BHARGAVA J. - These two connected references arise out of one and the same proceeding taken under section 34 of the Income-tax Act. The assessee is a Hindu undivided family going by the name of Messrs. Shridhar Udai Narayan and until the 22nd of January, 1947, when Shridhar was the karta of the assessee family. For the year 1946-47 the karta Shridhar filed a return on December 18, 1946, showing a total income of Rs. 5,713 and on the basis of that return the tax was assessed by an order dated 13th May, 1947. This order was thus passed on the basis of the return filed by Shridhar but after he had died. Later on, proceedings for the assessment year 1947-48 came up before the Income-tax Officer and while dealing with those proceedings, he got definite information that income for the year 1946-47 had escaped assessment when the original assessment was made. He, therefore, issued a notice under section 34 of the Income-tax Act which was addressed to the Hindu undivided family Shridhar Udai Narayan. The notice was served on 6th of February, 1948, on the eldest male member of the family Udai Narayan Trivedi who according to the Tribunals statement of the case had become the karta of the family by that time. Udai Narayan had been born on 5th of July, 1930, so that on the date of service of the notice he was about 17 years and 7 months old. He had, therefore, not attained majority under the Indian Majority Act. In response to the notice served on him, Udai Narayan filed a return on 10th March, 1948, showing an income of Rs. 19,713 and in that return described himself as the karta of the assessee family. The Income-tax Officer did not accept the income shown in the return and computed the total income of the assessee at Rs. 47,745 and assessed the tax on that basis by his order dated 30th March, 1948. The assessee went up in appeal against that order to the Appellate Assistant Commissioner mainly on the ground that the notice which was served on Udai Narayan on 6th of February, 1948, had not been validly served as Udai Narayan on that date was not an adult member of the assessee family so that the proceedings for assessment in pursuance of that notice were void. This argument was accepted by the Appellate Assistant Commissioner and he set aside that assessment. Thereupon, there was an appeal before the Tribunal on behalf of the department and the Tribunal by its order dated July 13, 1950, held that the service of notice on Udai Narayan was legal and proper as he was an adult member of the assessee family on the date of service of the notice. On this finding the Tribunal remanded the case to the Appellate Assistant Commissioner for disposing of the appeal on merits. At this stage two different proceedings started. Against the appellate order of remand the assessee moved an application under section 66(1) praying that a question of law be referred to this court. The Tribunal accepted the application and has, therefore, referred to this court the following question :
'Whether on the facts and in the circumstances stated above service of the notices on Udai Narayan was a valid service within the meaning of section 63 of the Income-tax Act ?'
This question is the subject-matter of Miscellaneous Case No. 38 of 1952.
The second proceedings that started at this stage was the decision of the appeal on merits by the Appellate Assistant Commissioner in pursuance of the appellate order of the Tribunal dated 13th July, 1950. The Appellate Assistant Commissioner when disposing of the appeal after remand upheld the assessment of tax on the Hindu undivided family which had been made on the basis of the return that was filed by Udai Narayan on 10th of March, 1948. That appellate order of the Appellate Assistant Commissioner was again challenged by an appeal by the assessee before the Appellate Tribunal and in this appeal the Appellate Tribunal permitted the assessee to raise a new question which had not been raised at the earlier stage of appeal before it or at any stage before the Appellate Assistant Commissioner. The point raised whether he could validly represent the assessee Hindu undivided family during the assessment proceedings. The Tribunal allowed this point to be raised on the basis that it was a question of law only and thereafter the Tribunal came to the finding that the return dated 10th March, 1948, which had been filed by Udai Narayan was not a valid return as he was not a major and was not the karta of the assessee family. The Tribunal further held that on that date Udai Narayan could not validly represent the assessee family. On these findings, the Tribunal quashed the tax which had been imposed on the assessee family on the basis of the notice issued under section 34 of the Income-tax Act. Thereupon, the Commissioner of Income-tax moved the Appellate Tribunal under section 66(1) and the Tribunal has referred the following two further questions for our opinion which are the subject-matter of Miscellaneous Case No. 332 of 1953. These questions for convenience may be numbered as questions Nos. 2 and 3 while the question referred in Miscellaneous Case No. 38 of 1952 may be conveniently numbered as the first question. The two questions are :
'(2) Whether on the facts and in the circumstances of this case the return filed by Udai Narayan who was a minor at the time of filing it as karta of the assessee Hindu undivided family was legal and valid ?
