment at too low a rate. The Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, dealing with a case arising under Section 34(1)(b) of the Income-tax Act relating to escaped assessment which is in similar terms held that:
'Two conditions must be satisfied before the Income-tax Officer can act under Section 34(1)(b): He must have information which comes into his possession subsequent to the making of the original assessment order, and that information must lead to his belief that income chargeable to tax has escaped assessment, has been under-assessed or assessed at too low a rate, or has been made the subject of excessive relief.'
8. Therefore, the words 'in consequence of any information in his possessions' in Section 16(b) would include information as to the truth and correct state of law, as pointed out by the Supreme Court, the only limitation on the powers of the Expenditure-tax Officer being if notice is given under Section 16(a), it should be at any time within eight years and in cases falling under Clause (b), it should be at any time within four years. In this case notice was served within four years. All that is required for the Expenditure-tax Officer is that he should have reason to believe under Clause (a) that as a result of the assessee's failure to make a return or disclose fully the particulars of his expenditure, expenditure has escaped assessment. Under Clause (b), the officer should have reason to believe in consequence of the information in his possession that the income has escaped assessment. A scrutiny of the returns field by the assessee for the three relevant years would show that all the material facts were not disclosed by the assessee in the first instance and even after notice was given under Section 16(b), there was no disclosure in the return that the Princess was his wife and she had her own source of income and that she had filed separate returns. Under column 1 to annexure 5 of the returns it is incumbent on the assessee to disclose particulars of his 'dependants' and as there is no disclosure of dependants, the Expenditure-tax Officer can proceed to assess or reassess such escaped expenditure of the dependant under Section 16(b). Therefore, it is manifest that the respondent was competent to issue the notice under Section 16 of the Act,
9. It is next contended by Mr. Narasaraju that this enactment is void ab initio for want of legislative competency. According to him, there is no entry in List I of Seventh Schedule or in List III regarding tax on expenditure.
10. But there is entry 97 which as a residuary entry must comprehend the tax of the kind. It is, however, contended that for a concept of expenditure-tax there must of necessity be some direct relation or at least a rational nexus between the tax and the expenditure of the assessee. But it must be borne in mind that it would be inappropriate to apply the test popularly known or traditionally prescribed to such concepts as the legislative intents must have particular connotation. If the legislature for purposes of expenditure-tax takes a certain group of persons as one unit, unless that group is hit by constitutional inhibitions, it cannot be contended that the expenditure of the assessee alone as distinct from that of the units should be taken into consideration. The rule of rational nexus as contended for on behalf of the petitioner-appellant does not so circumsdribe the power of the legislature. The Supreme Court decision on which the reliance is placed by the learned counsel does not advance his theory. In fact the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner dealing with the question raised therein, challenging the impugned provisions as beyond the legislative powers of Parliament, observed thus:
'In dealing with this point, it is necessary to consider what exctly isthe denotation of the word 'income' used in the relevant entry. It ishardly necessary to emphasise that the entries in the Lists cannot be readin a narrow or restricted sense, and as observed by Gwyer C.J. in UnitedProvinces v. Aliqya Begum,' each general word should be held to extend to allancillary or subsidiary matters which can fairly and reasonably be said tobe comprehended in it. What the entries in the List purport to do is to confer legislative powers on the respective legislatures in respect of areas or fields covered by the said entries; and it is an elementary rule of construction that the widest possible construction must be put upon their words. This doctrine does not, however, mean that Parliament can choose to tax as income an item which is no rational sense can be regarded as a citizen's income. The item taxed should rationally be capable of being considered as the income of a citizen. But in considering the question as to whether a particular item in the hands of a citizen can be regarded as his income or not, it would be inappropriate to apply the tests traditionally prescribed by the Income-tax Act as such.'
11. It is clear and manifest from entry 97 in List I that on any other matter not enumerated in List II or III including any tax not mentioned in either of those lists, Parliament has exclusive power under Article 246 to make laws. The expenditure-tax which is not specifically provided for in any of the entries in the said lists falls well within the ambit or scope of entry 97 and as such exclusively is within the legislative competency of Parliament. So long it is in fact a tax on expenditure, the mere fact that in furtherance of legislative intent and object the expenditure on which the tax is sought to be levied is not necessarily confined to the expenditure actually incurred by the assessee himself, does not render it other than the expenditure-tax.
12. Mr. Narasaraju next contended that a fiscal statute has to be strictly construed and if a provision in the statute is susceptible of two interpretations, the one in favour of the assessee or the subject should be adopted and that the various provisions of the statute should be read together and harmonious interpretation should be placed thereon in order to ascertain and give effect to the intention or object of the legislature. It is his further contention that there should be some reasonable nexus between the expenditure of the dependant and the assessee to render it taxable expenditure of the assessee and if there be no such nexus, imposition of tax thereon in beyond legislative competence and invalid. Learned counsel argues where the husband has no control over the expenditure of the wife, who lives separate and is possessed of independent means, it is but fair, just and legitimate that he should not be taxed for such expenditure.
13. Referring to the Finance Act of 1959, in so far as it amended the definition of dependant in Section 2(g) and substituted Section 4(ii) by introducing a new clause, learned counsel argues that though the definition refers to two categories, viz., (1) his or her spouse or minor child, and (2) any person wholly or mainly dependent on the assessee for support and maintenance, on a proper construction the first category of persons should also satisfy the conditions as in the second category, namely, they must be mainly or wholly dependent on the assessee for support and maintenance. It is thus urged that, in fact, there is no real classification as everyone is controlled by the same pre-essential condition of support and maintenance; that, on the other hand, if the first part be construed to mean that it is unqualified by the said condition, the classification must be held to be arbitrary and artificial, not based on any intelligible or reasonable differentia distinguishing persons grouped together from those left out of that group and the differentia, if any, must be held to be having no rational relation to the object of legislation. It is also urged that discrimination is inherent in such a provision and there being no rule of guidance as to the selection of a spouse as an assessee, arbitrary power is given to the executive or taxing authority to select any spouse as assessee which is bad in law. Attack also has been made in relation to amendment of Section 4(ii) more or less on similar lines.
14. Mr. Kondaiah, the learned counsel for the respondent, argued that the powers of Parliament are wide enough to take within their range this legislation, that the two essential conditions are satisfied inasmuch as there is a reasonable classification of the assessees into two classes, individual and Hindu undivided family, and that this differentia has a rational relation to the object sought to be achieved by the statute. The amendments introduced by the Finance Act, 1959, suffer from no constitutional inhibition and they advance the purpose and objects of legislation.
15. This argument leads us to the question as to the object of the legislation, the purpose for introducing amendment in Sections 4(ii) and 2(g)(i), the exact meaning of those provisions and whether the classification introduced has a rational and intelligible basis and whether it has a reasonable nexus with the object sought to be achieved by the statute.
16. We may state at the outset that taxation laws cannot claim any immunity from equality clause of the Constitution. They cannot afford to be arbitrary. They cannot transcend the reasonable limits enjoined by the Constitution. They are liable to be struct down if they suffer from constitutional inhibitions. With these preliminary remarks we proceed to consider whether the attack made by the learned counsel for the assessee on the validity and constitutionality of the amendment can be sustained. As there is dispute, first and foremost, with regard to the real meaning of the amended provisions, we have to necessarily ascertain the same by construing the said provisions. It may also be necessary in this connection to understand the scope and object of the Act, the need for amending the provision, the deficiency sought to be supplied thereby and the purpose which the amended provisions have to serve. It is also to be seen whether notwithstanding the marked difference of language deliberately employed in the amended provisions in Section 2(g) and constitution of Section 4(ii), the law in substance remains the same as before, if not whether this innovation ishit by constitutional inhibition. As we are primarily concerned with the interpretation of Sections 2(g) and 4(ii) on which the whole discussion revolves, we have to notice these provisions together with the other relevant provisions in the Act. These provisions, as they were before and after amendment, are detailed hereunder in juxtaposition:
Before amendment After amendment
'2. (g) 'dependant' means- ' 2(g) 'dependant' means- (i) where the assesses is an individual, his or her spouse orchild wholly or mainly dependent on the assessee for support and maintenance;
(i) where the assessee is an Individual, his or her spouse orminor child, and includes any person wholly or mainly dependent on theassessee for support and maintenance;
(ii) where the assessee is a Hindu undivided family-
(ii) where the assessee is a Hindu undivided family-
(a) every coparcener other than the karta; and
(a) every coparcener other than the karta; and
(b) any other member of the family who under any law or order ordecree of a court, is entitled to maintenance from the joint family property.
(b) any other member ot the family who under any law or order ordecree of a court, is entitled to maintenance from the joint family property.
