TMI Blog1991 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellate Tribunal held that the assessee is not an assessable entity and the Act does not govern it at all. It has found that the assessee is also not a trust and, therefore, the relevant provisions in the Act taxing the trust are also not attracted. The Revenue contends that the assessee is an "individual" as referred to in section 3 ; the term "individual" would include plurality of individuals, such as an association of persons and since certain assets belong to this association of persons, it is liable to be assessed, while the assessee contends that, in the sphere of fiscal legislation, various concepts such as "individual", "association of persons", "firm" and other entities are wellknown and Parliament has deliberately omitted to include association of persons from the purview of section 3 of the Act. The question is not free from difficulty and divergent views are forthcoming amongst various High Courts. Having considered the question deeply, we are of the opinion that the Appellate Tribunal has taken the correct view of the matter. Under section 3 of the Indian Income-tax Act, 1922, income-tax was charged in respect of the total income of "every individual, Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat High Court held that art association of persons is not an assessable entity under the Act. In Royal Calcutta Turf Club v. WTO [1984] 148 ITR 790, the Calcutta High Court also expressed the same view. A different note was struck for the first time by the Madras High Court in Coimbatore Club v. WTO [1985] 153 ITR 172. The decision of the Gujarat High Court was rendered on July 19, 1979. