9911796707
TMI Blog1967 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e Expenditure-tax Act, 1957, hereinafter referred to as the Act, for the expenditure assessment year 1959-60. The relevant facts necessary for appreciating the question referred to the Full Bench are the following: The assessee, the eldest on of Nizam VII, filed expenditure-tax returns under the Act for the assessment years 1959-60, 1960-61 and 1961-62 and the respondent completed the expenditure-tax assessments on March 27, 1961, December 22, 1961, and January 25, 1962, respectively, determining the assessee's taxable expenditure for the three years at Rs. 2,34,864, Rs. 1,66,687 and Rs. 2,30,384, and the assessee also paid the tax demands in full. Subsequently, the respondent issued a notice dated May 5, 1962, under section 16 of the Act calling upon the assessee to file supplemental returns of expenditure for the three years in question on the ground that the respondent had reason to believe that the assessee's expenditure had escaped assessment or that he has been under-assessed. As the assessee was not aware of the reasons which prompted the respondent to reopen the assessment, he filed supplemental returns of expenditure on July 16, 1962, declaring the same figures as shown e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded family, inasmuch as in the case of an individual, expenditure incurred by any dependant of such individual has to be included in the assessment of the individual, without regard to any other consideration, while in the case of a Hindu undivided family, expenditure by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee alone has to be included. This according to the assessee constitutes discrimination. The assessee's wife did not incur any expenditure from out of the income or property transferred directly or indirectly by the assessee and even so under the amended section 4(ii), expenditure has to be included in the assessee's assessment and tax levied on him, whereas in the case of a Hindu undivided family, no such expenditure of the dependant has to be included in the assessment of the family. The provisions of the Act are also challenged on the ground that they constitute an unreasonable restriction on a person's right to hold and enjoy property, and, consequently, violate articles 19 and 31 of the Constitution. In the counter filed by the respondent it was averred that it is incumbent under section 13 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inatory as to offend article 14 of the Constitution. The other contention of the assessee, that the provisions of section 4(ii) read with section 2(g) of the Act are hit by the provisions of articles 19 and 31 of the Constitution, is devoid of any merit or substance. There is no fundamental right involved in the circumstances of the case, nor is there any deprivation of the right of the assessee to property. The learned judge negatived all the contentions of the assessee and dismissed his writ petitions. On the first contention, the learned judge held that the respondent was empowered to reopen the assessment under section 16 of the Act. Regarding the main question under article 14 turning on the interpretation of section 4(ii) of the Act, it was held by the learned judge that different kinds of property may be subject to different rates of taxation, but so long as there is a rational basis for classification, article 14 will not be in the way of such a classification, resulting in an unequal burden on different classes of properties. The learned judge also observed that in a tax legislation, incidence of tax falls on different classes of assessees and for that reason it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing assessment. "If the Expenditure-tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his expenditure under section 13 for any assessment year, or to disclose fully and truly all material facts necessary for his assessment for that year, the expenditure chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise" he may reopen at any time within 8 years and serve a notice on the assessee or if under section 16(b) in consequence of any information in his possession he has reason to believe that notwithstanding that there has been no such omission or failure as is referred to in clause (a) the expenditure chargeable to tax has escaped assessment for any assessment year, the Expenditure-tax Officer may at any time within four years of the end of the assessment year serve a notice on the assessee. In this case, the notice issued by the respondent merely shows that it is issued under section 16 of the Act. In response to the notice the assessee filed returns disclosing identical items of expenditure which were disclosed earlier in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin four years. All that is required for the Expenditure-tax Officer is that be should have reason to believe under clause (a) that as a result of the assessee's failure to make a return or disclose fully the particulars of his expenditure, expenditure has escaped assessment. Under clause (b), the officer should have reason to believe in consequence of the information in his possession that the income has escaped assessment. A scrutiny of the returns filed by the assessee for the three relevant years would show that all the material facts were not disclosed by the assessee in the first instance and even after notice was given under section 16(b), there was no disclosure in the return that the Princess was his wife and she had her own source of income and that she had filed separate returns. Under column 1 to annexure 5 of the returns it is incumbent on the assessee to disclose particulars of his "dependants" and as there is no disclosure of dependants, the Expenditure-tax Officer can proceed to assess or reassess such escaped expenditure of the dependant under section 16(b). Therefore, it is manifest that the respondent was competent to issue the notice under