2. (h)'expenditure' means any sum in money or money's worth, spent or disbursed orfor the spending or disbursing of which a liability has been incurred by anassessee, and includes any amount which under the provisions of this Act isrequired to be included in the taxable expenditure.
2, (h)'expenditure' means any sum in money or money's worth, spent or disbursed orfor the spending or disbursing of which a liability has been incurred by anassessee, and includes any amount which under the provisions of this Act isrequired to be included In the taxable expenditure.
2. (o) 'taxable expenditure' means the total expenditure of an assesseeliable to tax under this Act.
2. (o) 'taxable expenditure' means the total expenditure of an assessee liable totax under this Act,
3. charge or expenditure-tax- 3. charge or expenditure-tax.- (1) Subject to the other provisions contained in this Act, thereshall be charged for every financial year commencing on and from the firstday of April, 1958, a tax (hereinafter referred to as expenditure-tax) at the rate orrates specified in the Schedule in respect of the expenditure incurred by anyindividual or Hindu undivided family in the previous year:
(1) Subject to the other provisionscontained in this Act, there shall be charged for every financial year, commencingon and from the first day of April, 1958, a tax (hereinafter referred to as expenditure-tax) at the rate orrates specified in the Schedule in respect of the expenditure incurred by anyindividual or Hindu undivided family in the previous year:
Provided that no expenditure-tax shall be payable by an assesseefor any assessment year if his income from all sources during the relevantprevious year as, reduced by the amount of taxes to which such income may beliable under any other law for the time being in force does not exceed rupeesthirty-six thousand.
Provided that no expenditure-tax shall be payable by an assesseefor any assessment year if the income from all sources derived by theassessee and his dependants during the previous year as reduced by theamount of taxes to which such income may be liable under any law for the timebeing in force does not exceed rupees thirty-six thousand.
Explanation.- lncome derived by an assessee or any of his dependants shall include -
(i) income which a trustee or any other person receives or isentitled to receive during the previous year on behalf of the asscssee orany of his dependants, or both, as the case may be; and
(ii) in the case of an assessee being an individual who is amember of a Hindu undivided family or of any association of persons, any sumin money or money's worth spent or disbursed for the benefit of the assessee orany of his dependants during the previous year from or out of the Income orproperty of the Hindu undivided family or the association, as the casemay be.
(2) For theremoval -of double, it is hereby declared that nothing contained in this Actshall require the inclusion in the taxable expenditure of an assessee for anyyear of expenditure for the spending or dis-bursing of which a liability hasalready been incurred and which has been included in thetaxable expenditure for any earlieryear.
(2) For theremoval of doubts it is, hereby declared that nothing contained in this Actshall require the inclusion in the taxable expenditure of an assessee for anyyear of expenditure for the spending or dis-bursing of which a liability hasalready been incurred and which has been included in thetaxable expenditure for any earlieryear.
4. Unlessotherwise provided in sec-tion 5, the following amounts shall be included incomputing the expenditure of an assesses liable to tax under this Act,namely:
4. Unlessotherwise provided in sec-tion 5, the following amounts shall be inclu-ded incomputing the expenditure of an assessee liable to tax under this Act,namely:
(i) any expenditureincurred, whe-ther directly or indirectly by any person other than theassessee in respect of any obli-gation or personal requirement of theassessee or any of his dependants which, but for the expenditure having been incurredby the other person, would have been incurred by the assessee, to the extentto which the amount of all such expenditure in the aggregate exceeds Rs.5,000 in any year;
(i) any expenditureincurred, whe-ther directly or indirectly by any person other than theassessee in respect of any obligation or personal requirement of the assesseeor any of his dependants to the extent to which , the amount of all suchexpenditure in the aggregate exceeds Rs. 5,000 in any year;
(ii) any expenditureincurred by any dependant of the assessee for the benefit of the assessee orof any of his dependants out of any gift, donation or settlement on trust orout of any other source made or created by the assessee, whether directly orindirectly.
(ii) where theassessee is an indivi-dual, any expenditure incurred by any dependant of theassessee, and where the assessee is a Hindu undivided family, any expenditureincurred by any dependant from or out of any income or property transferreddirectly or indirectly to the dependant by the assessee,
Explanation.- For the removal of doubts it is hereby declared that nothingcontained in this section shall be deemed to require the inclusion in theexpenditure of the assessee of any expenditure, incurred by any other personfor or on behalf of the assessee by way of customary hospitality or which isof a trivial or inconsequential nature.
Explanation. - For the removal of doubts it is hereby declared that nothingcontained in this section shall be deemed to require the inclusion in the expenditureof the assessee of any expenditure incurred by any other person for or onbehalf of the assessee by way of customary hospitality or whfch is of atrivial or inconsequential nature.
6. (1) The taxable expenditure of an assessee for any year shall becomputed after making the following deductions and allowances, namely:- , . ,
6. (1) The taxable expenditure of an assessee for any year shall becomputed after making the following deductions and allowances, namely;-
(h) a basic allowance- (h) a basic allowance- (i) where the assessee is an individual, of Rs. 30,000; and
(i) where the assessee is an individual, of Rs. 30,000 for himself and all his dependants;and
(ii) where the assessee is a Hindu undivided family, of Rs. 30,000 in respect, of the karta and his wifeand children, .and a further allowance of Rs. 3,000 for every additional coparcener, provided that the basicallowance for the Hindu undivided family as a whole shall not exceed Rs. 60,000in any case.'
(ii) where the assessee is a Hindu undivided family, of Rs. 30,000 in respect of the karta and his wifeand children, and a further allowance of Rs. 3,000 for every additional coparcener:
Provided that the basic allowance for the Hindu undivided familyas a whole shall not exceed Rs. 60,000 in any case;
Provided further that the allowance of Rs. 3,000 for any additional coparcener shall notbe allowed where the coparcener is separately assessed under this Act and isentitled to the allowance of Rs. 30,000 under sub-clause (i) '
17. The expenditure tax is a legislation hitherto unknown to this country and in fact not experimented anywhere else in the world. Although in the United States of America a bill was introduced in the Federal Legislature in July, 1921, for levy of what was styled as 'Spendings Tax', it was summarily rejected by the Congress as it was considered unworkable and too complicated. In the words of one of the Senators, the bill was a 'most complicated monstrosity'. The idea of expenditure-tax in India seems to have had its origin in the recommendations of Dr. Nicholas Kaldor, Reader in Economics, University of Cambridge, who gave a report on Indian Tax Reform. It is essentially a tax on spending or consumption, i.e., expenditure. It is not the entire expenditure but only the taxable expenditure for any year as defined in the Act that is liable to tax. The assessee is liable to such tax only if his income exceeds certain limits. In computing this taxable expenditure certain deductions are permissible. Sections 5 and 6 exclude certain types of expenditure from being taxed. The object of this legislation, according to the statement of object and reasons, is to levy annually tax on expenditure above the prescribed level of an individual and a Hindu undivided family. This taxon expenditure is expected to serve as a deterrent on extravagant or unnecessary personal expenditure, promote thrift and act as an incentive to save and promote economy. While introducing the amendment, the Finance Minister in his Budget Speech for 1959-60 (see  35 I.T.R. 57 (Statutes) para. 66) observed:
'I propose, therefore, to withdraw some of the exemptions now available and, in particular, to provide that the husband, wife and minor children should be regarded as one unit for the exemption limit of Rs. 30,000 in the matter of non-taxable expenditure and not as separate assessees if they have incomes in their individual rights.'
18. In the Memorandum Explaining the Provisions of the Finance Bill, in so far as it relates to the definition of 'dependant', it is stated:
'At present the wife and children are dependants, if they are wholly or mainly dependent on him for support and maintenance. It is now proposed to dispense with this requirement. Any other person who is actually dependent on the assessee for support and maintenance will also be regarded as dependant.'
19. In the Memorandum Explaining the Provisions of the Finance Bill also, which brought about the impugned amendment, there is a note to Clause 24, which reads:
'Even at present expenditure incurred by a dependant is included in the assessee's expenditure if it has been met out of any gift, donation or settlement or trust made or created by the 'assessee whether directly or indirectly. Since the basic allowance of Rs. 30,000 is meant for the assessee's family as a whole consisting of himself and his wife and minor children, it is only proper to take into account their aggregate expenditure without looking into the sources from where it has been met. In the case of a Hindu undivided family, the expenditure incurred by a member will be treated as the family's expenditure only if it has been met from the resources of the family.'
