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Coimbatore Club Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
Overruled ByCWT Gujarat III Ahmedabad v Ellis Bridge Gymkhana
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberW.P. Nos. 4091 and 4124 to 4127 of 1978
Judge
Reported in(1984)43CTR(Mad)38; [1985]153ITR172(Mad)
ActsWealth Tax Act, 1957 - Sections 3
AppellantCoimbatore Club
RespondentWealth-tax Officer
Advocates:V. Ramachandran, Adv.
Cases ReferredWillingdon Sports Club v. C. B. Patil
Excerpt:
direct taxation - individual - section 3 of wealth tax act, 1957 - whether club can be dealt as assessable unit or entity under section 3 and subjected to levy of wealth-tax - expression 'individual' occurring in section 3 include plurality of individuals including group of individuals forming single collective unit with common aims and no profit motive behind owning property - held, petitioner club would be subject to provisions of act as 'individual'. - - 3. the principal and the only contention urged by the learned counsel for the petitioner is that a body like club as in this case cannot be included within the ambit of the expression 'individual' in s. strong reliance in support of this contention was placed by the learned counsel for the petitioner on the decisions in orient.....ratnam, j.1. these writ petitions praying for the issue of writs of prohibition at the instance of the coimbatore club (hereinafter referred to as 'the club') challenge the legality and validity of the notice issued by the wto. city circle i(2), coimbatore, the respondent herein, to the club under s. 16(2) of the w.t. act, 1957 (hereinafter referred to as 'the act'), for the assessment years 1972-73 to 1976-77. earlier, notices under s. 17 of the act, had been issued to the club on the ground that for the assessment years mentioned above, the assessable net wealth of the club had escaped assessment and the club was called upon to deliver returns of its net wealth for the years in question chargeable to tax together with other particulars. the club sent a reply stating that on the.....
Judgment:
Ratnam, J.

1. These writ petitions praying for the issue of writs of prohibition at the instance of the Coimbatore Club (hereinafter referred to as 'the club') challenge the legality and validity of the notice issued by the WTO. City Circle I(2), Coimbatore, the respondent herein, to the club under s. 16(2) of the W.T. Act, 1957 (hereinafter referred to as 'the Act'), for the assessment years 1972-73 to 1976-77. Earlier, notices under s. 17 of the Act, had been issued to the club on the ground that for the assessment years mentioned above, the assessable net wealth of the club had escaped assessment and the club was called upon to deliver returns of its net wealth for the years in question chargeable to tax together with other particulars. The club sent a reply stating that on the abolition of wealth-tax on companies from the assessment year 1960-61 onwards, wealth-tax is chargeable only on individual and HUFs and as the club did not fall within these categories of assessable units or entities, it is not liable to be assessed to included with in the expressions 'individual' occurring in s. 3 of the Act has it had been assessed for purposes of income-tax as an association of persons and the property of the club was also not held by a body of individuals. In these proceedings, the club seeks to have the notices quashed on the ground that it is not a taxable unit or entity under s. 3 of the Act and all the notices issued are, therefore, without jurisdiction.

2. In the common counter filed by the respondent, the issue of notices under the Act is sought to be supported on the basis that has club should be regarded as an 'individual' for purposes of the Act, as these expression 'individual' is not confined only to a human being, but is wide enough to take in group of persons forming a single collective unit or entity and owning property. Alternatively, it was claimed that even on the footing that the club can be treated as an association of persons, such an entity or unit is also comprehended within the expression 'individual', notwithstanding that s. 3 of the Act does not specifically mention association of persons as such. As objection was also raised that having regard to the availability to the club of other adequate alternative remedies under the Act the discretionary remedy of writ should not be granted.

3. The principal and the only contention urged by the learned counsel for the petitioner is that a body like club as in this case cannot be included within the ambit of the expression 'individual' in s. 3 of the Act as an assessable unit or entity and the proceedings commenced by the respondent herein by way of issue notices calling upon the club to submit a return of its wealth and also other particulars are, therefore, without jurisdiction. Strong reliance in support of this contention was placed by the learned counsel for the petitioner on the decisions in Orient Club v. WTO : [1980]123ITR385(Mad) . Orient Club v. CWT : [1982]136ITR697(Bom) and Willingdon Sports Club v. C. B. Patil, Addl. WTO : [1982]137ITR83(Bom) . On the contrary, the learned counsel for the Revenue submitted that though in s. 3 of the Act, the expression used is 'individual', yet it is wide enough o comprehend within it scope not only human beings individually, but also a group or body of human beings or other persons forming a single collective entity compendiously known as a club, a statutory corporation, etc., and, therefore, the charging s. 3 of the Act cannot be confined to an 'individual' in the sense of a human being only. The further submissions of the learned counsel was that the expression 'individual' was of sufficient width and amplitude to take within its fold a plurality of individuals or a body of individual banded together as a single collective entity by ties of common aim or joint interest other than the acquisition of gain and having rights in relation to common property which can be regarded as an entity or unit by itself for purposes of assessment under the head 'individual' occurring in s. 3 of the Act.