section 16 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould rationally be capable of being considered as the income of a citizen. But in considering the question as to whether a particular item in the hands of a citizen can be regarded as his income or not, it would be inappropriate to apply the tests traditionally prescribed by the Income-tax Act as such." It is clear and manifest from entry 97 in List I that on any other matter not enumerated in List II or III including any tax not mentioned in either of those lists, Parliament has exclusive power under article 246 to make laws. The expenditure-tax which is not specifically provided for in any of the entries in the said lists falls well within the ambit or scope of entry 97 and as such exclusively is within the legislative competency of Parliament. So long it is in fact a tax on expenditure, the mere fact that in furtherance of legislative intent and object the expenditure on which the tax is sought to be levied is not necessarily confined to the expenditure actually incurred by the assessee himself, does not render it other than the expenditure-tax. Mr. Narasaraju next contended that a fiscal statute has to be strictly construed and if a provision in the statute is susceptible of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the powers of Parliament are wide enough to take within their range this legislation, that the two essential conditions are satisfied inasmuch as there is a reasonable classification of the assessees into two classes, individual and Hindu undivided family, and that this differentia has a rational relation to the object sought to be achieved by the statute. The amendments introduced by the Finance Act, 1959, suffer from no constitutional inhibition and they advance the purpose and objects of legislation. This argument leads us to the question as to the object of the legislation, the purpose for introducing amendment in section 4(ii) and 2(g)(i), the exact meaning of those provisions and whether the classification introduced has a rational and intelligible basis and whether it has a reasonable nexus with the object sought to be achieved by the statute. We may state at the outset that taxation laws cannot claim any immunity from equality clause of the Constitution. They cannot afford to be arbitrary. They cannot transcend the reasonable limits enjoined by the Constitution. They are liable to be struck down if they suffer from constitutional inhibitions. With these preliminary rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incurred by an assessee, and includes any amount which under the and includes any amount which under the provisions of this Act is required to be provisions of this Act is required to be included in the taxable expenditure. included in the taxable expenditure. 2. (o) 'taxable expenditure' means 2. (o) 'taxable expenditure' means the total expenditure of an assessee the total expenditure of an assessee liable to tax under/this Act. liable to tax under/this Act. 3. CHARGE OF EXPENDITURE-TAX-- 3. CHARGE OF EXPENDITURE-TAX-- (1) Subject to the other provisions (1) Subject to the other provisions contained in this Act, there shall be contained in this Act, there shall be charged for every financial year charged for every financial year commencing on and from the first day commencing on and from the first day of April, 1958, a tax (hereinafter referred of April, 1958, a tax (hereinafter referred to as expenditure-tax) at the rate or rates to as expenditure-tax) at the rate or rates specified in the Schedule in respect of specified in the Schedule in respect of the expenditure incurred by any individual the expenditure incurred by any individual or Hindu undivided family in the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whether directly or indirectly by any person other directly or indirectly by any person other than the assessee in respect of any than the assessee in respect of any obligation or personal requirement of the obligation or personal requirement of the assessee or any of his dependants which, assessee or any of his dependants to the but for the expenditure having been incurred extent to which the amount of all such by the other person, would have been expenditure in the aggregate exceeds incurred by the assessee, to the extent to Rs. 5,000 in any year; which the amount of all such expenditure in the aggregate exceeds Rs. 5,000 in any year; (ii) any expenditure incurred by any (ii) where the assessee is an individual, dependant of the assessee for the benefit any expenditure incurred by any dependant of the assessee or of any of his dependants of the assessee, and where the assessee out of any gift, donation or settlement on is a Hindu undivided family, any trust or out of any other source made or expenditure incurred any dependant from created by the assessee, whether directly or out of any income or property transferred or indirectly. directly or indirectly to the dependant b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st complicated monstrosity". The idea of expenditure-tax in India seems to have had its origin in the recommendations of Dr. Nicholas Kaldor, Reader in Economics, University of Cambridge, who gave a report on Indian Tax Reform. It is essentially a tax on spending or consumption, i.e., expenditure. It is not the entire expenditure but only the taxable expenditure for any year as defined in the Act that is liable to tax. The assessee is liable to such tax only if his income exceeds certain limits. In computing this taxable expenditure certain deductions are permissible. Sections 5 and 6 exclude certain types of expenditure from being taxed. The object of this legislation, according to the statement of objects and reasons, is to levy annually tax on expenditure above the prescribed level of an individual and a Hindu undivided family. This tax on expenditure is expected to serve as a deterrent on extravagant or unnecessary personal expenditure, promote thrift and act as