TMI Blog1963 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... n the net wealth of individuals, Hindu undivided families and companies. The wealth-tax is an important constituent of an integrated tax structure which the Government have been aiming at for some time and it is consistent with the avowed goal of the attainment of a socialistic pattern of society . This goal appears to have been aimed at with a view to implement article 39(c) of the Constitution which seeks to prevent concentration of wealth in the hands of a few individuals which is perhaps the necessary evil of any capitalistic system. The Act authorises the imposition of wealth-tax at certain rates on the net wealth, either of an individual or of a Hindu undivided family subject to certain exemptions specified in section 5. The schedule attached to the Act gives the rates at which wealth-tax is leviable on the net wealth. Different rates of assessment have been provided for assessing tax on: (i) an individual, and (ii) a Hindu undivided family. The net wealth of a person is defined in clause (m) of section 2 of the Act and it would include all assets including movable and immovable property. Section 4 however says that, in computing the net wealth of an individual, any transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause occurring in clause (1) of article 246 of the Constitution; and clause (3) of that article makes the power of the State legislature subject to the power of the Union legislature under clause (1). Hence, there can be no doubt that if there is any overlapping between entry 86 of List I and entry 49 of List II, Parliament's power to legislate must prevail. But as pointed out by the Federal Court in In re Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 [1938] 1 S.T.C. 1, 40; A.I.R. 1939 F.C. 1: A reconciliation should be attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting and, where necessary, modifying the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the Federal power prevail. But the clause ought to be regarded, as a last resource, a witness to the imperfections of human expression and the fallibility of legal drafts manship. The aforesaid observations were made while construing the corresponding provisions of the Government of India Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention. The word assets in entry 86 of List I is not qualified by any limiting expression. On the other hand by excluding agricultural lands only the framers of the Constitution made it absolutely clear that all other assets would come within the scope of that entry. It is true that entry 49 of List II is also wide enough to include not only agricultural lands but also non-agricultural lands, as pointed out by the Supreme Court in Raja Jagannath Baksh Singh v. State of Uttar Pradesh*. It was however urged that the makers of the Constitution could not have thought of conferring on the State legislature the power to impose taxes on non-agricultural lands and at the same time conferring power on Parliament to levy taxes on the capital value of those lands. The obvious reply to this argument is that if that was the intention there is no reason why, in entry 86 of List I, only agricultural lands should have been expressly excluded. There was nothing to prevent the makers of the Constitution from excluding, from the scope of that entry, all lands agricultural and non-agricultural, and also buildings. Apart from this reason I would with respect adopt the reasons given by the Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the learned judge (Sahay J.) pointed out (paragraph 35) that this question did not directly arise for decision, and hence, his observations are in the nature of obiter. In my opinion, the express exclusion of agricultural lands in entry 86 of List I is decisive. I would therefore reject this contention of Mr. Narasaraju. The entries dealing with the power of taxation are dealt with in List I, beginning with entry 82 which deals with taxes on income other than agricultural income. It is true that the power of taxation conferred by entries 82, 83, 84, 87 and 88 can be used only once, in respect of a taxable event, such as income, entry of goods, production of goods, death duty, succession duty etc. But such a result flows from the nature of the taxable event which is the basis of those entries. Thus the same sum of money cannot accrue as income more than once, the same goods cannot enter a country or leave a country except once, and similarly, a person can die only once and another person can succeed to an item of property only once. But as regards entry 86 of List I the taxable event is the ownership of the assets; and the ownership continues unless it is divested subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it must follow that if a tax is within the lawful power, the exertion of that power may not be judicially restrained because of the results to arise from its exercise. In a very recent (unreported) judgment of the Supreme Court in Rai Ramakrishna v. State of Bihar (Civil Appeals Nos. 16 and 17 of 1963) decided on February 11, 1963, the same principle has been reiterated as follows: The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes article 19, courts will naturally be circumspect and cautious. Where for instance it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, courts would be justified in striking down the impugned statute as unconstitutional. In such cases, the character of the material provisions of the impugned statute is such that the court would feel justified in taking the view that, in substance, the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undivided family. With respect I am inclined to follow the view taken by the Bombay, Kerala and Andhra High Courts in this respect. The fourth contention of Mr. Narasaraju is in respect of section 4 of the Act. It was urged that when the legislative power conferred by entry 86 of List I is restricted to assets of individuals, the legislature cannot, by a deeming provision in the Act, include the assets of some other persons for the purpose of taxation. He contended that if there is a transfer by an individual in favour of his wife (living with him) or his minor children even without consideration, which is otherwise valid under any other law in force in India (such as the Transfer of Property Act), the legislature while passing the Act must recognise such transfers and cannot, by a deeming provision in section 4 of the Act, ignore such transfers for the purpose of assessment. The object of section 4 is clear. It is meant to prevent evasion of tax by transfer made by an assessee in favour of his wife or minor children living with him, and also transfers made in favour of other persons which are not irrevocable. It was conceded by Mr. Narasaraju that the power to legislate for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estriction having regard to the main object of preventing large-scale evasion of the tax. Doubtless, if such transfers have been ignored for all purposes the restriction may be held to be unreasonable. But it should be remembered that section 4 only refuses to recognize such transfers for the limited purpose of assessment of wealth-tax. The transfers are valid for other purposes. By expressly excluding those transfers made for adequate consideration or made in favour of a wife who is living separate from the husband-assessee, the apparent unreasonableness of the restriction is removed. It should be pointed out here that there is a similar provision in the Indian Income-tax Act, 1922: see section 16(3). Though the Constitution has been in force from 1950, this provision has not been challenged till now on the ground that it amounts to an unreasonable restriction on the fundamental right of a person to hold and dispose of property. On the other hand, in a very recent (unreported)* judgment of the Supreme Court in Philip John Plasket Thomas v. Commissioner of Income-tax (Civil Appeals Nos. 352 to 355 of 1962) decided on March 22, 1963, the aforesaid provision in the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act also. This argument cannot bear scrutiny. Once it is held that the power to tax is conferred by the entry, the classification of the assessees for the purpose of levying different rates of taxation must be left to the wisdom of the legislature, and it need not necessarily follow the same rule of construction applied in interpreting an entry in the legislative list. Considerations of equity, reason and justice, have no place in a taxing statute, which must be construed only on the basis of the language used therein: see Cape Brandy Syndicate v. Inland Revenue Commissioners* and 1834(2) Dowl 497. I may now notice the last contention of Mr. Narasaraju. The Act was passed by Parliament and was published in the Gazette only on September 12, 1957. But it was given retrospective effect from April 1, 1957. Mr. Narasaraju, quite fairly, conceded in view of the pronouncement of the Supreme Court in Chhotabhai Jethabhai Patel Co. v. Union of India** that taxation measures may be retrospective, but urged that the computation of the net wealth with reference to the assets of the previous year on March 31, 1957, was not justified, because, according to him, the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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