4. Thus, the principal question is, whether a club as we have in this case can be dealt with as an assessable unit or entity under s. 3 of the Act and subjected to the levy of wealth-tax under its provisions. Before embarking upon a consideration of this question, it would be necessary to briefly advert to the nature of the club, the composition of its membership, its management and the method and manner of its holding and administering its properties as could be gathered from the affidavit. The club appears to have been in existence as a members' club for several years past functioning under the rules and by-laws framed by the members. The strength of the club shall not exceed more than 200. The management of the club is vested in a committee consisting of the president, vice-president and some members. The club is not registered under any law for the item being in force. The admission to the club is restricted and the enjoyment of the benefits and amenities provided by the club is confined to its members The club is not a profit-making organisation or association as it has no profit motive and its income from property and interest income had been assessed up to 1976-77 under the I.T. Act, treating it as an 'association of persons'. The properties are, according to the club, owned by the members.

5. We may briefly advert to the status of a non-proprietary members' club. Principally, it is a body or group of individuals, each of whom contributes to the coffers of the collective entity known as the club for defraying its expenses. Such contributions normally take the shape of entrance fee or subscription or both. The element of partnership is totally absent as there is no motive of sharing profits. It has not been recognised a having an independent legal existence apart from the membership of which it is composed. Rules and regulations govern every activity of such groups or body of persons regarding the admission, payment of entrance fee, subscription, resignation an expulsion of members, management of the affairs, ordinary and extraordinary meetings, alteration of rules, making of new rules, etc. The rules of the club regulate the conduct of the members of the club and the rights and duties of the members as between themselves and the arrangement for carrying on the activities of the club depend essentially on the rules. The benefits and privileges extended by the club are made available to its members and so long as the members pay their subscription and continue to be members, they are entitled to enjoy such benefits and amenities. The members (for the time being are jointly and together a body) are entitled to all the property and funds and it is only on a disruption or dissolution that the individual interests of the members becomes capable of ascertainment. Essentially, therefore, a members' club is a voluntary body of group of persons coming together with some common aims and joint interest bereft of any profit motive for the purpose of enabling the members of the at body or group to enjoy facilities and amenities.

6. We may now briefly refer to the general scheme of the Act and the provisions. The Act passed by Parliament had come into force on April 1, 1957. The predominant purpose and object of the Act is to levy tax on wealth in the hands of all persons, who possessed such wealth beyond a particular limit. Section 2(c) of the Act defines an 'assessee' as a person by whom wealth-tax or any other sum of money is payable under the Act and includes every person in respect of whom any proceedings under the Act has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person, every person who is deemed to be an assessee under this Act and every person who is deemed to be an assessee in default under this Act. 'Net wealth' is defined in cl (m) of s. 2 of the Act as the amount by which the aggregate value of all assets as computed in accordance with the provisions of the Act is in excess of the aggregate value of all the debts on the valuation date.'Valuation date' is defined in s. 2(q). Chapter II of the Act provides for the charge of wealth and deals with the assets subjected to such a charge. Chapter III of the Act deals with the authorities created under the Act. Assessment is dealt with under Chap. IV. Section 14 of the Act imposes an obligation on the part of every person whose net wealth on the valuation date was of such an amount as to be render him liable to wealth-tax to submit a return. Section 14(2) of the Act enables the WTO to serve a notice upon a person if he is of opinion that the net wealth of that person is of such an amount as to render him liable to wealth-tax under the Act requiring him to furnish within a period of thirty days the particulars of net wealth of such a person on the valuation date in the prescribed form. Section 16(1) of the Act provides that if the WTO is satisfied that the return under s. 14 is complete, then, he may assess the net wealth of the assessee and determine the amount of tax. If the WTO is not so satisfied with the return, under s. 16(2) of the Act, he may call upon the assessee to produce evidence in support of his return and, after looking into the materials so produced, assess the net wealth of the assessee and determiner the tax. Where a person fails to make a return in response to a notice under s. 14(2) of the Act or fails to comply with a notice under s. 16(2) or s. 16(4) of the Act, the WTO may make an assessment to the best of his judgment under s. 16(5) of the Act. Assessment in special cases is provided for under Chap. V. Chapter V-A deals with settlement of cases. Chapter VI enumerates the further remedies by way of appeals, revisions and references. Chapter VII deals with the provisions relating to payment and recovery of wealth-tax.