20. This, in short, is the history of legislation with the amendments therein. We have also referred incidentally to the memoranda or notes. Concerned as we are with the construction of certain provisions our conclusions must be reached mainly and solely on the language of those provisions. Memoranda or notes are irrelevant for the purpose. They cannot be relied on as aids to construction. Even the legislative intent has to be gathered only from the language of the various provisions read as a whole. Lord Halsbury in Lord Advocate, v. [Fleming (Bindra's Interpretation of Statutes) page 503, stated:
''And in construing such Acts, we have no governing principle to look at: we have simply to go to the Act itself to see whether the duty claimed is that which the legislature has enacted.
Lord Russell C.J. in Attorney-General v. Carlton Bank stated:
The duty of the court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, viz., to give effect to the intention of the legislature as that intention is to be gathered from the language employed. The court must no doubt ascertain the subject-matter to which the particular tax is by the statute intended to be applied, but when once that is ascertained, it is not open to the court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like.'
If the language of an Act of Parliament is clear and explicit it must receive full effect whatever may be the consequences (vide Crates on Statute Law, 6th edition, by S. G. G. Edgar, page 94) '.
21. The classic statement of Rowlatt J., in Cape Brandy Syndicate v. Inland Revenue Commissioners cited with approval by the Supreme Court in Commissioner of Income-tax v. Shahzada Nand & Sons, reads thus:
''... in a taxing Act one has to look merely at what is clearly said.There is no room for any intendment. There is no equity about a tax.There is no presumption as to a tax. Nothing is to be read in, nothing is tobe implied. One can only look fairly at the language used.' . . . ' The underlying principle is that the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather thanfrom any notions which may be entertained by the court as to what is justor expedient.''
22. Maxwell on the Interpretation of Statutes (11th edition, by, Roy: WilsonQ. C. and Brain Galpin, page 2) states:
'If there is one rule of construction for statutes and other documents, it is that you must not imply anything in them which is inconsistent with the words expressly used.' (vide Lord Greene M. R. in In re A Debtor).
23. Again, at page 16, he also points out that:
'Where alternative constructions are equally open that alternative isto be chosen which will be consistent with the smoothi working of the systemwhich the statute purports to be regulation; and that alternative is to berejected which will introduce uncertainty, fiction on confusion into the workingof the system.'
24. Mr. Justice Subba Rao (as he then was) in State of Punjab v. JullundurVegetables Syndicate, dealing with the interpolation of fiscal statutes,observed:
'It is a settled rule of construction that in interpreting a fiscal statute the court cannot proceed to make good the deficiencies, if there be any, inthe statute; it shall interpret the statute as it stands and in case of doubt, it shall interpret it in a manner favourable to the taxpayer.'
25. To the same effect, in an earlier case, Sikri J. in Board of Revenue v. Sidhnath observed:
'We need hardly say that the Stamp Act is a taxing statute and must be construed strictly, and if two meanings are equally possible, the meaning in favour of the subject must be given effect to.'
26. The rules in the Heydon's case, which have been continually cited with approval and acted upon, are as follows:
'That for the sure interpretation of all statutes in genera! four things have to be discerned and considered: (1) what was the common law before the making of the Act, (2) what was the mischief and defect for which the common law did not provide, (3) what remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth, (4) the true reason of the remedy. And then the office of all the judges is always to make such construction as shall suppress the mischief and advance the remedy,...'
27. It is plain that a statute being the will of the legislature has to be expounded according to the intent of those who made it. That intent has to be necessarily gathered from the language employed. If the language employed is clear and unambiguous the question of construction would not arise. The intention being manifest, no difficulty would arise, for nothing can be implied which is inconsistent with the words expressly used. It is only where the express intention is not manifest it has to be determined by inference based on legal principles which are well-settled. We have now to construe Sections 2(g) and 4(ii) which have undergone substantial amendments as shown above for obvious reasons. Section 2(g), however, it may be noted, is left intact.
28. The definition of 'dependant', before amendment of Section 2(g), so far as that clause is concerned, read thus:
'2. (g) ' dependant ' means-
(i) where the assessee is an individual, his or her spouse or child wholly or mainly dependant on the assessee for support and maintenance.'
29. After amendment, Section 2(g) reads:
' 'dependant' means-
(i) where the assessee is an individual, his or her spouse or minor child, and includes any person wholly or mainly dependent on the assessee for support and maintenance.'
30. Under the unamended section a spouse or a child in order to comewithin the meaning of 'dependant' of an assessee who is an individualhad to be dependent wholly or mainly on the assessee for support andmaintenance. After the amendment, obviously enough, where the assessee is an individual, 'dependant' would necessarily mean his or her spouse or minor child. That is by reason of their very relationship and irrespective of the fact whether they are wholly or mainly dependent on him for maintenance or support. Persons other than these, be they his own adult children, may be included within this definition only if they arc wholly or mainly dependent on the assessee for support and maintenance. That indeed is the distinguishing feature between those two categories of persons. Thus, whereas under the unamended provision dependence wholly or mainly on the assessee for support and maintenance was the sole test and even so persons other than the spouse or children could not have been included in that definition, the amendment has given extended meaning to the definition of that term by including other persons also and confined the statutory qualification of dependence only to persons other than the spouse or minor children. That is obvious from the clear language of the provision. The legislature has given the meaning of dependant as spouse or minor child and further included in that term any person who is wholly or mainly dependent on the assessee. Learned counsel submits that the clause 'wholly or mainly dependent on the assessee' should be construed to govern not only the persons who come under the inclusive definition but also the spouse and minor child referred to in the meaning clause of the definition and, if so construed, the Princess notwithstanding that she is the spouse of the assessee is not his dependant within the meaning of the Act, as she is not as a matter of fact wholly or mainly dependent on him for maintenance and support. Whatever may be said of the unamended provision for the qualifying words of dependence for maintenance and support which followed the words 'spouse and children' governed both of them having regard to the context created in that provision, the amendment providing for two distinct groups has made all the difference. Indeed, having regard to the clear context in the present provision there is no occasion for such construction.
31. We have already noticed that nothing can be implied which is inconsistent with the express words used. It is said if the words used are sufficiently flexible they must be construed in the sense which, even if less correct grammatically, is more in harmony with the intention. Having regard to the obvious meaning of the words used, there is no occasion for the application of this rule. Reference also is made, though not directly, to the rule of ejusdem generis. As observed by the Supreme Court in Kochuni Moopil Nair v. States of Madras and Kerala, that rule means: when general words follow particulars and specific words of the same nature, the general words must be confined to the things of the same kind asthose specified. It is, however, clearly laid down at the same time that the specific words must form a distinct genus or category and, further, it is not an inviolable rule of law, but it is only permissible inference in the absence of an indication to the contrary.
32. Then again in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. the Supreme Court said:
'When in a statute particular classes are mentioned by name and then are followed by general words, the general words are sometimes construed ejusdem generis, i.e., limited to the same category or genus comprehended by the particular words. But it is not necessary that this rule must always apply. The nature of the special words and the general words must be considered before the rule is applied. ... It follows, therefore, that interpretation ejusdem generis or noscitur a sociis need not always be made when words showing particular classes are followed by general words. Before the general words can be so interpreted, there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted.'
33. This in short is the scope and limitation of the rule of ejusdem generis. It is manifest that the rule is essentially a rule of construction and has to be applied with caution and certainly cannot be pushed too far. It may be properly invoked in a suitable context where a general word follows less general or particular and specific terms of the same nature as itself to be attached with the same meaning and there should be nothing to show in the language or context that a wider or different sense was intended. In the context to which we have already referred this rule cannot be attracted at all. Even otherwise when the words affirmatively indicate the obvious intention of the legislature, invocation of this rule for an inference to the contrary is not at all permissible. A reading of Section 2(g) would make it abundantly clear that spouse and minor child as such are well within the category of dependants. Other persons may be included in the category of dependants only if they are wholly or mainly dependent on the assessee. In the first part, it is shown who are the persons directly within the meaning of the dependants and in the second part it is shown who may be included in that term. Each part is complete by itself and stands independent of the other. There are thus two distinct compartments, of course, in one department of dependants. The words 'and includes', in their context, separate one compartment from the other. We are, therefore, unable to agree with the arguments of Mr. Narasaraju that a different construction ought to be placed on the language of the provision which so clearly shows the obvious intention of the legislature.
34. We then advert to Section 4(ii). Before doing so, we may notice the definition of 'expenditure' and 'taxable expenditure.' We may note that no change has been made in the definitions of these two expressions. 'Expenditure' means 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. Section 2(g) defines 'taxable expenditure' as the total expenditure of an assessee liable to tax under this Act. The charging section is Section 3 and this section has undergone changes. In the proviso to the amended section the following words are inserted, 'derived by the assessee and his dependants', while the proviso before amendment showed that no expenditure-tax shall be payable by an assessee for any assessment year if his income from all sources during the relevant previous year as reduced by the amount of taxes to which such income may be liable under any other law for the time being in force, does not exceed rupees thirty-six thousand. The words 'and his dependants during' are added after the word 'assessee' as to bring the income derived by the assessee's dependants also within the exemption limit of Rs. 36,000. Further, an Explanation is added to the section so as to bring in the income of any dependant of an assessee or the income which he is entitled to receive.