(3) Whether on the facts and in the circumstances of the case the said Udai Narayan could validly represent the assessee Hindu undivided family during the assessment proceeding ?'
In dealing with the three questions which have been referred to us, we have to keep in view a distinction that appears to have been made in the various relevant Acts between the words 'adult' and 'major'. Amongst Hindus, the question when a person becomes a major and for what purposes used to be determined by the principles of Hindu law until the legislature intervened and passed the Indian Majority Act, 1875 (IX of 1875). Section 3 of that Act laid down that under certain circumstances a minor is to attain majority on completing the age of 21 years whereas in all other circumstances he is to be deemed to have attained majority when he shall have completed the age of 18 years and not before. Section 2 of that Act made a little exception of the cases in which the provisions of section 3 were to apply laying down that the provisions of this Act were not to affect the capacity of any person to act in matters of marriage, dower, divorce and adoption, of religions, of religious rights and usages of any class of citizens of India or the capacity of any person who before that Act come into force had attained majority under the law applicable to him. The language of section 2 appears to imply that, for matters not enumerated in that section, if a question arose whether a person had or had not attained majority, the determining factor would be the principle laid down in section 3 of that Act. The effect of this we shall consider at the appropriate time when we deal with the questions referred to us. At this stage what we have to notice is that though the Indian Majority Act had come into force in 1875 and the Income-tax Act now current was passed in the year 1922, the Income-tax Act in section 63 used the word 'adult' and not the word 'major'. In section 63(2) of the Income-tax Act, a provision has been made for addressing a notice or requisition in the case of a Hindu undivided family to the manager or any adult male member of the family. It appears to us that if the intention had been that the notice must be addressed to a person who had attained majority under the Indian Majority Act the legislature could very conveniently have used the expression 'any male member of the family who has attained majority', and when the legislature instead that the expression 'adult male member of the family' it was intended that the expression 'adult male member of the family' it was not be construed with reference to the provisions of the Indian Majority Act of 1875. The Indian Majority Act had been passed almost solely with the purpose of declaring when a citizen of India was to attain majority and if there had been the intention of the legislature that in the case of a Hindu undivided family who had attained majority care would have been taken to use language which would have clarified that position. Instead, the legislature used the word 'adult' and the consequently in interpreting the meaning of the word 'adult' we should not make a reference to the provisions of the Indian Majority Act.
'Adult' in the dictionary has been defined as connoting a person who has attained the age of discretion. The Tribunal in the present case has held that in India the age of discretion is normally considered to be 16 years in the case of a male person. This view was held by the Tribunal on the basis of the opinion expressed by the Calcutta High Court in Hari Charan Singh v. Chandra Kumar Dey and on the basis of the view expressed by this court in In re, De Souza. In the latter case the Income-tax Officer had issued by means of a registered post acknowledgment due a notice under section 22(2) and the notice was delivered by the postal authorities to the son of the assessee who was found to be a minor and possessed of ordinary intelligence. It was held that in proper circumstances a minor son might be an agent of the father and that the service of the notice was a good service. In both these cases, it was held that, when the word 'adult' is to be interpreted, the main determining factor is not the actual age in years but the circumstance whether the person in respect of whom the word 'adult' is being interpreted has or not attained discretion. We think that this test laid down in those cases is the appropriate test which should be applied. In the case before us, the notice was served on Udai Narayan who was about 17 years and 7 mounts of age at that time. Within a period of 5 months, he would have even attained majority under the Indian Majority Act. Further, he was the eldest male member of the family and the subsequent conduct of his in filing the return and in contesting the proceedings before the Income-tax Officer and the other authorities showed that he was in fact managing the affairs of the family in his capacity as the eldest member. In fact, the circumstance that he did file a return in pursuance of the notice, itself leads to the inference that he had attained sufficient discretion at the time of receipt of the notice to understand the implications of this notice and to comply with it by actually filing are return. In the present case, therefore, it is clear that at the time when the notice was served on Udai Narayan he had attained sufficient discretion for the purpose of his being held to be an adult member of the Hindu undivided family for receiving notice under the provisions of the Income-tax Act. In these circumstances, we must hold that the Tribunal was quite right in the view that Udai Narayan was an adult member of the assessee family and notice was validly served on him so that the first question which is the subject matter of Case No. 38 of 1952 must be answered in the affirmative.
