TMI Blog1954 (3) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ership with a total of 8 annas share between them. The petitioner was entitled to a four annas share. This partnership also was registered under Section 26-A of the Income-tax Act. After determining the income of the firm of the assessment year 1952-53, and after apportioning it between the shares under Section 23(5) of the Income-tax Act, the Income-tax Officer assessed the petitioner to tax on her income and also that of her three minor children under the provisions of Section 16(3) (a)(ii) of the Income-tax Act. It was on the same basis that he proposed to assess the petitioner of the assessment year 1953-54 also but that assessment had not been completed when the petitioner filed these petitions in this Court for the issue of writs prohibition. The petitioner challenged the validity of the proceedings before the Income-tax Officer on the ground that Section 16(3) of the Income-tax Act was ultra vires the Central Legislature. Section 16(3)(a)(ii) of the Income-tax Act, which was inserted by the Amending Act IV of 1937, runs:- In computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of a wife ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other requirements of Section 16(3)(a)(ii) of the Income-tax Act are satisfied. The contention of Sri Rajah Aiyar, the learned counsel for the petitioner, was that Entry 54 in the Federal Legislative List of the Government of India Act, 1935, did not confer on the legislature any legislative power to tax A on the income of B, that is, in this case to tax the petitioner on the income of her minor children. Acceptance of that contention means that Entry 54 would have to be read or at least interpreted as a tax on income of the person assessed to the tax . Does Entry 54 read with Section 100 of the Government of India Act, 1935, necessarily carry with it such a limitation is the question for determination. It was a rule of construction repeatedly laid down by courts in India and in England that Chagla, C.J., restated when he observed in J.N. Duggan v. Income-tax Commissioner, Bombay City [1952] 21 I.T.R. 458 at 463:- It is well settled now that a large and liberal interpretation must be placed upon all entries in the Seventh Schedule of the Government of India Act, and that the widest import and significance must be given to the language used by Parliament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l limits of due process and equal protection of laws guaranteed by the American Constitution, Neither of these limitations was imposed on the Indian Legislature by the Government of India Act of 1935. We shall consider later whether the impugned statutory provision offends any of the provisions of our Constitution. Hoeper's case* may not be of any direct assistance in deciding the limits of legislative authority conferred on the Indian Legislature by Entry 54 of the Federal Legislative List read with Section 100 of the Government of India Act. The wisconsin legislature could exercise sovereign authority which the Indian Legislature could not claim to the same extent; only the exercise of that sovereign power by the Wisconsin legislature was subjected to the constitutional safeguards prescribed by the Constitution of that State and by the Constitution of the United States. In United States v. Ballimore and Ohio Railroad Co.* the Court observed:- A tax is understood to be a charge, a pecuniary burden for the support of Government. Of all burdens imposed upon mankind that of grinding taxation is the most cruel. It is not taxation that Government should tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n re*. At pages 112-113, after pointing out that the Ruler of the Patiala State could not be regarded as a person within British India, Beaumond, C.J., observed:- I think that, properly considered, Income-tax is a tax on a person in relation to his income. The tax is not imposed on income generally; it is imposed on the income of a person, natural or artificial, as defined in Section 3. The assessment has to be made against a person, and the tax has to be collected from the assessee. The tax is not made a charge on the income upon which it is levied, and I think, broadly speaking, it is accurate to say that Income-tax is a tax imposed upon a person in relation to his income. It was with reference to Section 65 of the Government of India Act, 1919, that the validity of the provision impugned in that case had to be decided. The relevant portion of Section 65 ran:- The Indian Legislature has power to make laws for all persons, for all Courts and for all places and things with in British India. After discussing the true nature of the Income-tax, Beaumont, C.J., upheld the validity of the legislation in that case. He observed:- But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative power, we are unable to hold that the legislature had no power to enact the impugned provision to lay a tax liability on the minor child's income on the parent. In Commissioner of Excess Profits Tax v. Jivaraj Topun Sons [1951] 20 I.T.R. 143 the learned Judges quoted with approval a passage from the judgment of Viscount Finlay in John Smith and Son v. Moore [1921] 12 Tax Cas. 266 at pp. 285-286:- But though for this purpose the business is treated as continuous, the essential incidence of the tax is upon the person by whom it is conducted at the time in question. Just as a rate is imposed upon the occupant in