35. Then there is Section 4(ii) which relates to the computation of the expenditure of an assessee liable to tax under the Act. The changes brought about in the first part of this section, viz., Section 4(ii), are the following: By the amendment the following words are deleted 'which, but for the expenditure having been incurred by that other person, would have been incurred by the assessee 'and the words' or any of his dependants' are substituted instead. If follows that amount expended for the dependants even though there may be no obligation on the assessee to meet such expenditure are included in the assessee's taxable expenditure. In the result, the amended Section 4(ii) reads;
'Unless otherwise provided in Section 5, the following amounts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely:-- (i) any expenditure incurred, whether directly or indirectly, by any person other than the assessee in respect of any obligation or personal requirement of the assessee or any of his dependants to the extent to which the amount off all such expenditure in the aggregate exceeds Rs. 5,000 in any year.'
36. The omission of the words referred to and the insertion of 'or any of his dependants' is necessitated obviously by the change in the definition of 'dependant' in Section 2(g).
37. The impugned Section 4(ii) may now be noticed. Prior to amendment, Section 4(ii) read:
'Unless otherwise provided in Section 5, the following amounts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely:--. . . (ii) any expenditure incurred by any dependant of the assessee for the benefit of the assessee or of any of his dependants out of any gift, donation or settlement on trust or out of any other source made or created by the assessee, whether directly or indirectly.'
38. After amendment, Section 4(ii) reads:
'Unless otherwise provided in Section 5, the following amounts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely:--.... (ii) where the assessee is an individual, any expenditure incurred by any dependant of the assessee, and where the assessee is a Hindu undivided family, any expenditure incurred by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee.'
39. It is thus plain that after the amendment a distinction is made between the assessee where he is an individual and where he is not an individual but is a Hindu undivided family. Where the assessee is an individual any expenditure incurred by any dependant of the assessee is included in computing the expenditure of the assessee. But, where the assessee is a Hindu undivided family, only such expenditure incurred by any dependant as is met from or out of any income or property transferred directly or indirectly to him by the assessee is to be included in computing the expenditure of a Hindu undivided family. That can be the only interpretation that the language used is susceptible of. The opening clause of Section 4(ii)., 'the following amounts shall be included in computing' read with the distinction drawn between the two clauses in Section 4(ii) by using the words 'where the assessee is an individual' and 'where the assessee is a Hindu undivided family' leave no scope for argument that the concluding portion of Section 4(ii), viz., 'any expenditure incurred by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee' should govern not only the case where the assessee is a Hindu undivided family but also where he is an individual. It is obvious that the said clause governs only where the assessee is a Hindu undivided family. The amended provision, which is marked by a substantial departure from the previous provision conveys to that effect the obvious intention of the legislature. It is by reason of this amendment that the learned counsel for the assessee argued before our learned brother that there is discrimination between an assessee who is an 'individual' and one who is a Hindu undivided family, as the taxable expenditure of the two classes of assessees and the deductions permissible are different.
40. It was further argued by Mr. Narasaraju that if a dependant in Section 2(g), a spouse or a minor child, is to be considered as one class or category and any person wholly or mainly dependent on the assessee for support and maintenance is considered as another class of dependant, such classification not being based on an intelligible differentia and bearing no reasonable nexus with the object of the Act is unconstitutional and the provision should be struck down as discriminatory.
41. Mr. Narasaraju further assailed the classification on the ground thatthe legislature has not laid down in relation to a spouse any principles forguidance, and, consequently, given naked authority and arbitrary power tothe executive or the taxing authority to pick and choose any spouse at willand subject him or her to tax under the Act and that again is unconstitutional.
42. Mr. Kondaiah, the learned counsel for the department, has contended that under the Act a spouse and a minor child within the meaning of Section 2(g) need not be dependent on the assessee for support and maintenance and yet any expenditure incurred by such spouse and minor child is liable to be taxed, for, according to the scheme of the Act, not only the income derived by the assessee, but also that derived by all his dependants is taken into account under Section 3 as income of the assessee and likewise the expenditure of that entire unit, namely, the assessee and his dependants, is taken into consideration as taxable expenditure of the assessee, of course with various statutory, deductions and allowances. So long as the assessee is an individual and sought to be taxed 'as such, even he be a member of the Hindu undivided family, is subject to the same test. Thus the persons similarly circumstanced are dealt with in the same or similar manner. There can be no question of discrimination. Of course, if the assessee is an undivided family and not 'an individual a different yardstick is prescribed by the amended Act. Prior to the amendment of Section 4(ii) there was no difference in relation to treatment of income and expenditure of a dependant vis-a-vis the assessee, whether an individual or Hindu undivided family. All that was required under the old Section 4(ii) to attract the tax liability of the assessee was that, be it an individual or a Hindu undivided family, the expenditure incurred by any dependant should have been incurred from out of the sources made available by the assessee. Section 4(ii) in the amended form makes distinction by means of classification, for the purpose of the Act, between an assessee who is an individual and the assessee who is a Hindu undivided family. Whereas in the case of the assessee-Hindu undivided family, the expenditure incurred by any dependant shall beincluded in the taxable expenditure of the assessee, only if it was made from or out of any income or property transferred directly or indirectly to the dependant by the assessee, the said condition which was likewise applicable to the expenditure of the dependant of any assessee who is an individual is now dispensed with. In other words, the source of income from and out of which the expenditure is incurred by the dependant is the test in the case of' a Hindu undivided family for judging whether the expenditure incurred by such a dependant is to be included in the taxable expenditure of the assessees, but that has no relevance in a case where the assessee is an individual. Thus the two limbs of Section 4(ii) refer to two separate classes of assessees and the tests applicable to them for the purpose of the Act as already noticed are different. It cannot be said, for reasons to be presently recorded, that the classification for the purpose of the Act is unwarranted or unreasonable. The different tests for persons or category of persons differently circumstanced cannot attract the inhibition of equality clause. As the main attack is on Section 2(g) we have to deal with that question as well. In short it is said that it is this provision which is the source of all trouble and dispute, for if spouse and minor child like any other person were governed by the condition of dependence for maintenance and support in order to come within the definition of a dependant, no question as to constitutionality of Section 4(ii) also would have arisen in this case. Be that what it may, as matters stand, we have to necessarily address ourselves to the question of constitutionality of both the provisions.
43. Section 2(g) as Section 4(ii) is subject to attack on the ground that itviolates Article 14 and Article 19 of the Constitution. It is but elementarythat the legislatures have plenary powers controlled only by the basic concepts of written Constitutions and can exercise their powers as best as theycan within the legislative fields assigned to them by the Constitutionwithout trespassing on the fundamental rights of the citizens in a mannernot justified by the relevant articles dealing with such rights. We havealready stated that taxation laws like any other laws, are equally subject toconstitutional limitations. There is, however, a presumption in favour ofthe constitutionality of an enactment. There are also other presumptions,although all of them are rebuttable, in relation to the fact, that the legislature understands and correctly appreciates the need of its own people, thatits laws are directed to problems made manifest by experience and that itsdiscriminations are based on adequate grounds. We may do well to referto them presently by citing the very authorities which have laid downthe same.
44. Article 14, which is the main article relied on, says that the State shall not deny to any person equality before law or equal protection of laws inthe territory of India. That does not preclude the legislature from making a reasonable classification for purposes of legislation.
45. Willis in his book on Constitutional Law, at page 587, dealing with a classification for taxation, states:
'One reason for this undoubtedly is the urgent need for revenue by the various Governmental agencies. A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods, and even rates for taxation if it does so reasonably.'
46. In Colgate v. Harvey it was observed:
'The boundary between what is permissible and what is forbidden by the constitutional requirement of equal protection of laws is incapable of exact delimitation.
The equal protection clause of the fourteenth amendment does not preclude the States from resorting to classification for the purposes of legislation, so long as the classification is founded upon pertinent and real differences as distinguished from irrelevant and artificial ones.'
47. In Kunnathat Thathunni Moopit Nair v. State of Kerala, Sinha C.J., speaking for the court, said:
'In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in Article 13 of the Constitution.