The relevant section for purposes of these petition is s. 3 of the Act, which is as follows :

'Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I.'

7. The word 'individual', according to Shorter Oxford English Dictionary, means inter alia, a single object or thing, or a group of things regarded as a unit; a single member of a class, group, or number; numerically one, single; existing as a separate indivisible entity; distinguished from others by attributes of its own. According to Webster's New International Dictionary also, the word 'individual' means, inter alia, existing as a separate and distinct entity; single or singular; particular; opposed to general and universal; of the character of an individual; possessing the distinctness and complexity in unity, characteristics of organised things, concepts, organic beings and persons. It is thus evident that the word 'individual' has a wider as well as a narrower shade of meaning, depending upon the context. It is, therefore, to be seed whether the word 'individual' in s. 3 of the Act is confined in its applicability only to a human being or it is intended to have wider scope and application so as to take in plurality of human beings or even a body of human beings who can be regarded as a distinct unit and entity, but compendiously and conveniently designated as a club. The word 'individual', though used in the singular in. 3 of the Act, would take in not only a human being but a plurality of individuals or human beings as well, banded or tied together by common aim or joint interests and forming a single collective unit. Giving the word 'individual' occurring in s. 3 Of the Act the ordinary and wider meaning, there being no indication in that section to limit is meaning in any manner, the expression 'individual' appears to comprehend human beings (individuals) who have constituted themselves into a single distinct collective unit or entity known as the club, for pursuing it aims or objects without any motive for profit.

8. We now proceed to a consideration of this aspect from different view points. The constitutional validity of the levy of wealth-tax on HUFs in the light of entry 86 of List I of Sch. VII to the Constitution of India came to be considered in number of vases. The earliest of them was Mahavirprasad Badridas v. Yagnik, 2nd WTO [1959] 37 ITR 181. Entry 86 of List I of Sch. VII reads as 'Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies.'Section 3 of the Act was challenged on the ground that Parliament had no power to legislate and impose the levy of wealth-tax of HUFs as assessable units, since entry 86 contemplated the imposition of tax on the capital value of the assets of individuals and not an HUF. Entry 86, though it contained the expression 'individual', was so interpreted as to include within it scope a body or group of male Hindus lineally descended in the male line from a common ancestor comprising of individuals, their wives and unmarried daughters and sons. In other words, the HUF was held to be a body or a group of individuals, the whole body of which owned the property and it could, therefore, be taken to be a group of individuals with certain special features and right but forming a distinct unit. The decisions in Subramanian v. WTO : [1960]40ITR567(AP) and Ramabhadra Raju v. Union Of India : [1962]45ITR118(AP) upheld the view that an HUF would be within the connotation of the word 'individual', the family being a body of individuals not falling outside the sweep of Entry 86. In Mammad Keyi v. WTO : [1962]44ITR277(Ker) , again an HUF was held to be not an entity distinct and separate from its members but that it is a group or body within the connotation of the term 'individual' in entry 86 and that to exclude such a group or body of individuals, would be to restrict the filed of legislation, for which there was no warrants. Again in Narayanamurthy v. CWT : [1965]56ITR298(Orissa) , the views expressed by the Bombay, Andhra Pradesh and Kerala High Courts were followed and an HUF, though not a corporation, was held to be a group of individuals forming a unit and that the expression 'individual' in entry 86 cannot be so construed as to exclude an HUF. Sarjerao Appasaheb Shitole v. WTO : [1964]52ITR372(KAR) , also interpreted the word 'individual' occurring in entry 86 of List I to include undivided families also, as an undivided family was only a collection of individuals. It was also further laid down that undivided families, which are not HUFs, are also not exempt from levy of wealthy-tax, as such families are liable as individuals, as they are an association of individuals. The Supreme Court in Banarsi Dass v. WTO : [1965]56ITR224(SC) dealt with the identical question on the view expressed by the Allahabad High Court in Jugal Kishore v. WTO : [1962]44ITR94(All) . After referring to the use of the expression 'individual' in entry 86, the Supreme Court stated that if individuals constitute themselves into a group and such a group owns capital assets, it is not easy to understand why the value of such assets should not be included within the legislative field covered by entry 86 and it is inconceivable that the word 'individual' in entry 86 was introduced with the object of excluding from its scope, a large and intensive area, which would be covered by the HUF. Reference was made to and reliance was placed on the earlier decision in CIT v. Sodra Devi : [1957]32ITR615(SC) , for the purpose of showing that the word 'individual' was interpreted by the Supreme Court as including a group or person forming a unit. A Full Bench of the Kerala High Court in Mammad Keyi v. WTO : [1966]60ITR737(Ker) , by a majority took the view that a group of individuals constituting the members of a Mapilla Marumakkathyam tarwad would be within the expression 'individual' occurring in s. 3 of the Act. On further appeal to the Supreme Court in WTO v Mammad Keyi : [1981]129ITR307(SC) , the Supreme Court pointed out that the enumeration of units or entities of taxation, though specified, was no antithetic enumeration, but that the intention of the Act was to tax wealth in the hand of persons who possessed such wealth beyond a particular limit. Construing the expression 'individual' under in s. 3 of the Act, the Supreme Court was of the view that that expression, in view of s. 13(2) of the General Clauses Act, 1897, can be read as 'individuals' and the mere specific mention of 'individual' in s. 3, would not result in the exclusion of a 'group of individuals'. It was also further pointed out that the reference to wife, daughter and child of an individual in s. 4 of the Act would not lead to the construction of the expression 'individual' in s. 3 of the Act as referable only to a single human being. The absence of provisions for assessing a 'group of individuals' who form a non-HUF was hald not to affect or in any manner control the charging section and, therefore, the expression 'individual' in s. 3 of the Act would include a group lime Mapilla Marumakkathyam tarwad. In the course of the judgment, it has also been pointed out that merely because the expression 'individual' occurring in entry 86 of List I of the Seventh Schedule to the Constitution of India, will take within its ambit an HUF, it would not automatically follow that the term 'individual' would take in a non-Hindu family like Mapilla Marumakkathayam tarwad, but that question will have to be considered in the light of the scheme of the Act. Even so it is clear from that decision that the mention of taxable units or entities in s. 3 of the Act is only for broadly specifying such an unit for purposes of assessment of wealth and imposition of the tax thereon and that the terms 'individual' and 'Hindu undivided family' used in s. 3 have not been used in antithesis or in opposition to each other. Further, the specific non-mention of an HUF has been held not to result in the exclusion of a group of individuals, who form a unit by reason of their birth like a Mapilla Marumakkathayam tarwad and the argument that the specification of HUF as a unit of assessment was redundant, if the term 'individual' was intended to include such joint families or undivided families, was also repelled.