an incentive to save and promote economy. While introducing the amendment, the Finance Minister in his Budget Speech for 1959-60 (see [1959] 35 I.T.R. 57 (Statutes) para. 66) observed: "I propose, therefore, to withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey-General v. Carlton Bank stated: 'The duty of the court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, viz., to give effect to the intention of the legislature as that intention is to be gathered from the language employed. The court must no doubt ascertain the subject-matter to which the particular tax is by the statute intended to be applied, but when once that is ascertained, it is not open to the court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like.' If the language of an Act of Parliament is clear and explicit it must receive full effect whatever may be the consequences (vide Craies on Statute Law, 6th edition, by S. G. G. Edgar, page 94)". The classic statement of Rowlatt J., in Cape Brandy Syndicate v. Inland Revenue Commissioners cited with approval by the Supreme Court in Commissioner of Income-tax v. Shahzada Nand & Sons, reads thus: " '...in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...." It is plain that a statute being the will of the legislature has to be expounded according to the intent of those who made it. That intent has to be necessarily gathered from the language employed. If the language employed is clear and unambiguous the question of construction would not arise. The intention being manifest, no difficulty would arise, for nothing can be implied which is inconsistent with the words expressly used. It is only where the express intention is not manifest it has to be determined by inference based on legal principles which are well-settled. We have now to construe sections 2(g)(i) and 4(ii) which have undergone substantial amend ments as shown above for obvious reasons. Section 2(g)(ii), however, it may be noted, is left intact. The definition of "dependant", before amendment of section 2(g)(i), so far as that clause is concerned, read thus: "2. (g) 'dependant' means-- (i) where the assessee is an individual, his or her spouse or child wholly or mainly dependent on the assessee for support and maintenance." After amendment, section 2(g)(i) reads: " 'dependant' means-- (i) where the assessee is an individual, his or her spouse or minor child, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g regard to the clear context in the present provision there is no occasion for such construction. We have already noticed that nothing can be implied which is inconsistent with the express words used. It is said if the words used are sufficiently flexible they must be construed in the sense which, even if less correct grammatically, is more in harmony with the intention. Having regard to the obvious meaning of the words used, there is no occasion for the application of this rule. Reference also is made, though not directly, to the rule of ejusdem generis. As observed by the Supreme Court in Kochuni Moopil Nair v. States of Madras and Kerala, that rule means : when general words follow particular and specific words of the same nature, the general words must be confined to the things of the same kind as those specified. It is, however, clearly laid down at the same time that the specific words must form a distinct genus or category and, further, it is not an inviolable rule of law, but it is only permissible inference in the absence of an indication to the contrary. Then again in Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd. the Supreme Court said : "When in a statute par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature. We then advert to section 4(ii). Before doing so, we may notice the definition of "expenditure" and "taxable expenditure." We may note that no change has been made in the definitions of these two expressions. "Expenditure" means any sum in money or money's worth spent or disbursed or for the spending or disbursing of which a liability has been incurred by an assessee and includes any amount which under the provisions of this Act is required to be included in the taxable expenditure. Section 2(o) defines "taxable expenditure" as the total expenditure of an assessee liable to tax under this Act. The charging section is section 3 and this section has undergone changes. In the proviso to the amended section the following words are inserted, "derived by the assessee and his dependants", while the proviso before amendment showed that no expenditure-tax shall be payable by an assessee for any assessment year if his income from all sources during the relevant previous year as reduced by the amount of taxes to which such income may be liable under any other law for the time being in force, does not exceed rupees thirty-six thousand. The words "and his dependants during" are adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividual, any expenditure incurred by any dependant of the assessee, and where the assessee is a Hindu undivided family, any expenditure incurred by any dependant from or out of any income or property transferred directly or indirectly to the dependant by the assessee." It is thus plain that after the amendment a distinction is made between the assessee where he is an individual and where he is not an individual but is a Hindu undivided family. Where the assessee is an individual any expenditure incurred by any dependant of the assessee is included in computing the expenditure of the assessee. But, where the assessee is a Hindu undivided family, only such expenditure incurred by any dependant as is met from or out of any income or property transferred directly or indirectly to him by the assessee is to be included in computing the expenditure of a Hindu undivided family. That can be the only interpretation that the language used is susceptible of. The opening clause of section 4, viz., "the following amounts shall be included in computing" read with the distinction