A taxing statute is not wholly immune from attack on the ground thatit infringes the equality clause in Article 14, though the courts are not concerned with the policy underlying a taxing statute or whether a particulartax could not have been imposed in a different way or in a way that thecourt might think more just and equitable. If the legislature has classifiedpersons or properties into different categories which are subjected todifferent rates of taxation with reference to income or property, such aclassification would not be open to the attack of inequality on the groundthat the total burden resulting from such a classification is unequal. Similarly,different kinds of property may be subjected to different rates of taxation,but so long as there is a rational basis for the classification, Article 14 willnot be in the way of such classification resulting in unequal burdens ondifferent classes of properties. But if the same class of property similarlysituated is subjected to an incidence of taxation, which results in inequalitythe law may be struck down as creating an inequality amongst holders ofthe same kind of property.'
48. The Supreme Court in Ram Krishna Dalmia v. Justice Tendolkar has laiddown the principles to be borne in mind by courts in determining the validityof a statute, when challenged on the ground of violation of Article 14 of the Constitution. S. R. Das, Chief Justice, speaking for the court, observed:
'It is now well established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of the Supreme Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure.'
49. The decisions further establish:
(a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself;
(b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles;
(c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds;
(d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest;
(e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and
(f) that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons forsubjecting certain individuals or corporations to hostile or discriminating legislation.
50. The above principles will have to be constantly borne in mind by the court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws.'
51. We may also refer to Swami Motor Transport (P.) Ltd. v. Sri Sankaraswamigal Mutt, where these principles have been reiterated. In Khandige Sham Bhat v. Agricultural Income-tax Officer, Subba Rao J. (as he then was), speaking for the court, laid down the test to determine whether a law offends the equality clause, Article 14, of the Constitution:
'Though a law ex facie appears to treat all that fall within a class alike, if in effect it operates unevenly on persons or property similarly situate, it may be said that the law offends the equality clause. It will then be the duty of the court to scrutinise the effect of the law carefully to ascertain its real impact on the persons or property similarly situated. Conversely, a law may treat persons who appear to be similarly situate differently; but on investigation they may be found not to be similarly situated. To state it differently, it is not the phraseology of a statute that governs the situation but the effect of the law that is decisive. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine. .. . But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.. . .
It is true, taxation law cannot claim immunity from the equality clause of the Constitution. The taxation statute shall not also be arbitrary and oppressive, but at the same time the court cannot, for obvious reasons, meticulously scrutinise the impact of its burden on different persons or interests. Where there is more than one method of assessing tax and the legislature selects one out of them, the court will not be justified to strike down the law on the ground that the legislature should have adopted another method which, in the opinion of the court, is more reasonable, unless it is convinced that the method adopted is capricious, fanciful, arbitrary or clearly unjust.'
52. The same learned judge, speaking for the court, in Gopal Narain v. State of Uttar Pradesh, stated:
'But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of 'wide range and flexibility' so that it can adjust its system of taxation in all proper and reasonable ways.'
53. It follows from the above that presumptions as to constitutionality of the enactments of the legislatures are well settled, that the power of the legislature to classify for legislation is of necessity of wide range and flexibility, that in view of the inherent complexity of fiscal adjustment of diverse elements the courts permit a larger discretion to the legislature in the matter of classification in a fiscal enactment, that a fiscal enactment is, like other laws, subject to equality clause, that it shall not be patently or in effect arbitrary and oppressive but all the same the court cannot for obvious reasons meticulously scrutinise the impact of its burden on different persons or interests, that the classification should be founded on an intelligible differentia and that the classification or differentia should have a rational relation to the object sought to be achieved by the legislation and that if there be equality and uniformity within each group notwithstanding that owing to some fortuitous circumstances arising out of a peculiar situation some inequality or some advantage over the other might result except that it be plain that such persons are singled out, the law will not be unconstitutional as discriminatory.
54. In the light of the above authorities, it is now to be seen whether the impugned provisions contravene Article 14. The impugned legislation is an enactment levying tax on expenditure. It is a charge on spending, i.e., on the activity of the person in spending the amount. It is not the expenditure of every person that is brought to tax. It is only persons or class of persons who come under certain income group are liable to this charge. A person having no income of his own is not assessable to expenditure-tax whatsoever be the extent of capital that he is possessed of and howsoever high his expenditure might soar in any year. It is only when he gets income and it is not less than Rs. 36,000 after the statutory deductions or allowances his expenditure is brought under levy. In other words, expenditure above Rs. 36,000 is leviable to tax provided the income level of the person satisfies the condition. Once the level is reached, the legislature intends that the assessee should take care that he does not spend more than Rs. 36,000 a year except on pain of being liable to tax and that at a rate progressively increasing to such a deterrent extent that at a certaineven soon the rate of levy becomes equal to the very amount expended. It is plain from the above broad outlines of the scheme of the Act that the legislature by this piece of legislation has sought to check extravagance and waste and promote thrift and economy. The legislation, which has for its object instilling saving habits, promotion of thrift and economy by discouraging extravagance and waste must necessarily contribute to the growth of the national wealth. Of course, as a taxing statute, augmenting the Government revenue is also a necessary consideration. The legislature, in order to achieve its object, has not only to see that there is equitable levy on all assessees but also the devices of evading legitimate tax are discouraged and all loopholes in that behalf are plugged. While judging the constitutionality of the various provisions, these objects of legislation cannot be lost sight of.
55. Now, as we have already noticed, the attack is on Section 2(g) and Section 4(ii)of the Act. The former relates to the definition of 'dependant' of an individual assessee and the latter to the inclusion of the expenditure incurred by dependants in the taxable expenditure of the assessee. It may be noted that the legislature has brought assessees for purposes of the Act under two broad heads: (1) individual and (2) Hindu undivided family For purposes of computing the taxable expenditure, it chose to take into account the expenditure of the dependants and made provision therefor. It had, therefore, to necessarily determine in each case who should be treated as dependants. Section 2(g)(i) and (ii) respectively define the term 'dependant' in relation to the assessee who is an individual and also cine which is a Hindu undivided family. The contention is that whereas dependence for maintenance and support should alone be the 'test of a dependant, the legislature in the definition in Section 2(g) has in relation to an assessee who is an individual regarded his or her spouse and minor-child as a dependant merely by reason of that relationship even though for any other person it laid down the test that he or she should wholly or mainly depend for maintenance and support on the assessee. It is urged that by reason of this difference, the spouse or minor child are discriminated against and the vice of Article 14 of the Constitution is thus attracted. It is not easy to see how, by reason of the classification of persons to be included in the definition of dependant for furtherance of the general scheme of the Act, the ques-tion of banned discrimination would arise. Also it is not easy to understand why technical terms in a statute should necessarily be employed only in their literal sense. If such an obligation on the legislature be accepted there would be no need nor occasion for the legislature to define various expressions used in the Act. But the legislature in every statute does define certain terms and sometimes even refers to other Acts for the meaning and import of certain other terms which have not been defined. Sometimesneed to refer to the General Clauses Act would arise to warrant the legal import and the meaning of general expressions used, where no definition is given in an enactment. All this would have been wholly unnecessary if the dictionary or the literal meaning alone had to prevail. It is significant that even in Section 2(g), which is in relation to a coparcener, the legislature did not lay down any pre-requisite conditions of dependence, whether legal or factual, for maintenance and support. It is not un-often that a coparcener has independent means of support and maintenance and may even become an individual assessee for the purpose of the Act. It may also be noticed that Clause (b) of Section 2(g) which bears specific reference to legal obligation unlike any provision in Section 2(g) is silent on the question of support. All this must necessarily demonstrate that the legislature having regard to the scheme of the Act sought to include in the definition various classes of persons as dependants in each category of assessees, the main division of assessees being that of an individual and a Hindu undivided family. While doing so it had in mind the objects of legislation as warranted by the needs of the people and the times and also the effective way in which they could be fulfilled. Indeed while the Act originally levied the condition of dependence for maintenance and support in relation to spouse and minor children, experience warranted the need for amendment of the said provision, with the result that Section 2(g) has been amended whereby a wider scope is given to that provision by taking in other persons and confining the condition of actual dependence for maintenance and support only to persons other than the spouse and minor child. We have discussed this aspect while interpreting the amended provision. It may also be noticed that this amendment was but one of the several amendments effected for carrying out the main scheme of the Act in an effective manner. In Section 3, while the proviso formerly referred to the income from all sources of the assessee alone, the amendment included the income derived by the dependants also, in the income of the assessee if he was an individual. But in the case of a dependant in a Hindu undivided family, the income of the dependant could be included in the income of the assessee only if it was derived from or out of the property of the undivided family. Further, as to the expenditure, whereas in the unamended provision dependant's expenditure could have been taken into account only if it were a liability of the assessee, Section 4(ii) in the amended form provides that the amounts expended by the dependant, even if they be in relation to his personal requirements or obligation, ought to be taken into consideration