9. Bearing in mind these consideration, when the expression 'individual' occurring in s. 3 of the Act is examined, it is at once apparent that the expression cannot be so narrowly construed as to exclude a body or group of persons knit together and forming a single collective unit and owning property. In other words, the expression 'individual' would include within its scope a plurality of individuals or body of individuals constituted into a single collective unit with ties of common aims or joint interest and owning property.

10. We now proceed to a consideration of the interpretation of the expression 'individual' occurring in the Indian I.T. Act, 1922. A very wide interpretation of that word had been given so as to include a group of persons forming a unit, a corporation created by a statute, co-operative society, a university, Bar Council or trustees of a Baronetcy trust incorporated under the Baronetcy Act, etc. In one of the earliest cases in CIT v. Currimbhoy Ibrahim, AIR 1932 Bom 106, it was argued that a corporation created with a perpetual succession and a common seal under the style and title of the trustees of the Sir Currimbhoy Ibrahim Baronetcy under a private Act passed by the Governor-General of India in Council would not fall within the scope of s. 3 of the Indian I.T. Act, 1922. That argument was negatived by Sir John Beaumont, Chief Justice, in the following terms (p. 107) :

'I think the corporation constituted by the special Act is an individual within that section. The learned Commissioner seems to treat it as an association of individuals, but I think myself it comes within the term 'individuals' and not an association of individuals, and on the words of that section, it seems to me clear that the trustees can be charged....'

11. The matter was taken up before the Privy Council in Currimbhoy Trust v. CIT [1934] 2 ITR 148. The conclusion arrived at by Sir John Beaumont C.J. in CIT v. Currimbhoy Ibrahim, AIR 1932 Bom 106, was ultimately upheld, though there was no discussion regarding this aspect of the matter. CIT v. Salem District Urban Bank Limited : [1940]8ITR269(Mad) had to consider the question whether a co-operative central bank registered under the Indian Co-operative Societies Act of 1912, whose shareholders consisted of individuals and co-operative societies was an individual for purposes of s. 3 of the Indian I.T. Act, 1922. Leach C.J., in holding that to give the word 'individual' the meaning of a person only would be to disregard the scheme of the Act and also to rob the word of an accepted meaning, observed as follows (p. 278 of 8 ITR) :

'While it is true that ordinarily in conversation the use of the word 'individual' would be taken to denote a person, the word has in fact a far wider meaning. The first definition of the word given in the Oxford Dictionary is : 'One in substance or essence ; forming an indivisible entity; indivisible'. It is also defined as 'existing as a separate indivisible entity, numerically one, single'. If a corporate body created by a statute is an individual within the meaning of the section and I hold that it is - a co-operative society registered under the Co-operative Societies Act must fall within the same category. It is a corporate body and has perpetual succession, I consider that it is not reasonable to suppose that the Legislature intended that there should be a difference in the meaning of the word 'individual' that the plural 'individuals'. If the word 'individual' includes a corporation, the words 'association of individuals' must embrace an association of corporate bodies, and, therefore, the assessee is an 'association of individuals'.'