The second question that has been referred to us and which is the first question in Miscellaneous Case No. 332 of 1953 requires us to determine the validity of the return which was filed by Udai Narayan purporting to act as karta of the assessee family. It would at first appearance seem to be necessary that in order to answer this question we would have to decide whether Udai Narayan was or was not competent to act as karta of the assessee family, but it seems to us that in the circumstances of this case we need not go into this aspect of this question of law. As we have indicated earlier, the question whether Udai Narayan, who had not attained the age of majority under the Indian Majority Act, 1875, could not legally function as the karta of the Hindu undivided family may have to be determined by interpreting the language of the provisions contained in the Indian Majority Act, but in proceedings under the Income-tax Act where a return has been filed, the return may still be legal and valid even though it may not have been filed by the person entitled in law to function as the karta of the Hindu undivided family. It seems to us that the case before us is of such a nature that in this case the return filed by Udai Narayan should be held to be legal and valid, even if we were to accept the proposition that he was not entitled in law in function as the karta of the assessee family. The facts as it would given by the Appellate Tribunal show that, at the relevant time when the notice was validly served on Udai Narayan under section 34 of the Income-tax Act, there was no male member of the Hindu undivided family who had attained majority under the Indian Majority Act. There was no doubt the mother of Udai Narayan was a major, but she could not function as the karta of the Hindu undivided family under the Hindu law. The result is that, after the death of Shridhar and at the time when the notice under section 34 was served on Udai Narayan, this Hindu undivided family had no member who could legally function as the karta of the Hindu undivided family if it be held that a male member who has not attained majority under the Indian Majority Act cannot function as such. Yet the facts given show that it was Udai Narayan who was in fact managing the affairs of the family. It was he who received the notice which was addressed to the family on behalf of the family. Thereafter it was he who filed a return on behalf of the family indicating that he was in charge of the accounts and affairs of the family and was in a positing to file that return on behalf of the assessee family. He was, therefore, the de jure karta, an assessment on the Hindu undivided family can be made at all and, if so, how. On the face of it, it would appear that if an assessment can at all be made it must be made by the income-tax department sending notices and dealing with the de facto karta of the family who was in charge of the affairs of the family and had sufficient discretion to control and manage the property of the family and earn the income on its behalf. To such a case, the provisions of sections 40 and 41 of the Income-tax Act cannot apply. Section 40 of the Income-tax Act deals with cases where a guardian can be assessed in respect of the income of his minor ward. This liability of the guardian to be assessed for the income of a ward is imposed by section 40 of the Income-tax Act in cases where there is a guardian who is entitled to receive or is in actual receipt of the income, profits or gains on behalf of the ward. In the present case, there was no guardian at all and, even if the income-tax authorities had taken any proceedings to have a guardian appointed of the various members of the Hindu undivided family including Udai Narayan, that guardian would not have become entitled to receive the income on behalf of the family automatically. In fact, the situation on that date was such that, even if proceedings had been taken to have a guardian appointed, very likely before an order of appointment could have been made Udai Narayan would have attained majority and the result would have been that no guardian could have been appointed. On attaining majority, there could be no doubt that Udai Narayan would have become the karta of the assessee family. It seems to us in these circumstances that section 40 of the Income-tax Act has been enacted to make provision for those cases only where in fact a guardian of a minor or a set of minors constituting a Hindu undivided family is in existence. Where there is no guardian section 40 of the Income-tax Act would not apply. Similarly section 41 of the Income-tax Act would also