for computing the taxable expenditure of the assessee. As regards the basic allowance provided for under Section 6, the amended provision specifies that it is the allowance not only for the assessee himself but also for all his dependants. Thus it is plain that all the said amendments were effected togave effect to one integrated plan. The legislature in order to effectively carry out the purposes of the Act thought thus of including necessarily thespouse and minor child of an individual assessee in the unit of dependants and made other persons dependants only on their satisfying the test ofdependence and sought to include the income of all dependants in the income of the assessee and so also their expenditure irrespective of the source from which it was made. Whether this classification in Section 2(g)and the distinction created in Section 4(ii) between the individual assessee and Hindu undivided family is permissible in law having regard to thescheme and does not smack of alleged vice of Article 14 is the question. Article 14, which forbids class legislation, does not forbid reasonable classification for purposes of legislation. In order that the classification is reasonable or permissible it must be founded on intelligible differentia and that differentia must have a reasonable relation to the object sought to be achieved. There should be a nexus between the basis of classification and the object sought to be achieved. We have detailed above the objects which the Act is intended to achieve and also the classification and how intimately is the classification connected with the said objective. It must be borne in mind that in fiscal enactments a large discretion is allowed in the matter of classification having regard to the inherent complexity of the fiscal adjustments of diverse elements. The Act, it may be seen, has classified the variousassessees into two broad heads: (1) an individual and (2) a Hindu undivided family. By no stretch of imagination could it be said that these classifications are not reasonable or have no nexus to the object to be achieved indeed, these are the well known classifications in the taxation laws. Further under each head it has categorised dependants who should go with them, because the income of the dependants also has to be included having regard to the avowed purpose of the Act. It must be held that the classification of dependants also is reasonable. In the case of an individual assessee his dependants are necessarily the spouse and minor child and the other persons may also be dependants by reason of their being dependent on him for support and maintenance. That is how the classification is made. The legislature, while making laws, always takes into account the social and economic set up of the country, the condition of the people and their requirements and the devices usually adopted in the matter of evasion. If the devices of evasion so warrant, it is always competent to them to prescribe as fiction so that any scope for devices of evasion may successfully be averted and the purposes of the Act be achieved. While enacting the present piece of legislation Parliament had all these basic facts in mind. It is on that ground that they have carefully categorised the various types of dependants. Further, experience of Parliament has taught them that, unless the spouse and minor child are necessarily brought intothe unit, the purpose of the Act would not be effectively carried out on account of, interal alia, the various possible devices that may thwart the purpose. As observed by Subbarao J, (as he then was), while delivering the opinion of the court in Balaji v. Income-tax Officer:
'A wife in India, particularly if she be illiterate--a large majority of them are illieterate--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 people and their requirements, with the awareness of this particular widespread 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. On the contrary, there is a direct decision of the Madras High Court in Amina Utnma v. Income-tax Officer, Kozhikode sustaining the said provision on the ground of reasonable classification. Rajagopalan J., speaking for the Division Bench, after considering the relevant decisions on the subject, observed at page 150 thus:
'The reasonableness or otherwise of a classification has to be decided with reference to all the circumstances of the case including the social and economic structure prevalent in the area where the taxing statute is in operation.... An attempt to prevent by legislation an evasion of just tax liability and the necessary classification to give effect to that object cannot, in our view, be termed unreasonable.' With respect we give our full assent to the said observations.'
56. We may also notice the following opinion of Justice Holmes in Albert A. Hoeper v. Tax Commission of Wisconsin, who dissented from the majority:
'... that this case cannot be dispensed of as an attempt to take one person's property to pay another's debts. The statutes are the outcome of a thousand years of history. They must be viewed against the background of the earlier rules that husband and wife are one, and that as the husband took the wife's chattels he was liable for her debts. They form a system with echoes of different moments none of which is entitled to prevail over the other. The emphasis in other sections on separation of interests cannot make us deaf to the assumption in the sections quoted of community when, two spouses live together and when usually each would get the benefit of the income of each without inquiry into the source. So far as the Constitution of the United States is concerned the legislature has power to determine what the consequences of marriage shall be, and as it mayprovide that the husband shall or shall not have certain rights in his wife's property and shall or shall not be liable for his wife's debts it may enact that he shall be liable for taxes on an income that in every probability will make his wife easier and help to pay his bills. Taxation may consider notonly command over but actual enjoyment of the property taxed.... And when the legislature clearly indicates that it means to accomplish a certain result within its power to accomplish it is our business tosupply any formula that the elegentia juris may seem to require..........The statute is justified also by its tendency to prevent tax evasion.'
57. Of course these remarks relate to a country where prevail somewhat different social and economic conditions from those of our country. But the principle laid down affords much guidance for our purposes also. We are inclined to the view that if the legislature has in the light of pastexperience included unconditionally the spouse and minor child in the definition of dependants under Section 2(g) for carrying out effectively the purposes of the Act, this classification can in no sense be unreasonable but only just and legitimate and based on intelligible differentia and further that differentia has a reasonable nexus with the object to be achieved.
58. An argument has been raised on the basis of a comparison between the wife of an individual assessee and the wife of a karta of a Hindu undivided family, that the law has not treated both the dependants alike. It must be borne in mind that the vice of discrimination has to be judged having regard to the position in which the persons similarly circumstanced are placed. There can be no question of discrimination if the persons in two different categories are not treated alike. It is plain that under the Act wherever the assessee is an individual his dependants will be treated in the same way as any other dependant of an individual assessee. Amongst the individual assessees the dependants of each would be entitled to similar treatment under the Act. Thus all equals are treated alike. There can, therefore, be no question of discrimination. It is well-settled that for ascertaining the vice of discrimination comparison of persons in different categories is of no avail. We may also state that for similar reasons the discrimination complained of as having been created among dependants under Section 4(ii) in relation to expenditure incurred by any dependant of the assessee where he is an individual and that incurred by any dependant of a Hindu undivided family does not offend Article 14. Parliament in its wisdom has thought that in the case of a dependant of an individual assessee the source of income from out of which the expenditure is met by the dependant should not be a point for consideration whereas in thecase of a dependant of a Hindu undivided family it should be material. The two categories are different. It cannot be said that both thedependants are similarly circumstanced. There can thus be no basis for comparison between the two for purposes of Article 14.
59. The other point raised in this case is that, as the legislature has not laid down any rules for guidance in the matter of choice of spouse as an assessee for purposes of expenditure-tax, Section 2(g) should be struck down on the ground of arbitrariness. It should be remembered that, having regard to the incidence of taxation, whether the husband is chosen as the assessee or the wife, in either event the tax to be paid will be the same. Unless the limit of Rs. 36,000 is crossed no tax is leviable. It is the income from all sources, whether of the assessee or of the dependant and the expenditure made directly or indirectly by the assessee and by his dependants, that is to be taken into account with the result that the total expenditure shall have to be taxed as one unit. It becomes, therefore, immaterial whether the assessee is the husband or the wife. It cannot, therefore, be said that an arbitrary power has been given to the expenditure tax authority or that the legislature has abdicated the function of legislating by not providing for such contingency.
60. Mr. Narasaraju has argued that the spouse, in this case, the Princess, lives separately and maintains herself from her own sources of income and she could not, therefore, be categorised as dependant. Apart from the fact that there is nothing to show from the returns filed by the assessee that his, wife, the Princess, was maintaining herself from her own sources of income and not from or out of any income or property transferred directly or indirectly by him to her, the very fact that she is the spouse of the assessee brings her within the meaning of dependant under Section 2(g) and her expenditure irrespective of the fact from which source the income has come has to be included in the taxable expenditure of her husband. We have already said that Parliament after some experience of the working of the Act has come to the conclusion that the wife and minor child are necessarily to be included in the definition of dependants of an assessee who is an individual. Indeed, Parliament, has considered them as constituting the integral unit of the family and this for good reasons, viz., having regard to the social conditions of the country for effective working of the legislative enactments and avoiding devices of evading tax. We have also said that Parliament was concerned with the object of promoting thrift in the family expenditure, It was, therefore, necessary to include the income and expenditure of these dependants in the income and expenditure of the assessee and that is what Parliament has done. When Parliament, after taking into account the historical background, the family relationship, the social and economic conditions of the family, has made such classification to effectuate the purposes for which the Act was brought, we are unable to accept the contention that the classification suffers from the vice ofdiscrimination and hit by Article 14. It is clear to our minds that the amendments introduced are not unconstitutional. They were intended to check the evasion, to augment the revenue, to promote thrift and economy, the result of which will ultimately benefit the community or society at large. Again, if Parliament has not prescribed any rules in relation to the choice of the assessee in the case of spouses the law does not become bad on that account. The taxing authority may select the assessee from one of the spouses as only one of the spouses can be made an assessee and not both. The incidence of tax would be the same whether one is selected as the assessee or the other. We, therefore, reject the contention based on discrimination in relation to Sections 2(g) and 4(ii) of the Act.