12. To give the word 'individual' the meaning of 'person' only would, it seems to me, be to disregard the scheme of the Act and to rob the word of an accepted meaning.

13. A Bar Council created under the provisions of the Indian Bar Councils Act (XXXVIII of 1926) has been held to be an individual or association of persons within the meaning of s. 3 of the Indian I.T. Act, 1922, and, therefore, its income was taxable in CIT v. Madras Bar Council : [1943]11ITR1(Mad) . The question whether the word 'individual' in s. 16(3)(a)(iii) of the Indian I.T. Act, 1922, includes also a female and the income of the minor sons derived from a partnership to the benefits of which they have been admitted is liable to be included in the income of the mother, who is a member of that partnership, arose for decision in CIT v. Sodra Devi : [1957]32ITR615(SC) . Considering the scope of the expression 'individual', the Supreme Court pointed out at page 620 as follows :

'Whereas the word 'individual' is narrower in its connotation being one of the units for the purposes of taxation than the word 'assessee', the word 'individual' has not been defined in the Act and there is authority for the proposition that the word 'individual' does not mean only a human being but is wide enough to include a group of persons forming a unit. It has been held that the word 'individual' includes a corporation created by a statute, e.g., a university or a Bar Council, or the trustees of a baronetcy trust incorporated by the Baronetcy Act. It would also include a minor or a person of unsound mind.'

14. However, in the context of s. 16(3) of the Indian I.T. Act, 1922, the Supreme Court held that the 'individual' contemplated therein was one capable of having a wife or minor child or both and that would exclude from the purview of the section, a group of persons forming a unit or a corporation created by statute, as only human beings would be included within that category in the context. This decision of the Supreme Court undoubtedly supports the wider interpretation of the expression 'individual' as including a body or group of individuals forming a unit as contended for on behalf of the Revenue. With the passing of the Road Transport Corporations Act, 1950, many States established under the provisions of that Act, road transport corporations and the question with reference to the status of such corporations which did not fall under any of the categories of the assessees specified in the provisions of the Indian I.T. Act, 1922, arose. The question arose with reference to the status of such a road transport corporation established by the State of Andhra Pradesh in Andhra Pradesh State Road Transport Corporation v. ITO : [1963]47ITR101(AP) . The views expressed by the Madras and Bombay High Courts in CIT v. Madras Bar Council : [1943]11ITR1(Mad) and CIT v. Currimbhoy Ibrahim, AIR 1932 Bom 106, and the Supreme Court in CIT v. Sodra Devi : [1957]32ITR615(SC) , were referred to and it was decided that there can be little doubt that the road transport corporation would be an 'individual'. Pepsu Road Transport Corporation v. ITO had an occasion to consider a similar question. It was argued that the Pepsu Road Transport Corporation was not a taxable unit or entity at all, as it was neither an association of persons nor an individual. The Punjab High Court, agreeing with the ratio of the Madras decisions referred to earlier, took the view that such a road transport corporation can, reasonably and without stretching the term, be described as an individual and, therefore, a taxable unit or entity. We find that the decision in Andhra Pradesh State Road Transport Corporation v. ITO : [1963]47ITR101(AP) was affirmed on appeal by the Supreme Court in Andhra Pradesh State Road Transport Corporation v. ITO : [1964]52ITR524(SC) , and though the view taken by the High Court was affirmed, the argument that the Andhra Pradesh State Transport Corporation was not an individual for purposes of the Indian I.T. Act, 1922, was not even attempted to be put forward. In Abhay L. Khatau v. CWT : [1965]57ITR202(Bom) , the question arose whether a group or body of trustees could be assessed as 'individual' under s. 3 of the Act. In holding that groups of trustees forming a single collective unit would be within the scope of the expression 'individual' and they cannot be assessed as an association of persons, it was pointed out that the omission to include in the provisions of the Act those units and entities enumerated in the Indian I.T. Act, 1922, would not have the effect of totally excluding such units, if the words found in the provisions of the W.T. Act are sufficiently wide in their ambit to include even those taxable units or entities which have been additionally enumerated under the provisions of the Indian I.T. Act, 1922. Ultimately, a group of trustees forming a single collective unit was held to be an assessable entity under the Act on the ground that such an unit would be an 'individual' under s. 3 of the Act. The Supreme Court in Jogendra Nath Naskar v. CIT : [1969]74ITR33(SC) , dealt with the propriety of the assessments made on a Hindu deity treating it as an individual under the Indian I.T. Act, 1922. On an examination of the position in law of an idol in the light of the relevant texts and applying the interpretation earlier put upon the expression 'individual' in CIT v. Sodra Devi : [1957]32ITR615(SC) , a Hindu deity was held to fall within the meaning of the expression 'individual' and could be regarded or treated as a unit of assessment. A deity, though a juristic person, is not a human being and even in such a case, the expression 'individual' occurring in the Indian I.T. Act, 1922, had been applied to it. Even for purposes of s. 3 of the Act in Kerala Financial Corporation v. WTO : [1971]82ITR477(Ker) , the Kerala High Court has construed the expression 'individual' as not being restricted to human being only, but would include a corporation like Kerala Financial Corporation constituted under a Central or State Act. In Gordhandas Govindram Family Charity Trust v. CIT : [1973]88ITR47(SC) , the Supreme Court considered the question whether four trustees appointed under a document to carry out the objects of a trust could be brought within the expression 'individual' occurring in s. 3 of the Act. In declining to accept the argument that 'individual' does not include 'individuals' on the analogy of the provisions of the Indian I.T. Act, 1922, the Supreme Court observed at page 51 as follows :