only apply where the superintendence of the property of the minor or minors constituting a Hindu undivided family has been taken over by the court of wards or the administrator-general, the official trustee or any receiver or manager appointed by or under order of any court. The case before us will not be governed even by the provisions of section 41 of the Income-tax Act. In these circumstances, no question could have arisen of assessing the income of the assessed family in the hands of any guardian or any other person. It had to be assessed in the hands of the Hindu undivided family itself which at the appropriate time was comprised of male members none of who had attained majority under the Indian Majority Act. We cannot believe that the legislature ever intended that in such a case there should be no assessment of the income of a Hindu undivided family at all. A similar situation may arise where the income may be income earned by an individual person who has not attained majority under the Indian majority Act. The income may be of the nature of salary. Such a case can arise where a person below the age of 18 may be capable enough of getting employment under which he would receive a monthly salary that would be chargeable to tax under the Income-tax Act. In such a case, even if a guardian of that minor were to be appointed, the guardian would not become entitled to receive the salary from the employer of his ward nor would he be in actual receipt of that income so that the provisions of section 40 of the Income-tax Act would not apply. In such a case, it is clear that the income will be and should be taxable in the hands of the person earning the income even though he may not have attained majority under the Indian Majority Act. This liability of the person to tax, it seems to us, arises on the proper interpretation of the charging section, viz., section 3 of the Income-tax Act. In that section, inter alia, it is laid down that tax is to be charged on the income of the previous year of every individual. Even a person who has not attained majority is an individual and his income under section 3 would be chargeable to income-tax. Similarly, if there be a Hindu undivided family consisting of several male members none of whom has attained majority the income of that Hindu undivided family would still be liable to be charged to income-tax under section 3 of the Income-tax Act. If the income is chargeable to income-tax in such cases, the subsequent provisions of the Act which lay down how the tax is to be assessed and collected must be so interpreted as to enable the tax to be assessed and realised even in such circumstances. The only interpretation which appears to us to be possible is that in such cases the income must be assessed and the tax released from the person who may be in the actual receipt, control and management of that income, even though he may not have attained the age of majority. In the case of an individual minor, who may be in receipt of salary, in such circumstances, the tax could be assessed by taking proceedings direct against that individual even though he might not have attained majority. This it appears was made permissible by the Act on the principle that a person, who is capable of earning an income and of controlling and managing it, should be capable of making returns and dealing with proceedings under the Income-tax Act in respect of the income and, consequently, even if he has not attained majority, the income should be taxed directly in his hands in case he is in receipt of and controls and manages that income. In the case of a Hindu undivided family constituted of male members none of who has attained majority, similarly, the law should be interpreted as enabling the taxing authorities to tax the income of the Hindu undivided family in the hands of the person who is in receipt of and is actually controlling and managing the income of the family, who in the case before us was clearly Udai Narayan. Consequently, it seems to us that not only was the service of the notice on Udai Narayan, when the notice was addressed to the Hindu undivided family, valid but the income-tax authorities rightly proceeded to tax the income of the assessee family by dealing directly with Udai Narayan on the basis of the return filed by him. Our view thus is that in a case where a person, who is in receipt of and is controlling and managing income assessable to tax, files a return that return would be a legal and valid return for the purposes of assessing that income and consequently in this case the second question referred to us must be answered in the affirmative.