drawn between the two clauses in section 4(ii) by using the words" where the assessee is an individual "and" where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and his dependants, is taken into consideration as taxable expenditure of the assessee, of course with various statutory deductions and allowances. So long as the assessee is an individual and sought to be taxed as such, even he be a member of the Hindu undivided family, is subject to the same test. Thus the persons similarly circumstanced are dealt with in the same or similar manner. There can be no question of discrimination. Of course, if the assessee is an undivided family and not an individual a different yardstick is prescribed by the amended Act. Prior to the amendment of section 4(ii) there was no difference in relation to treatment of income and expenditure of a dependant vis-a-vis the assessee, whether an individual or Hindu undivided family. All that was required under the old section 4(ii) to attract the tax liability of the assessee was that, be it an individual or a Hindu undivided family, the expenditure incurred by any dependant should have been incurred from out of the sources made available by the assessee. Section 4(ii) in the amended form makes distinction by means of classification, for the purpose of the Act, between an assessee who is an individual and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady stated that taxation laws like any other laws are equally subject to constitutional limitations. There is, however, a presumption in favour of the constitutionality of an enactment. There are also other presumptions, although all of them are rebuttable, in relation to the fact that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. We may do well to refer to them presently by citing the very authorities which have laid down the same. Article 14, which is the main article relied on, says that the State shall not deny to any person equality before law or equal protection of laws in the territory of India. That does not preclude the legislature from making a reasonable classification for purposes of legislation. Willis in his book on Constitutional Law, dealing with a classification for taxation, states : "One reason for this undoubtedly is the urgent need for revenue by the various Governmental agencies. A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed : "It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of the Supreme Court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure." The decisions further establish : (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ascertain its real impact on the persons or property similarly situated. Conversely, a law may treat persons who appear to be similarly situate differently ; but on investigation they may be found not to be similarly situated. To state it differently, it is not the phraseology of a statute that governs the situation but the effect of the law that is decisive. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine .... But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways . . . . It is true, taxation law cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw will not be unconstitutional as discriminatory. In the light of the above authorities, it is now to be seen whether the impugned provisions contravene article 14. The impugned legislation is an enactment levying tax on expenditure. It is a charge on spending, i.e., on the activity of the person in spending the amount. It is not the expenditure of every person that is brought to tax. It is only persons or class of persons who come under certain income group are liable to this charge. A person having no income of his own is not assessable to expenditure-tax whatsoever be the extent of capital that he is possessed of and howsoever high his expenditure might soar in any year. It is only when he gets income and it is not less than Rs. 36,000 after the statutory deductions or allowances his expenditure is brought under levy. In other words, expenditure above Rs. 36,000 is leviable to tax provided the income level of the person satisfies the condition. Once the level is reached, the legislature intends that the assessee should take care that he does not spend more than Rs. 36,000 a year except on pain of being liable to tax and that at a rate progressively increasing to such a deterre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted. It is not easy to see how, by reason of the classification of persons to be included in the definition of "dependant" for furtherance of the general scheme of the Act, the question of banned discrimination would arise. Also it is not easy to understand why technical terms in a statute should necessarily be employed only in their literal sense. If such an obligation on the legislature be accepted, there would be no need nor occasion for the legislature to define various expressions used in the Act. But the legislature in every statute does define certain terms and sometimes even refers to other Acts for the meaning and import of certain other terms which have not been defined. Sometimes need to refer to the General Clauses Act would arise to warrant the legal import and the meaning of general expressions used, where no definition is given in an enactment. All this would have been wholly unnecessary if the dictionary or the literal meaning alone had to prevail. It is significant that even in section 2(g)(i)(a), which is in relation to a coparcener, the legislature did not lay down any pre-requisite conditions of dependence, whether legal or factual, for maintenance and suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for under section 6, the amended provision specifies that it is the allowance not only for the assessee himself but also for all his dependants. Thus it is plain that all the said amendments were effected to give effect to one integrated plan. The legislature in order to effectively carry out the purposes of the Act thought thus of including