'Section 3 of the Act does bring within its scope an individual which expression in view of the Central General Clauses Act includes individuals as well, unless the context otherwise indicates. In this case, the context, far from not indicating that the individual does not include individuals, clearly shows at any rate so far as the trustees are concerned that it includes individuals. As the Indian Income-tax Act provides for the assessment of 'an association of persons', the context therein may indicate that individual does not include individuals. But such an interpretation is not permissible when we deal with section 3 of the Act.'

15. Reference was also made by the Supreme Court to its earlier decisions in CIT v. Sodra Devi : [1957]32ITR615(SC) and v. Venugopala Ravi Varma Rajah v. Union of India : [1969]74ITR49(SC) , to the effect that joint trustees could be assessed as individuals under the Act and the view expressed by Abhay L. Khatau v. CWT : [1965]57ITR202(Bom) , was accepted as correct by the Supreme Court. Again, in Assam Financial Corporation v. CWT , s. 3 of the Act was held not restricted in its application to human beings, but that it included a corporation like the financial corporation constituted under the Central or State Act. It was pointed out that though ss. 4 and 5 related to human beings and not to a group of persons forming a unit or corporation, yet that would not militate against the generic meaning of the expression 'individual' occurring in s. 3 of the Act, and, therefore, ss. 3, 4 and 6 could stand together. Indeed, it is further seen from this decision that the argument that nothing in ss. 4, 6, 14, and 15 of the Act can abridge the meaning of the expression 'individual' occurring in s. 3 of the Act had been sustained on the basis of the judgment of the Supreme Court in CIT v. Sodra Devi : [1957]32ITR615(SC) , wherein the Supreme Court pointed out that though the words 'any individual' and 'such individual' occurring in s. 16(3) of the Indian I.T. Act, 1922, are restricted in their connotation only to a male of the species and not a female, yet the expression 'individual' used in the charging section of the Indian I.T. Act, 1922, encompasses both natural and juristic persons and that the generic meaning of the word 'individual' cannot in any manner be whittled down. By a parity of reasoning it has to be concluded that though it may be that ss. 4 and 6 of the Act are also related to human beings and not to a group of persons forming a unit or a corporation, that would not leave out from the generic meaning of the expression 'individual' occurring in s. 3 of the Act group or body of persons forming a single collective unit. The definitions of 'assessee' and 'net wealth' in s. 2(c) and (m) of the Act have already been referred to. section 2(c) of the Act uses the expression 'person'. Section 3(42) of the General Clauses Act, 1897, states that 'person' shall include a company or association or body of individuals, whether incorporated or not. In this background of statutory provisions, even on the footing that ss. 4 and 6 of the Act intended for ascertaining the net wealth of an individual and do not cover the cases of corporations or other units of assessment, which would be comprehended within the expression 'individuals', no deadlock is reached with reference to the computation of the net wealth of such persons. On the basis of the definition of 'net wealth' under s. 2(m) of the Act, it would be still possible to work out the net wealth of a group or body of persons forming a unit with reference to a particular valuation date. It is true that the non-applicability of ss. 4 and 6 may result in the benefits not being made available or the liabilities thereunder being suffered; but having regard to the interpretation of the word 'individual' and the definition of 'net wealth', it is manifest that a body or group of persons forming a unit is not really outside the scope of the Act. Therefore, ss. 4 and 6 of the Act cannot be pressed into service to exclude a group or body of persons forming a well defined unit from the scope of the expression 'individual'.