We may in this connection refer to the views expressed by the Court of Appeal in Rex v. Commissioners of Taxes for the Newmarket Division of Suffolk (Ex parte Huxley). In that case also the question had arisen whether Huxley, who had not attained the age of 21 years which was the age of majority in England, could be directly taxed in respect of income which he was receiving as a jockey. Cozens-Hardy M. R. held : 'It is to my mind almost absurd to suggest that a jockey making a large income, and, I presume, assisted by clerks or other servants, has not the requisite discretion to enable him to deliver, or procure to be delivered, all proper particulars, and, if necessary, to instruct legal advisers to protect his rights' when dealing with the question whether Huxley had or had not the requisite discretion to make the return and to defend proceedings or to appeal under the income-tax law in England. It was held on this principle that under the charging section of the income-tax law where the word used was 'person' that word would include an infant who had not attained the age of 21 years and direct taxation of income in his hands would be permissible under the circumstances mentioned above. Lord Justice Phillimore dealing with the question of incapacity of an infant who had not attained the age of 21 years held that the word 'incapacity' may be rightly confined to the case of an infant who does not receive or control his own property and who is, therefore, incapable of making a return. Lord Justice Warrington expressed his view by saying that an infant who controls and manages his own concern may well be treated as capable of doing what is required under the Income-tax Act. These principles were laid down by the Court of Appeal in England on interpretation of the provisions of the income-tax which was in force in England and, though those provisions are not identical with the provisions of the Indian Income-tax Act, it does appear to us that the two income-tax laws at least in this respect are very similar and the principle laid down in England would be for this reason applicable in India also. In England, income of every person was made chargeable while the income of every individual has been made chargeable in India, and the question of charging the income of a minor directly in his hands would, therefore, arise in England on determination of the question whether he is covered by the word 'person' and in India whether he is covered by the word 'individual' and it seems to us that the difference in the two words 'individual' and 'person' is not such as to make any difference in the view to be taken in interpreting these words. In England also, there were provisions for charging the income of a minor in the hands of a guardian and there the criterion laid down was that a guardian was to be charged if he was in the control and management of the property of the minor. In India, as we have indicated earlier, a guardian is to be charged in respect of the income of his ward if he is entitled to receive or is in actual receipt of the income of the minor. Both in England and in India, therefore, the criterion for charging the income of a minor in the hands of a guardian is whether the guardian is in a position to control and manage that income. In India, the control and management is expressed by saying that he should be either entitled to receive the income or should be in actual receipt of the income. In England, it was laid down by saying that he should be in the control and management of the property of the minor. Neither in India nor in England was any provision made for charging the income in the hands of a guardian who had no control or management of the income of the minor or where no guardian had existed. The case before us is, therefore, similar to the case of Huxley which was dealt with by the Court of Appeal in the case cited above and the principle laid down, therefore, strengthens the view which we have expressed earlier on interpretation of the provisions of the Indian Income-tax Act that charge of tax on the basis of the return filed by Udai Narayan on behalf of the Hindu undivided family would be valid as he was the eldest male member of the Hindu undivided family, which had no male member who had attained majority, and who was in the actual control and management of the income of the family. Consequently, the second question is answered in the affirmative.
So far as the third question is concerned, it appears to us that it is not at all necessary to answer it in the present case. We have already said that it is unnecessary to decide whether Udai Narayan could or could not validly represent the assessee Hindu undivided family during the assessment proceedings because of the view that we have taken on the validity of the return filed by him. The return having been validly filed by him and it being permissible for the income-tax authorities to assess the income on the basis of that return because Udai Narayan was in the control and management of the income of the family, it is clear that the subsequent proceedings for charging the income to tax treating it as the income in the hands of Udai Narayan would be certainly valid. The answer to this question, therefore, automatically flows from our answer given to the second question and this question stands answered in the affirmative without going into the question whether Udai Narayan was or was not in law the karta of the assessee family in view of the provisions of the Indian Majority Act.
Since all the questions have been answered in favour of the department and against the assessee, we direct that the assessee, we direct that the assessee shall pay the costs of this reference to the department which we fix at Rs. 150 in each case as representing fee of learned counsel for the department.
Questions answered accordingly.