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State Bank of Travancore Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)8ITD529(Mad.)
AppellantState Bank of Travancore
RespondentWealth-tax Officer
Excerpt:
.....of registered trade unions'. the section states that every registered trade union shall be a body corporate. according to the learned representative, a body corporate is not an assessable entity under the act. in his submission, the expression 'body corporate' is wider in context than the expression 'company' and a body corporate is distinct and apart from members constituting it and such entity by itself has no connection with the members. in his submission, all body corporates are not individuals and the act is not applicable. the learned representative of the assessee also referred to the discussion on the meaning of the expression 'individual' in the act at page 261 onwards of the commentary on three new taxes by a.c. sampath iyengar. according to the contention of the.....
Judgment:
1. The point for determination in these cases by a Special Bench is as to whether the assessee, State Bank of Travancore Employees Union, a trade union registered under the Indian Trade Unions Act, 1926, is liable to wealth-tax in the status of an individual. This case has come up before the Special Bench at the suggestion of a Bench consisting of two members, before whom it originally came up for hearing, as the members felt that the instances of case considered in another order of the Tribunal in the case of Third WTO v. State Bank of India Officers' Association (Madras Circle) [1982] 2 ITD 505 (Mad.) holding that a trade union registered under the Indian Trade Unions Act is chargeable to wealth-tax as an individual are all under the Income-tax Act, 1961 ('the 1961 Act'), the provisions of which are not in pari materia with the Wealth-tax Act, 1957('the Act') and further that the object of the Act itself is not to tax corporate bodies set up for public purposes because the statute has been enacted to give effect to a directive principle of the Constitution aimed at redistribution of wealth and would be counter-productive if it were to be applied to bodies set up for public purposes requiring the holding of properties for carrying out such public purposes.

2. The learned representative of the assessee points out that Section 13 of the Indian Trade Unions Act is entitled 'Incorporation of Registered Trade Unions'. The section states that every registered trade union shall be a body corporate. According to the learned representative, a body corporate is not an assessable entity under the Act. In his submission, the expression 'body corporate' is wider in context than the expression 'company' and a body corporate is distinct and apart from members constituting it and such entity by itself has no connection with the members. In his submission, all body corporates are not individuals and the Act is not applicable. The learned representative of the assessee also referred to the discussion on the meaning of the expression 'individual' in the Act at page 261 onwards of the commentary on Three New Taxes by A.C. Sampath Iyengar. According to the contention of the assessee's, representative, holding of the assets by a body corporate cannot be equated to holding of assets by an individual and artificial persons are not contemplated to be included in the term 'individual'. Only normal human beings, in his submission, are contemplated to be included in the expression 'individual' for the purpose of charge to wealth-tax. Reference was made to and reliance placed on the decisions of the Gujarat High Court in the case of Orient Club v. WTO [1980] 123 ITR 395 and the Bombay High Court in the case bearing the same name : Orient Club v. CWT [1982] 136 ITR 697. It is pointed out that according to the Bombay High Court decision in Orient Club's case (supra), having regard to the definition of 'company' in Section 2(h) of the Act, the position that emerges is that while a firm or AOP is not treated as a taxable unit, and the member of an AOP or a partner in the case of a partnership firm is individually taxable as a taxable unit, certain institutions, associations or bodies which may be included within the definition of 'company' by virtue of a general or special order made by the CBDT, could be treated as a taxable unit. In the present case it is pointed out that the trade union has not been declared by the Board as a company for the purpose of the Act. Reliance was also placed on the decision of the Bombay High Court in Willingdon Sports Club v. C.B. Patil, Third Addl. WTO [1982] 137 ITR 83. It was further argued that the decisions referred to and relied on for the finding in the order of the Tribunal in the case of State Bank of India Officers' Association (Madras Circle) (supra) are all distinguishable on facts and the dispute involved. It was finally submitted that since the Act specifically enumerates company as an assessable entity but does not mention a body corporate as one, the body corporate is by necessary implication excluded from the taxable entity.