16. We may now refer to the decision in Orient Club v. WTO : [1980]123ITR395(Guj) . The question arose whether the word 'individual' would cover a group or body of individuals and it was held that s. 2(h)(iii) and s. 4(1)(b) read with rule 2(1) of the Rules indicated that s. 3 of the Act by the use of the expression 'individual' was not intended to cover a body of individuals or an association of persons and, therefore, such an entity was not an assessable entity as an 'individual' under the Act. In coming to this conclusion, reliance was place upon s. 2(h)(iii) of the Act to bring in, having regard to its nature and objects, an institution, association or body whether incorporated or not, within the meaning of the expression 'company'. No doubt, provision has been made under s. 2(h)(iii) of the Act to enable the Board to label as a company, any institution or association or body, but that cannot constrict the meaning to be given to the expression 'individual' occurring in s. 3 of the Act as excluding all institutions, associations or bodies, which can be declared by the Board to be a company under s. 2(h)(iii) of the Act. The mere enabling power in the Board to declare any institution, association or body as a 'company' does not lead to the conclusion that those institutions, associations or bodies even if they could be fitted within the elastic interpretation of the meaning of the expression 'individual' within the scope of the Act, were intended to be excluded till such time as the Board thought fit to exercise its power under s. 2(h)(iii) of the Act. We are, therefore, unable to accept that merely because resort can be had in some cases to s. 2(h)(iii) of the Act to declare such entities as companies for the purpose of the Act, that will automatically exclude even a group or body of individuals forming a single, collective, indentifiable unit as in this case. The other reason given is the inapplicability of s. 4(1)(b) of the Act to a group of persons and the provisions in rule 2 of the W.T. Rules. We may observe that merely because, under s. 4(1)(b) of the Act, provision for the ascertainment of the value of the interest of an individual, in a firm or association has been made, it does not follow the expression 'individual' in s. 3 should be narrowly construed. The presence or absence of provisions in the Act to deal with a particular situation does not, in our view, control or restrict the field of operation of the charging section in its full sweep. We may observe that the Supreme Court in its decision in WTO v. C. K. Mammed Kayi : [1981]129ITR307(SC) had discouraged a similar approach. The Supreme Court observed as follows (p. 313) :

'The contention that because there are references to 'wife', 'daughter' and 'child' of an individual in s. 4, the term 'individual' in s. 3 should be construed as referable to a single human being cannot obviously be accepted. Similarly, the absence of provisions similar to those applicable to a HUF for assessing groups of individuals who form non-HUFs (provisions like s. 5(1)(ii)) cannot affect or control in any manner the charging section. On construction, therefore, we are clearly of the view that the term 'individual' in s. 3 includes a group of individuals like a Mapilla tarwad.'

17. The provision in the Act under s. 4(1)(b) and in rule 2 of the Rules for the ascertainment of the interest of an individual member in any property held by an association of persons is not an indication of the total exclusion of such an association of persons from the provisions of the Act, if the expression 'individual' in s. 3 of the Act can be interpreted in such a manner as to comprehend a single, collective unit of a body or group of persons. It may be that s. 5 and 21 of the Act indicate that a group or body of trustees would be comprehended within the expression 'individual', but that again by itself could not be taken as an indication that the expression 'individual' in s. 3 of the Act does not cover within its fold a single collective unit of a group or body of persons. In view of the above-said observations of the Supreme Court, we are unable to share the view that merely because provision is made under s. 4(1)(b) of the Act or rule 2 of the Rules, that is an indication that 'individual' in s. 3 of the Act would not cover a group or body of individuals. We are, therefore, unable to persuade overselves to accept the reasoning in Orient Club v. WTO : [1980]123ITR395(Guj) to uphold the claim made by the petitioner. In Orient Club v. CWT : [1982]136ITR697(Bom) , the court proceeded to uphold the claim of a club that its status is not that of an 'individual' within the meaning of s. 3 of the Act on the ground that s. 4(1)(b) of the Act and rule 2(1) of the Rules would exclude the applicability of the provisions of the Act to a collective unit of a group or body of parsons such as a club in that case. Sections 3 and 4 of the Act and the definition of a 'company' under s. 2(h)(iii) of the Act were also relied upon. The decision of the Supreme Court in WTO v. C. K. Mammed Kayi : [1981]129ITR307(SC) was distinguished on the ground that it was difficult to spell out a general proposition that the word 'individual' in s. 3 of the Act includes all groups of individuals but that decision is confined to the limited proposition that the term 'individual' in s. 3 of the Act includes a group of individuals like Mapilla Marumakkathayam tarwad. We have carefully perused the judgment and we are unable to accept the interpretation put upon the decision of the Supreme Court in the manner done. It would be relevant in this connection to notice the observations occurring at page 312 of 129 ITR :