61. It is then contended that the levy on the expenditure of the petitioner's wife on whom the petitioner has no control amounts to expropriation of property of the assessee. We have already noticed that the tax is levied on the activity of spending and for this purpose, according to the scheme of the Act, the expenditure of the assessee and the dependant as defined in the Act have to be taken into account. Once we hold that the wife and minor child, by reason of their relationship, can reasonably and justifiably be included in the definition of dependant, for their being included in the family unit for purposes of taxation, the question of expropriation does not arise at all. Having regard to the economic and social conditions of this country, the wife is always supposed to be a dependant on her husband. It is on that basis that the legislation has proceeded. When the legislature which has the right to pick and choose persons and methods and rates of taxation has exercised its powers within the permissible limits and the classification has been founded on intelligible differentia and that has a rational relation to the object sought to be achieved by the legislature and there is equality and uniformity within each group, merely because owing to fortuitous circumstances arising out of peculiar situations some inequality has resulted, unless it be claimed that such persons are singled out, the law will not be unconstitutional as discriminatory. It has been so held by the Supreme Court in the case to which we have already referred. We do not think that there is any unreasonable restriction on the right of the assessee to hold property for he is called upon to pay the tax due under the provisions of the Expenditure-tax Act. The legislation cannot be impugned as confiscatory in nature merely for the' reason that the spouse has been treated as dependant and the expenditure incurred by her not from or out of the income of the property transferred to her by the assessee, has been taxed. As already noticed, the concept of family includes the spouse and the minor child. That being necessarily the unit of the family the assessee is made liable for the expenditure of his dependants even though it may not be from or out ofthe source of income traceable to the assessee. The wife by reason of her marriage necessarily gets connected with the family. One cannot legitimately complain of the statutory and legal incidence flowing from such relationship. It is clear that the law, for purposes of levying expenditure-tax, has taken the total expenditure of the assessee and the dependants as a whole as they are presumed to constitute one unit and allowed deductions and allowances as permissible under Sections 5 and 6 of the Act. So long as the statute is held valid it is not open to attack on the ground of some hardship or unequal burden cast on the assessee merely on the basis that the expenditure for which he is being taxed was not from or out of the source of his income and was made by a person who is no other than his wife. We are of the view that the arguments founded on Articles 14, 19and 31 of the Constitution of India against the constitutionality of the Act are not tenable.
62. At the stage of arguments, it was brought to our notice that subsequent to the disposal of the writ petitions, the Expenditure-tax Officer finalised the assessments and assessed the assessee to tax by including the expenditure incurred by the Princess in computing the expenditure of the assessee liable to tax under the Act and that the appeals preferred against the assessmentorders of the Expenditure-tax Officer are pending. In other words, the need for which the writs of prohibition were filed does no longer exist. They were writs filed at the stage when notice under Section 16 of the Act was issued and it was prayed that the Expenditure-tax Officer should bedirected to forbear from taking or continuing any action under that notice. That stage has already passed. The writs of prohibition thus become infructuous. It is, however, still open to the assessee to raise before the Appellate Assistant Commissioner such pleas as may be available to him and claim such deductions and allowances as may be permissible under Sections 5 and 6 of the Act with reference to the expenditure incurred by the assessee's wife. It will also be open to the Assistant Commissioner to go into all relevant pleas which the assessee may legitimately take before him.
63. So far as these appeals are concerned, for the reasons recorded by us, we are unable to find any merits therein. The appeals are, therefore, dismissed with costs with the above remarks. Advocate's fees, rupees two hundred in each appeal.
64. I have had the advantage of going through the judgment of my learned brother, Obul Reddi J., and it is needless for me to set out the facts once again as they are stated fully in the said judgment.
65. The first question for determination is whether the taxing authority has jurisdiction to issue notice under Section 16 of the Expenditure-tax Act,as amended in 1959 (hereinafter referred to as 'the Act'), which is analogous to Section 34 of the Income-tax Act, 1922, proposing to reopen the previous assessments. The ground for reopening the prior assessments is that the assessee omitted or failed to disclose the expenditure of his wife who was his dependant. The attention of the assessee was pointedly drawn in the printed form of the return, annexure V of which requires the assessee to disclose the names of the individuals-dependants, setting forth their relationship, age, etc.; but the assessee did not mention the name of his wife as a dependant. It is now argued on behalf of the assessee that the said omission by him does not really affect the position because his wife had already submitted returns of her individual expenditure separately before the same officer. In other words, the contention of the assessee is that the fact was already disclosed by him and that there was no omission on his part which justifies the reopening of the assessments. On a perusal of the returns submitted by the wife, we have not been able to find any information on record that she is described as the wife of the assessee. Hence, there is nothing before the assessing officer inviting his attention to the fact that the present assessee had a wife. It is further argued on behalf of the assessee that he was justified in not disclosing the name of his wife as a dependant because, according to him, she was living on her own resources and that she was not a dependant under law. This contention cannot be accepted because it is a matter of inference to be drawn by the officer. It was, therefore, the duty of the assessee to have mentioned the name of his. wife in his return and it was open to the assessee to have made a further qualifying statement that, though she was his wife, she was living apart from him and met her expenditure solely out of her own separate incomes, and that she was not being wholly or partly maintained by him as required by law. If this statement had been made by the assessee, it was thereafter the duty of the taxing authority to draw the legitimate inference from the facts disclosed. The fact that the assessee had a wife is a primary fact which it was the duty of the assessee to have disclosed, while the question whether she would be a dependant as contemplated by the Act is a matter of inference to be drawn by the officer. Hence, applying the principle stated by the Supreme Court in Calcutta Discount Co. v. Income-tax Officer, I hold, agreeing with my learned brother, Obul Reddi J., that the notice-issued under Section 16 of the Act is valid. The order of our learned brother Jaganmohan Reddi J. (as he then was), dismissing the writ petitions (which are now under appeal), on this ground is, therefore, correct and does not call for any interference. This conclusion would have been sufficient for the disposal of the writ petitions. But our learned brother, Jaganmohan Reddi J. (as he then was), gave findings on other questions also to the effect that the assessee's wife is a dependant under law and that her expenditure also should be included in the taxable expenditure of the assessee even ifshe was not being maintained by the assessee. It has therefore become necessary in these appeals to go into the said questions. On these questions, my learned brother, Obul Reddi J., agreed with the views expressed by our learned brother, Jaganmohan Reddi J, (as he then was), but, with great respect, I am unable to agree with the said conclusions on this part of thecase and I would, therefore, give my own reasons:
Section 2(g) of the Act, which defines a 'dependant', reads as follows:
'2. (g) 'dependant' means--(i) where the assessee is an individual, his or her spouse or minor child, and includes any person wholly or mainly dependent on the assessee for support and maintenance.'
Prior to the amendment introduced in 1959, this definition read as follows:
'2. (g) 'dependant' means-
(i) where the assessee is an individual, his or her spouse or child wholly or mainly dependent on the assessee for support and maintenance.'