necessarily the spouse and minor child of an individual assessee in the unit of dependants and made other persons dependants only on their satisfying the test of dependence and sought to include the income of all dependants in the income of the assessee and so also their expenditure irrespective of the source from which it was made. Whether this classification in section 2(g)(i) and the distinction created in section 4(ii) between the individual assessee and Hindu undivided family is permissible in law having regard to the scheme and does not smack of alleged vice of article 14 is the question. Article 14, which forbids class legislation, does not forbid reasonable classification for purposes of legislation. In order that the classification is reasonable or permissible it must be founded on intelligible differentia and that differenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer : "A wife in India, particularly if she be illiterate--a large majority of them are illiterate--would ordinarily be in economic matters a tool in the hands of her husband. Many things are done in her name without her knowledge of the same. When the legislature of this country, which is assumed to know the conditions of the people and their requirements, with the awareness of this particular widespread fraudulent device in the matter of evasion of taxes ; made a law to prevent the said fraud, it is difficult for this court, in the absence of any counter-balancing circumstances to hold, on the analogy drawn from American decisions, that the need for such a law is not in existence. On the contrary, there is a direct decision of the Madras High Court in Amina Umma v. Income-tax Officer, Kozhikode sustaining the said provision on the ground of reasonable classification. Rajagopalan J., speaking for the Division Bench, after considering the relevant decisions on the subject, observed thus : 'The reasonableness or otherwise of a classification has to be decided with reference to all the circumstances of the case including the social and economic structure prevalent in the area whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of the Act, this classification can in no sense be unreasonable but only just and legitimate and based on intelligible differentia and further that differentia has a reasonable nexus with the object to be achieved. An argument has been raised on the basis of a comparison between the wife of an individual assessee and the wife of a karta of a Hindu undivided family, that the law has not treated both the dependants alike. It must be borne in mind that the vice of discrimination has to be judged having regard to the position in which the persons similarly circumstanced are placed. There can be no question of discrimination if the persons in two different categories are not treated alike. It is plain that under the Act wherever the assessee is an individual his dependants will be treated in the same way as any other dependant of an individual assessee. Amongst the individual assessees the dependants of each would be entitled to similar treatment under the Act. Thus all equals are treated alike. There can, therefore, be no question of discrimination. It is well-settled that for ascertaining the vice of discrimination comparison of persons in different categories is of no ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee brings her within the meaning of dependant under section 2(g)(i) and her expenditure irrespective of the fact from which source the income has come has to be included in the taxable expenditure of her husband. We have already said that Parliament after some experience of the working of the Act has come to the conclusion that the wife and minor child are necessarily to be included in the definition of dependants of an assessee who is an individual. Indeed, Parliament has considered them as constituting the integral unit of the family and this for good reasons, viz., having regard to the social conditions of the country for effective working of the legislative enactments and avoiding devices of evading tax. We have also said that Parliament was concerned with the object of promoting thrift in the family expenditure. It was, therefore, necessary to include the income and expenditure of these dependants in the income and expenditure of the assessee and that is what Parliament has done. When Parliament, after taking into account the historical background, the family relationship, the social and economic conditions of the family, has made such classification to effectuate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been so held by the Supreme Court in the case to which we have already referred. We do not think that there is any unreasonable restriction on the right of the assessee to hold property for he is called upon to pay the tax due under the provisions of the Expenditure-tax Act. The legislation cannot be impugned as confiscatory in nature merely for the reason that the spouse has been treated as dependant and the expenditure incurred by her not from or out of the income of the property transferred to her by the assessee, has been taxed. As already noticed the concept of family includes the spouse and the minor child. That being necessarily the unit of the family the assessee is made liable for the expenditure of his dependants even though it may not be from or out of the source of income traceable to the assessee. The wife by reason of her marriage necessarily gets connected with the family. One cannot legitimately complain of the statutory and legal incidence flowing from such relationship. It is clear that the law, for purposes of levying expenditure-tax, has taken the total expenditure of the assessee and the dependants as a whole as they are presumed to constitute one unit and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as amended in 1959 (hereinafter referred to as "the Act") which is analogous to section 34 of the Income-tax Act, 1922, proposing to reopen the previous