3. The learned departmental representative submitted that the two reasons on which the Bench of the Tribunal, before which the case originally came up for hearing, had suggested constitution of a Special Bench for hearing this case are not tenable. It is pointed out that the first reason stated by the Bench is that there is no direct decision under the Act on the question of interpretation of the expression 'individual' or to show that the concept of the expression 'individual' under the 1961 Act in the cases considered are also applicable for the purpose of assessment to wealth-tax. The second reason was on a constitutional issue. So far as the first reason is concerned, it is submitted that the principles enunciated by the Supreme Court on the question of determination of the status as individual in the income-tax cases right from the case of CIT v. Sodra Devi [1957] 32 ITR 615 have been repeatedly emphasised and held applicable to assessments both under the 1961 Act and the 1957 Act. Reference in this connection is made to the decisions in Khan Bahadur Chowakkaran Keloth Mammad Keyi v.WTO [1962] 44 ITR 277(Ker.), particularly the observations at pages 287-288; Andhra Pradesh State Road Transport Corpn. v. ITO [1963] 47 ITR 101 (AP), the observations at pages 106 to 109; Sarjerao Appasaheb Shitole v. WTO [1964] 52 ITR 372 (Mys.), the observations at pages 378 and 379; Rajah Sir M.A. Muthiah Chettiar v. WTO [1964] 53 ITR 504 (Mad.), the observations at pages 523-524, last para; Banarsi Dass v.WTO [1965] 56 ITR 224 (SC), the observations at pages 228, 230 and 233; Kerala Financial Corpn. v. WTO [1971] 82 ITR 477(Ker.) (FB) the observations at the middle of page 479; CWT v. Hyderabad Race Club [1978] 115 ITR 453 (AP), Orient Club's case (supra) the observations at pages 401-402; Assam Financial Corpn. v. CWT [1974] 94 ITR 404 (Gauhati), the observations at pages 407, 411 to 413 and WTO v. C.K.Mammed Kayi [1981] 129 ITR 307(SC), the observations at pages 312-313.

4. With regard to the constitutional issue, it was submitted that the Tribunal, a creature of the statute, cannot go into the constitutionality or otherwise of the charge created under the Act and as to its validity in the light of directive principles. The learned representative for the assessee contended that the case referred to and relied on in Kerala Financial Corpn.'s case (supra) was rendered in the context of writ petition and, in his submission, is not appropriate to the question for determination in this appeal. According to the learned counsel, Shri K.R. Ramamani, who intervened, a registered trade union under the Indian Trade Unions Act being a body corporate is a corporation established by or under a Central or State Act and, consequently, is a company within the meaning of the expression in Section 2(h) and since company is not liable to wealth-tax by a notification, the charge of wealth-tax is not applicable to a trade union registered under the Indian Trade Unions Act. Our attention is also drawn to the difference in the charging provisions of the Gift-tax Act, 1958 ('the 1958 Act') where the charge is in respect of gifts made by a 'person', as defined in Section 2(xviii) thereof.

5. On a careful consideration of the facts and the contentions of the parties, we hold that there is no merit in the assessee's objection. It is true that in the decision of the Supreme Court in Sodra Devi's case (supra) the question that came up for consideration is with regard to the meaning of the words 'any individual' and 'such individual' occurring in Section 16(3) of the Indian Income-tax Act, 1922 ('the 1922 Act'). It was held that the expressions are restricted in their connotation in the context to mean only human beings and confined only to the male of the species and do not include the female of the species. But in considering the question the Court has considered the general meaning of the term 'individual' as comprehending not only human being but also to include any group of persons forming a unit, and the word 'individual' has been held to include a corporation created by a statute, e.g., a university or a bar council, or the trustees of a baronetcy trust incorporated by a Baronetcy Act, a minor or a person of unsound mind. After stating the wide connotation of the word as stated above, it has been held that when Section 16(3) talks of an 'individual' it is only in a restricted sense that the word has been used because the section only talks of 'individual' capable of having a wife or a minor child or both. The case of the Kerala High Court in Khan Bahadur Chowakkaran Keloth Mammad Keyi's case (supra) is a case under the Act in which it was held that a HUF is a group or body coming within the connotation of the term 'individual' in entry 86 of the Union List. In this decision, the observations at pages 287 and 288 support the view that the expression 'individual' is wide enough to include a group or collection of body of individuals including a registered trade union. In the Andhra Pradesh High Court decision in Andhra Pradesh State Road Transport Corpn.'s case (supra) the discussion at page 107 shows that the assumption that 'individual' should be a human being alone or that an AOP should consist human beings has been given a quietus by a series of authoritative pronouncements. It has been stated in this connection at page 107 that of the two views, the view that the word 'individual' is wide enough to include a group of persons forming a unit and includes a corporation created by a statute, e.g., a university or a bar council or the trustee of a baronetcy trust, has been accepted by some of the High Courts and the Supreme Court, while the other view that after the amendment of the 1922 Act in 1939, the word 'individual' can only mean a natural person, viz., a human being, has been adopted by Allahabad, Lahore and one of Bombay High Court cases and by Pakistan Federal Court but as far as the case before them is concerned, the view adopted by the Supreme Court is the one which would prevail. Reference has been made in this decision to the decision of the Madras High Court in CIT v. Bar Council [1943] 11 ITR 1. In the decision of the Mysore High Court in Sarjerao Appasaheb Shitole's case (supra) it has been held that though the Act provides for levy of wealth-tax specifically on HUFs, undivided families which are not HUFs are not exempted from such tax. Such families also are liable to pay wealth-tax as individuals as they are an association of individuals. At page 620 the observations of the Supreme Court in Sodra Devi's case (supra) that the word 'individual' is not confined to a human being but includes a group of persons forming a unit, etc., have been quoted.