66. The interpretation placed by Sri Narasaraju on behalf of the assessee is that, both before and after the amendment, the qualifying expression 'wholly or mainly dependent on the assessee for support and maintenance ''qualifies all the preceding classes of persons mentioned therein, namely, spouse, child or any person. The other construction sought to be placed by Sri Kondaiah on behalf of the revenue is that, though the said words 'wholly or mainly dependant, etc.' qualified the words 'spouse' or 'child' before the amendment, they were no longer intended to qualify 'spouse' or 'child' after the amendment but that they refer only to the third class which has been introduced, namely, any person, that is,other than spouse or minor child. The contention on behalf of the revenue has been accepted by my learned brother, Obul Reddi J. But, I am inclined to accept the construction suggested on behalf of the assessee. If, so much is conceded, namely, that the qualifying words 'wholly or mainly depend-dent on the assessee for support and maintenance' apply to his or her spouse or child, as the definition stood before 1959 I do not find any ostensible reason for coming to a different conclusion after the amendment merely because the definition of the word 'dependant' is widened by the inclusion of the words 'any person' other than a spouse or a child. The main ground on which the learned counsel for the revenue bases his argument is that there are certain observations made in the speech of the Union Finance Minister and in the memorandum of notes relating to the respective amendments which go to show that in the case of a spouse or a child the qualification that they should be dependent for their support and maintenanceon the assessee has been dispensed with. I do not think it is permissible for the learned counsel to rely upon these notes or speeches as an aid to the construction of the plain language of the definition. It was further contended by the learned counsel for the revenue that the object of this amendment is to increase the revenues and that the legislature, therefore, wanted to include the expenditure of the spouse irrespective of the fact whether the said spouse was being maintained by the assessee or not. If the object was to augment the revenues, it was certainly achieved by including persons other than the spouse or the child who are maintained by the assessee and there is really no need to go further and hold that the expenditure of a spouse or a minor child has to be included in the assessee's expenditure irrespective of the fact whether the assessee maintained the spouse or child or not. It was further contended by the learned counsel that the amendment was introduced to prevent evasion of tax. But there is no whisper in the objects and reasons of the amending Act that any evasion of the tax was sought to be remedied by the amending Act. If the above material, namely, the speech of the Finance Minister and the notes pertaining to the proposed amendment are ignored, I do not find any difficulty in coming to the conclusion which I did. The scope and object of the Expenditure-tax Act is to tax the expenditure of an individual assessee and that expenditure may be incurred on his own behalf or on behalf of his near relatives like spouse or a minor child or any other member or non-member of the family. In all these cases, the crucial test is whether it is expenditure incurred by the assessee. Section 2(g) of the Act which defines 'expenditure' also indicates that the expenditure should be incurred by the assessee. Section 3, which is the charging section, also emphasises the fact that the expenditure is one incurred by the individual. The word 'dependant' may involve various elements, such as dependency in the matter of merely taking advice or mere protection. But the test laid down by the Act is that the assessee should maintain the dependant. Hence, the essential test is that the expenditure in relation to the maintenance of the particular dependant must be incurred by the assessee. It, therefore, excludes all expenditure which has been incurred by the members of the family out of their own resources and separate property. For instance, the spouse of a husband assessee, as in this case, who is living apart from her husband is maintaining herself out of her own separate property. Similarly, a minor child who is not living with the assessee may be maintained out of his own separate estate if he is possessed of such an estate. There may be a discarded spouse who is not being maintained by her husband, but who is maintained on her own resources. The legislature would never have intended to include the expenditure of a person who is not really dependent upon the assessee. The very word 'dependant' carries with it the inherent quality of being dependent upon the assessee. On the other hand, if there is no connection or nexus between the assessee and the expenditure, it would mean that a person is a dependant of an assessee while in fact, he is not a dependant. It would, therefore, be a contradiction in terms to describe a person as dependant when he is really not a dependant. The contention of Sri Kondaiah on behalf of the revenue is that, by virtue of the very personal relationship and the personal law, the wife or the child is presumed to be a dependant of the assessee and it is no longer necessary to find out whether the said dependant is actually being maintained by the assessee. If this test is to be employed in the case of an assessee, who is the wife, her spouse, namely, her husband, cannot be said under any personal law to be her dependant and it has got to be shown that the husband who is the spouse of the assessee is indeed wholly or mainly being maintained by the assessee-wife. On the other hand, the contention on behalf of the assessee does not lead to any such anomaly. Even as a matter of construction, the word 'include' indicates that the scope of the existing definition is merely enlarged. In the leading case of Dilworth v. Commissioner of Stamps, it was held by the Privy Council at pages 105 and 106 that:
'The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. ... It may be equivalent to 'mean and include'......'
67. Hence, the amending Act merely included any person other than a spouse or a child who is also maintained by the assessee, that is, in addition to a spouse or a minor child who are also being maintained by the assessee. It cannot, therefore, be interpreted as a matter of grammatical construction that the qualifying clause refers only to the last class immediately preceding 'any person', but not to the previous classes of persons. If the context requires that the qualifying clause should refer to all the previous classes of persons, it should be so interpreted. Reference may be made in this connection to the case of the Supreme Court in Regional Provident Fund Commissioner, Bombay v. Shree Krishna Metal Manufacturing Co., in which it is held that the ordinary rule of grammar on which a construction is based cannot be treated as a rule which must always and in every case be accepted without regard to the context and that when the context definitely suggests that the relevant rule of grammar is inapplicable, then the requirement of the context must prevail over the rule of grammar. Applying the said rule, the Supreme Court, disregarding the rule of grammar, interpreted aqualifying clause with reference to the context in construing certain words of the Employees' Provident Funds Act.
68. Again, In the Matter of reference under Article 143 of the Constitution of India, in interpreting Article 194(1) of the Constitution, which reads as follows: 'Subject to the provisions of this Constitution and to the rules and standing orders regulating the procedure of the legislature, there shall be freedom of speech in the legislature of every State', it was held that:
'The adjectival clause 'regulating the procedure of the legislature' governs both the preceding clauses relating to 'the provisions of the Constitution 'and 'the rules and standing orders'.'
69. Applying these rules of construction, the adjectival clause 'wholly or mainly dependent on the assessee for support and maintenance' occurring in Section 2(g) of the Act must be held, in the context, to govern each of the preceding classes of persons mentioned in the section, namely, his or her spouse, and minor child also, and not merely the word 'person' immediately preceding the said clause. Out of the two constructions placed before the court, it is settled law that in interpreting a fiscal statute that construction which is most beneficial to the assessee should be adopted by the court. It is also contended by the learned counsel for the assessee that if his contention is accepted, it would not violate the provisions of Article 14 or 19 of the Constitution of India and that it is equally settled that in interpreting a statute that construction which does not make the provisions of a statute unconstitutional should be accepted in preference to any other construction which would tend to make it unconstitutional. For these reasons, I agree with the learned counsel for the, assessee that on a proper construction of Section 2(g) of the Act, the qualifying clause 'wholly or mainly dependent on the assessee for support or maintenance' not only qualifies the word 'person' which immediately precedes the said clause but also the earlier words 'his or her spouse or minor child'. In this view of the matter, the question whether the assessee's spouse is wholly or mainly being maintained by the assessee has got to be determined by the assessing authority during the course of his investigation.
70. The other provision of the Act which falls for consideration is Section 4(ii), which reads as follows:
'4. Unless otherwise provided in Section 5, the following amounts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely: ....
(ii) where the assessee is an individual, any expenditure incurred by any dependant of the assessee, and where the assessee is a Hindu undivided family, any expenditure incurred by any dependant from or out of anyincome or property transferred directly or indirectly to the dependant by the assessee.'
71. Section 3(1) provides that the expenditure incurred by any individual or Hindu undivided family shall be charged at the rates specified for the relevant year. Section 4(ii) mentions what other amounts should be included in computing the expenditure of an assessee. Sub-section (ii) of Section 4(ii), with which we are concerned, seeks to include the expenditure of a dependant either when the assessee is an individual or when the assessee is an undivided family. The contention of Sri Kondaiah on behalf of the revenue is that the expression 'from or out of any income or property transferred directly or indirectly to the dependant by the assessee' qualifies only a dependant in a Hindu undivided family but not the earlier clause referring to a dependant of an individual, while the learned counsel, Sri Narasaraju, for the assessee, contends that the said qualifying clause refers to both the classes, namely, dependant of an individual as well as dependant of a Hindu undivided family. In the light of the interpretation given by me of the word 'dependant', that is, as a person who is wholly or partly maintained by the assessee, the above Section 4(ii) has necessarily to be interpreted in the manner contended for on behalf of the assessee, namely, that the expression 'from or out of any income or property transferred directly or indirectly to the dependant by the assessee' applies equally to the dependant of an individual assessee as well as to the dependant of a Hindu undivided family which is the assessee. There would have been no difficulty in the interpretation of Sub-clause (ii) of Section4(ii) if there had been a comma between the word 'dependant' and the qualifying expression 'from or out of any income or property transferred directly or indirectly to the dependant by the assessee'. But it has been repeatedly held that the guiding factor in the interpretation of a statute is really the context and not the presence or absence of the punctuation marks. In Aswini Kumar Ghose v. Arabinda Bose', it was held that:
'Punctuation is after all a minor element in the construction of a statute, and very little attention is paid to it by English courts... Punctuation may have its uses in some cases, but it cannot certainly be regarded as a controlling element and cannot be allowed to control the plain meaning of a text.'
72. I, therefore, hold, disagreeing with my learned brother, Obul Reddi J., that the qualifying clause, namely, 'from or out of any income or property transferred directly or indirectly to the dependant by the assessee' refers to each of the cases, namely, (i) where the assessee is an individual, any expenditure incurred by any dependant of the assessee; and (ii) where the assessee is a Hindu undivided family, any expenditure incurred by any dependant.
73. The third point argued by Sri Narasaraju is that if the above two sections are interpreted in the manner suggested on behalf of the revenue, the provisions would offend Articles 14 and 19 of the Constitution of India. But, in the view I have taken of the construction of the above provisions, this question does not arise, and, hence, I do not wish to express any opinion on the said question.
74. In view of my finding on the first question, I agree with my learned brother, Obul Reddi J., that the appeals have to be dismissed with costs.