respect of the house, so income-tax and super-tax are imposed upon individuals in respect of the business. The yield of the business during any particular period depends upon the amount of profit which is got from it by the person carrying it on for the time being and this must largely depend upon his personal qualities. The profits are not earned by the business, they are earned by the person who carries it on. This passage brings out in sharp relief the basis to taxation and the incidence of the tax. The incidence of the tax whether it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry incidence in addition to being consistent with legislative practice in England is also not inconsistent with any of the fundamental concepts of income-tax law either as understood in America or in England. In our opinion, Section 16(3)(a)(ii) of the Income-tax Act was well within the legislative power conferred on the Central Legislature by Entry 54 read with section 100 of the Government of India Act, 1935. It is into even necessary to have recourse to the enlarging provision of Section 100 with respect to any of the matters enumerated in List I to reach this conclusion. As we have pointed out, what the impugned provision taxes is income, the income of the minor. The next question whether the impugned provision contravenes any of the fundamental rights guaranteed by our Constitution. It is well settled that taxing legislation also controlled by the fundamental rights guaranteed in Part III of the Constitution. The contention of the learned counsel for the petitioner that the impugned provision offends Article 19(1)(g) of the Constitution is easiest disposed of. What Article 19(1)(g) provides for is the right of a citizen to practise any profession or to carry on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has been practical and has permitted a very wide latitude in classification for taxation. At page 593 the learned author observes: A frequent classification for taxation is a personal classification. Persons may be put in different classes and some persons taxed and others not taxed. If there is a reason for taxing those put in any class, and if those within the class are treated alike, there is no violation of the equality clause. These principles can well govern the interpretation of Article 14 of our Constitution by our Courts. To the discussion of the case law on the subject in Syed Mohamed Co. v. State of Madras*, there is little that we need add at this stage. What is the classification which underlies the impugned provision has to be considered before we apply the test whether such classification has been based upon some real and substantial distinction bearing a impugned provision. As we pointed out before it is only a limited class of persons that come within the purview of Section 16(3)(a)(ii) of the Income-tax Act. It is only a parent who is himself or herself a partner in a firm to the benefits of which partnership that individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the legislature. In effect the statutory provision as it was finally enacted in Section 16(3)(a)(ii) went even a little beyond what was the declared objective in the statement of objects and reasons. but that does not affect the question, was the classification which underlay the impugned provision reasonable? What the Income-tax Enquiry Commissioners wanted to provide for was a case where the assets are apportioned in a partition of a Hindu undivided family, which is not quite that of a partition effected among the heirs of a Mohammedan. But as pointed out by Rottschaefer in his Constitutional Law at page 667: It is generally held that an issue under the equal protection clause must be decided in respect of the general classification rather than by the chance incidence of the tax upon particular taxpayers. A classification that is in general reasonable does not become invalid as applied to a particular class merely because it might effect an unreasonable result therein. That was also the view adopted in Hoeper's case*, based upon the earlier decision in Purity Extract Co. v. Lynch**, ...............Where a legislature......makes a class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a married woman and her rights in Wisconsin State, after which he observed: We have no doubt that, because of the fundamental conceptions which underlie our system, any attempt by a State to measure the tax on one person's property or income by reference to the property or income of another is contrary to due process of law as guaranteed by the Fourteenth Amendment. It is not on the basis of any violation of due process of law or of the violation of equal protection of law that the question at issue has to be considered. But it must be remembered that the decision in Hoeper's case* was that the impugned Act also violated the equal protection of laws clause. As we understand the decision in Hoeper's case*, that court did not intend to lay down as a proposition of law universal in its cope and applicable at all times under all circumstances and to all States even within the United States that under no circumstance could a husband be taxed on the wife's income. Nor can that decision be treated as authority for universal application that under no circumstance could any State in America Tax A on the income of B. The reasonableness or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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