1. The only question debated before us in this application under Article 226 of the Constitution for the issue of a writ of certiorari to quash the order of the Income-tax Officer, Nagapattinam, was the validity of Section 4(2) of the Income-tax Act.
2. The petitioner is the wife of one Mohammad Abdulla, who was admittedly a 'non-resident' for the purposes of the Income-tax Act. He was a partner of a firm at Singapore. The finding of the Income-tax Officer was that the petitioner, who was a resident in the taxable territories, received during the year of account ending with 31st December, 1947, a sum of Rs. 10,217 which constituted the remittances by her husband from Singapore. On this sum the petitioner was assessed to income-tax.
3. One, of the contentions of the petitioner before, the taxing authorities was that these were not remittances to her at all.but constituted remittances made by her husband to one Mohammad Yousuff, with directions to pay over the amounts to Abdulla's mother and sisters for their maintenance. That contention was negatived by the Income-tax Officer. The correctness of his conclusion is pending investigation in the appeal preferred by the petitioner. The valitidy of Section 4(2) of the Act was argued before us on the assumption, that the finding of fact of the Income-tax Officer cannot be challenged before us. The correctness, of course, is open to challenge before the appellate authorities. Nothing that we say in these proceedings should be deemed as concluding that question of fact, whether these were remittances in fact to the petitioner the wife of Abdulla who himself was a non-resident.
4. Though in the normal course we should have refrained from investigating the alleged invalidity of a statutory provision when the questions of fact on which such a contention could be based have not been concluded, we heard the learned Counsel for the petitioner assuming the basic fact without deciding it.
5. The validity of Section 4(2) of the Act was challenged on two grounds : (1) it was beyond the legislative competence of the Indian Legislature when it enacted Section 4(2) in 1939, and (2) Section 4(2) as it now stands offends Article 14 of the Constitution and is therefore void under Article 13.
6. Section 4(2) runs:
For the purposes of Sub-section (1) where a husband is not a resident in the taxable territories, remittances received by his wife resident in the taxable territories out of any part of his income which is not included in his total income shall be deemed to be income accruing in the taxable territories to the wife.
7. The learned Counsel for the petitioner referred to the definition of income in Section 2(6-c) of the Act. But that definition, of course, does not affect the question of legislative competence to enact Section 4(2).
8. The issue of legislative competence has to be decided with reference to Entry 54 of List 1 of the Seventh Schedule to the Government of India Act, 1935 : 'Taxes on Income other than Agricultural Income'.
9. The learned Counsel for the petitioner contended that what Section 4(2) purports to tax is remittance. We are unable to agree. What it purports to tax is income. That portion of the non-resident's income, which is remitted to his wife resident within the taxable territories, is deemed for purposes of the Act to be her income. So, right through it is income that is taxed. It is qnly the non-resident husband's income remitted to his wife that is deemed to be her income. The basis of taxation is still income. Only the incidence of the taxation is not on the person to whom the income had accrued in the first instance, but the wife 10 whom that portion of the income was remitted. The wife is taxed because she is resident, within the taxable territories.
10. In Amina Umma v. Income-tax Officer, Kozhikode : 26ITR137(Mad) , Division Bench of this Court of which one of us was a member, followed the principle laid down by Viscount Finlay in John Smith & Son v. Moore 12 T.C. 266, and pointed out the difference between the basis of taxation and the incidence of the tax. At page 144 of the report it was observed:
The incidence of the tax whether it is the imfrifcdiate and apparent incidence, or whether it is the ultimate or real economic incidence, does not in our opinion, limit the taxing power given to the Central Legislature by Entry 54 of List I. All that Entry 54 requires is that the tax must be a tax on income other than agricultural income.... It coes not cdase to be a tax on income either in form or in substance, though it provides for the incidence of the tax not on the person whose income is to be assessed to tax, but on another.
11. Judged by that test, Section 4(2) of the Act was well within the scope of Entry 54. As we pointed out, it was a tax on income. It enacted a legal fiction to shift the incidence of taxation from the non-resident husband to the wife, who is resident in the taxable territories,
12. The next contention of the learned Counsel for the petitioner was that the impugned section offended Article 14 of the Constitution. The learned Counsel urged that the wife alone of a non-resident was singled out for purposes of taxation. Remittances sent by a non-resident to any person other than his wife would not come within the scope of Section 4(2). The defence to the charge of apparent discrimination was, of course, reasonable classification. To justify reasonable classification, the impugned provision should bear a just and true relation to the legislative purpose of the enactment as a whole. In our opinion, that test is satisfied by Section 4(2). Though the husband and wife, even for purposes of the Income-tax Act, are separate juristic persons, the unity brought about by matrimony is well recognised practically under all systems of personal law. The wife being apparently the person whom the non-resident husband could trust most to receive his moneys within the taxable territories, remittances to the wife were obviously singled out for special treatment, in levying a tax on income, which was the main objective of the Income-tax Act. The money remitted to the wife would normally be still money over which the person who remitted the money would have the power of disposal. It is really his income received within the taxable territories that is taxed. But for purposes of taxation within the taxable territories the money is deemed to be income of the wife which accrued to her within the taxable territories. The adoption of the legal fiction was justified. So was the apparent discrimination. In our opinion, Section 4(2) of the Act does not violate Article 14.
13. A further contention of the learned Counsel for the petitioner was that there was further discrimination against the wife amounting to denial of equal protection of laws guaranteed by Article 14, in that the wife as the assessee would be denied at least some of the privileges and exemptions guaranteed by the Act to other assessees. The learned Counsel urged that the exemptions granted by Section 4(3)(vii) of the Act for instance, to receipts of a casual, non-recurring nature would not be available to the wife's 'income' under the provisions of Section 4(2) of the Act. In Rani Amrit Kunwar v. Commissioner of Income-tax : 14ITR561(All) , the learned Judges pointed out that the scope of the legal fiction enacted by Section 4(2) excluded the operation of Section 4(3)(vii). That after all is yet another legal fiction for purposes of the Act that, though there is a receipt which may normally be income, it is not an income assessable to income-tax. We have pointed out the underlying principle of the unity of the married couple which justified the enactment of the impugned provision, Section 4(2). The moneys taxed as income are still the husband's moneys; only for the purposes of taxation, the legal fiction is enacted, that it is the income of the wife, with the further legal fiction, that it is income which accrued to the wife within the taxable territories. Here again we are unable to hold that Section 4(2) offends Article 14 of the Constitution.
14. We have no hesitation in upholding the validity of Section 4(2) of the Act.
15. The only point raised by the petitioner before us having failed, we direct that the rule be discharged and that this petition be dismissed with costs. Counsel's fee Rs. 250.