'The enactment is intended to provide for the levy of wealth-tax ; the general scheme thereof is to assess all persons who happen to possess or earn wealth beyond a particular limit fixed by the statute to wealth-tax and since the Act imposes a general tax on the entire wealth of the community, the presumption would be of equality of incidence rather than exemption of a few. Secondly, the term 'individual' under section 13(2) of the General Clauses Act, 1897, can be read in plural and, as such, would include a body or group of individuals like a Mapilla tarwad. Thirdly, there is no warrant for suggesting that the two terms 'individual' and 'Hindu undivided family' have been used in antithesis with each other, for section 3 being the charging provision is 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', 'Hindu undivided family' and 'company' (which was later omitted) have come to be specified in section 3. In our view, the specific mention of Hindu undivided family in the section does not result in the exclusion of groups of individuals who only form a unit by reason of their birth like a Mapilla tarwad from the operation of the section. It is difficult to accept the argument that if the term 'individual' was intended to include joint families or undivided families, it was redundant to specify Hindu undivided families.

In the context of the argument that the term 'individual' can refer only to a single human being, it will be apposite to refer to what the Supreme Court has observed in CIT v. Sodra Devi : [1957]32ITR615(SC) of the report, the Supreme Court has said : '.... the word 'individual' has not been defined in the Act (Indian Income-tax Act, 1922), and there is authority for the proposition that the word 'individual' does not mean only a human being, but is wide enough to include a group of persons forming a (natural) unit.'

18. A close and careful reading of the aforesaid observations of the Supreme Court along with the passage earlier referred to clearly established that the court was dealing with the construction of the expressions 'individual', 'Hindu undivided family', etc., in s. 3 of the Act generally and had also interpreted them in a manner which accorded with the decision in CIT v. Sodra Devi : [1957]32ITR615(SC) , so as to include a group or body of individuals. The use of the expression 'like' was merely illustrative of such groups or body of individuals who would be comprehended within the expression 'individual' in s. 3 of the Act. We are, therefore, unable to share the view that the court in that case was concerned only with the question whether a Mapilla Marumakkathayam tarwad would be an 'individual' for the purposes of s. 3 of the Act and not the general construction of the expression 'individual' in s. 3 of the Act in relation to its occurrence in the Indian I.T. Act, 1922, as well as in the Act. With respect, the distinction made regarding the applicability of the Supreme Court decision in Orient Club v. CWT : [1982]136ITR697(Bom) , does not appear to be acceptable. We find that the decision had also proceeded on the footing that cases of a body of trustees would fall within ss. 5 and 21 of the Act and, therefore, there was no justification for including such persons within the scope of the expression 'individual' in s. 3 of the Act. It may be that there are no specific provisions similar to those applicable to individuals, HUF, etc., for expressing a single collective unit of a group or body of persons but that cannot, as pointed out earlier, affect the charging section. For, can the exclusion of individual by justified if the interpretation of the charging section would result in their inclusion but there are not enough provisions to cover all such cases. The absence of specific provisions cannot in any manner make inroads into the applicability of the charging section as a result of the interpretation of the expressions employed therein. Therefore, if, as a matter of interpretation of s. 3 of the Act, a single collective unit of a group or body of persons would be comprehended within the expression 'individual', we do not see how merely because there are or there are not other provisions in tune with or to give effect to that interpretation, an exclusion from the charging section should be spelt out. We are, therefore, unable to accept the reasoning of the decisions in Orient Club v. WTO : [1980]123ITR395(Guj) and Orient Club v. CWT : [1982]136ITR697(Bom) . Willingdon Sports Club v. C. B. Patil, Addl. WTO : [1982]137ITR83(Bom) , is yet another decision of the Bombay High Court which followed the decision in Orient Club v. CWT : [1982]136ITR697(Bom) . The reasons for holding that that such a club could not be treated as a taxable unit under the Act are practically the same as given in Orient Club v. CWT : [1982]136ITR697(Bom) . Inasmuch as that decision merely follows the earlier decision, what we have said with regard to the earlier decision would be equally applicable and we are not able to persuade ourselves to that line of reasoning.

19. Thus, on a consideration of the meaning of the expression 'individual' occurring in s. 3 of the Act in the light of the interpretation put upon it in the decisions referred to earlier in this judgment, we are of the opinion that the expression 'individual' occurring in s. 3 of the Act would take in a plurality of individuals, which, in turn, would include a body or group of individuals forming a single collective unit knit together by ties of common aims and joint interest and not any profit motive but owning property. In the view we have taken, we are not inclined to consider whether a members' club would really fall within the scope of the expression 'association of persons'. The petitioner club being such a unit as would be subject to the provisions of the Act as an 'individual', we dismiss all these writ petitions. There will be, however, no order as to costs.


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