6. In the Madras High Court decision in Rajah Sir M.A. Muthiah Chettiar's case (supra), a decision under the Act, at page 523 their Lordships have disagreed with the view expressed by Velu Pillai, J., in Khan Bahadur Chowakkaran Keloth Mammad Kayi's case (supra) at page 295 to the effect that the term 'individual' as employed in Section 3 of the Act in juxtaposition with HUFs and the other provisions in the Act, which differentiate between these two units of assessment, leave no room for doubt that whatever be its connotation in entry 86, the term 'individual' in the Act cannot comprehend a HUF; if so, it cannot comprehend a Mappilla Marumakkattayam tarwad either. It is further observed that their Lordships were unable to follow why the term 'individual' should receive a narrow or restricted interpretation, while construing the provisions of the Act, especially when there is nothing in the context of the charging section to indicate that the term should not receive its ordinary meaning and that the expression 'HUF' which follows the word 'individual' is not to be read as importing a restriction upon the term 'individual'. It is further observed that the charging section has attempted a classification of the entity to be taxed, and for good and proper reasons, distinguished a HUF from an individual. In the case of Banarsi Dass (supra), a decision of the Supreme Court under the Act, the Supreme Court has upheld the validity of the levy of charge in respect of the net wealth of HUFs. In the decision the Supreme Court has reiterated the view stated in Sodra Devi's case (supra) in regard to the meaning of the term 'individual' at page 233, namely, that the word 'individual' includes a corporation created by a statute, e.g., a university or a bar council, or the trustees of baronetcy trust incorporated by a Baronetcy Act, and also that 'individual' would include a group of persons forming a unit. It is to be noted that in the decision in Sri Sri Sridhar Jiew v. ITO [1967] 63 ITR 192 (Cal,), which no doubt was a decision under the 1922 Act, it has been held that the word 'individual' includes a Hindu deity who is a juristic person and that the word 'individual' does not, according to the Supreme Court decision in Sodra Devi's case (supra), necessarily refer to a human being. In the Kerala High Court decision in Kerala Financial Corpn.'s case (supra), a case under the Act, it has been held that the word 'individual' in Section 3 is not restricted to human beings and includes a corporation, similar to the Kerala Financial Corporation, constituted under a Central, Provincial or State Act. After considering the decisions noticed by it, and in particular the decision of the Supreme Court in Jogendra Nath Naskar v. CIT [1969] 74 ITR 33 which related to the 1922 Act and not to the 1957 Act, the Court held that in the face of those decisions there cannot be any doubt that the term 'individual' in Section 3 must include a corporation similar to the petitioner constituted under a Central, Provincial or State Act.

Similarly, in the decision of the Gauhati High Court in Assam Financial Corpn.'s case (supra) it is held that the term 'individual' in the charging section, namely, Section 3 of the Act is not restricted to human beings and includes a corporation like financial corporation constituted under a Central or State Act. It is further held that though Sections 4 and 6 of the Act relate to human beings and not to a group of persons forming a unit or corporation but this reading of the relevant parts of Sections 4 and 6 does not militate against the generic meaning of the expression 'individual' in Section 3. It is also observed that though the wording of Sections 14 and 15 of the Act implies that the persons who are to file returns are natural persons and not juristic persons by the use of the pronouns 'his', 'he' and 'him', since every company is chargeable to wealth-tax under Section 3, the use of the pronouns is a grammatical error and that Sections 14 and 15 do not indicate either explicitly or impliedly that Parliament meant not to include corporations within the expression 'individuals'.

7. We may also refer to the recent decision of the Supreme Court in C.K. Mammed Kayi's case (supra) where the Supreme Court has reiterated and reaffirmed the view that the term 'individual' in the charging section of the Act includes a group of persons forming a unit. It is observed in this case after having regard to the scheme of the Act that there is no warrant for suggesting that the two terms 'individual' and 'HUF' have been used in antithesis with each other, for Section 3 being the charging Section 1s merely concerned with specifying different assessable units for purposes of assessment of wealth and imposition of the levy; it cannot be disputed that the Legislature can select persons, properties, transactions and objects for the imposition of a levy and for that purpose classify as many different assessing units as it could reasonably think necessary and this is how three assessable units, namely, 'individual', 'HUF' and 'company' have come to be specified in Section 3. It was further observed that the specific mention of a HUF in the section does not result in the exclusion of group of individuals who only form a unit by reason of their birth like a Mapilla tarwad from the operation of the section. Reference is also made to its earlier decision in Sodra Devi's case (supra) and the proposition stated therein has been reiterated.

8. Thus, it is seen that there is an overwhelming catena of authorities of both the High Courts and the Supreme Court affirming and reaffirming the proposition that the term 'individual' is not confined in its meaning or connotation to a natural human being but includes every entity, such as body of persons forming a unit an artificial juristic person, a body corporate, etc., not only for income-tax purposes but also for assessment under the Act. The decisions and authorities considered above also show that the mention of some of the assessable units like the HUF or company in the Act does not necessarily exclude other assessable units or entities which would come within the expression 'individual' and those units are not specified in antithesis to the expression 'individual'. As a matter of fact, the decision of the Supreme Court in C.K. Mammad Kayi's case (supra) has referred to its decision in V. Venugopala Ravi Varma Rajah v. Union of India [1969] 74 ITR 49 and quoted an extract from the same for showing that for the purpose of the various taxing statutes mentioned therein Mapilla tarwads governed by the Marumakkattayam law have been regarded as 'individuals'.

9. Coming to the two decisions in Orient Club's case (supra), one of the Gujarat High Court and another of the Bombay High Court, in our view, the facts in those cases are distinguishable from the facts in the assessee's case before us. In the case before the Gujarat High Court, the petitioner before the High Court was Orient Club, an unregistered association of persons acting through its hon'y secretary.

In this decision after referring to the Supreme Court decision in Andhra Pradesh State Road Transport Corpn. v. TTO [1964] 52 ITR 524 and the Kerala High Court decision in Kerala Financial Corpn.'s case (supra), it is observed that they are in line with observations in Sodra Devi's case (supra) and the word 'individual' can, therefore, be interpreted to mean a juridical person as well (vide page 402). The decision further refers to an amendment of definition of the word 'company' with effect from 1-4-1975 by virtue of which it is noted a corporation established by or under a Central, State or Provincial Act, which till then was looked upon as 'individual' was treated as a company and, consequently, ceased to be liable to tax.

In the Bombay High Court decision in the case of Orient Club's (supra), it was found that the club was non-proprietary members' club whose property acquired for or arising from the conduct of the club really belonged to the general body of members and having regard to the fact that tils club is not a juristic entity, having any corporate status was found to be incapable of owning the property. The real nature of the club was held to be an 'AOPs' (page 708) and it was held that the 'AOPs' is not an assessable entity under the Act, in the status of an individual. In the assessee's case before us, it is undisputed that by virtue of Section 13 of the Indian Trade Unions Act the assessee, which is a registered trade union, is a body corporate by the name under which it is registered having a perpetual succession and a common seal with power to acquire and hold both movable and immovable properties and to contract and by its name entitled to sue and be sued. Section 14 of the Act states that the Societies Registration Act, 1860, the Co-operative Societies Act, 1912, and the Companies Act, 1956, shall not apply to any registered trade union and registration of any such trade union under any such Act shall be void. Thus, the provisions show that a registered trade union is a body corporate having an independent legal existence, i.e., juristic person, and it cannot be an association or a society under the Societies Registration Act or a co-operative society under the Co-operative Societies Act or a company under the Companies Act. Apart from the fact that the assessee's representative, Shri Jagadisan, preferred not to adopt the line of argument of Shri Ramamani, in our view, such a trade union cannot also be regarded as a corporation established by or under a Central, State or Provincial Act.

The status of the assessee, having regard to these provisions and in the circumstances can only be 'individual'. It clearly follows, therefore, that the assessee is chargeable to wealth-tax under Section 3 in the status of an 'individual'. The various decisions considered above, in our view, should clearly allay the apprehensions entertained by the Bench which suggested reference of this case to the Special Bench on the point as to whether the decisions on the meaning of the term 'individual' under the 1961 Act would be applicable to the charge under the 1957 Act also. Though as pointed out by the learned departmental representative the question as to the constitutionality of levying wealth-tax on corporate bodies cannot be considered and decided by the Tribunal, which is a creature of the statute, some of the decisions referred to already, see for instance Kerala Financial Corpn.'s case (supra), also allay the doubt entertained by the Bench suggesting the reference to a Special Bench that the object of the Act is not to tax corporate bodies set up for public purposes. On a consideration of all the authorities mentioned above, we have no hesitation in holding that the assessee-trade union, which is a body corporate having independent legal existence and personality, is chargeable to wealth-tax in the status of 'individual'. We, therefore, reject the objection of the assessee and uphold the orders of the departmental authorities.

10. Before concluding this order, we would like to place on record our appreciation of the valuable assistance rendered by the representatives of the parties in this connection. The representation, on behalf of the department by Shri C.S. Padmanabhan, the learned departmental representative, which show that considerable research and effort has gone into this preparation in representing the case before us, matched no less by Shri Jagadisan, the learned chartered accountant.


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