assessments. The ground for reopening the prior assessments is that the assessee omitted or failed to disclose the expenditure of his wife who was his dependant. The attention of the assessee was pointedly drawn in the printed form of the return, annexure V of which requires the assessee to disclose the names of the individuals-dependants, setting forth their relationship, age, etc.; but the assessee did not mention the name of his wife as a dependant. It is now argued on behalf of the assessee that the said omission by him does not really affect the position because his wife had already submitted returns of her individual expenditure separately before the same officer. In other words, the contention of the assessee is that the fact was already disclosed by him and that there was no omission on his part which justifies the reopening of the assessments. On a perusal of the returns submitted by the wife, we have not been able to find any information on record that she is described as the wife of the assessee. Hence, there is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve my own reasons : Section 2(g) of the Act, which defines a "dependant", reads as follows : 2. (g) 'dependant' means- (i) where the assessee is an individual, his or her spouse or minor child, and includes any person wholly or mainly dependent on the assessee for support and maintenance." Prior to the amendment introduced in 1959, this definition read as follows : "2. (g) 'dependant' means-- (i) where the assessee is an individual, his or her spouse or child wholly or mainly dependent on the assessee for support and maintenance." The interpretation placed by Sri Narasaraju on behalf of the assessee is that, both before and after the amendment, the qualifying expression "wholly or mainly dependent on the assessee for support and maintenance" qualifies all the preceding classes of persons mentioned therein, namely, spouse, child or any person. The other construction sought to be placed by Sri Kondaiah on behalf of the revenue is that, though the said words "wholly or mainly dependent, etc." qualified the words "spouse" or "child" before the amendment, they were no longer intended to qualify "spouse" or "child" after the amendment but that they refer only to the third class wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in coming to the conclusion which I did. The scope and object of the Expenditure-tax Act is to tax the expenditure of an individual assessee and that expenditure may be incurred on his own behalf or on behalf of his near relatives like spouse or a minor child or any other member or non-member of the family. In all these cases, the crucial test is whether it is expenditure incurred by the assessee. Section 2(h) of the Act which defines "expenditure" also indicates that the expenditure should be incurred by the assessee. Section 3, which is the charging section, also emphasises the fact that the expenditure is one incurred by the individual. The word "dependant" may involve various elements, such as dependency in the matter of merely taking advice or mere protection. But the test laid down by the Act is that the assessee should maintain the dependant. Hence, the essential test is that the expenditure in relation to the maintenance of the particular dependant must be incurred by the assessee. It, therefore, excludes all expenditure which has been incurred by the members of the family out of their own resources and separate property. For instance, the spouse of a husband assessee, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than a spouse or a child who is also maintained by the assessee, that is, in addition to a spouse or a minor child who are being maintained by the assessee. It cannot, therefore, be interpreted as a matter of grammatical construction that the qualifying clause refers only to the last class immediately preceding is "any person", but not to the previous classes of persons. If the context requires that the qualifying clause should refer to all the previous classes of persons, it should be so interpreted. Reference may be made in this connection to the case of the Supreme Court in Regional Provident Fund Commissioner, Bombay v. Shree Krishna Metal Manufacturing Co., in which it is held that the ordinary rule of grammar on which a construction is based cannot be treated as a rule which must always and in every case be accepted without regard to the context and that when the context definitely suggests that the relevant rule of grammar is inapplicable, then the requirement of the context must prevail over the rule of grammar. Applying the said rule, the Supreme Court, disregarding the rule of grammar, interpreted a qualifying clause with reference to the context in construing certain wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely : ..... (ii) where the assessee is an individual, any expenditure incurred by any dependant of the assessee, and where the assessee is a Hindu undivided family, any expenditure incurred by any dependant from or out of any income or property transferred directly or indirectly to the dependent by the assessee" Section 3(1) provides that the expenditure incurred by any individual or Hindu undivided family shall be charged at the rates specified for the relevant year. Section 4 mentions what other amounts should be included in computing the expenditure of an assessee. Sub-section (ii) of section 4, with which we are concerned, seeks to include the expenditure of a dependant either when the assessee is an individual or when the assessee is an undivided family. The contention of Sri Kondaiah on behalf of the revenue is that the expression "from or out of any income or property transferred directly or indirectly to the dependant by the assessee" qualifies only a dependant in a Hindu undivided family but not the earlier clause referring to a dependant of an individual, while the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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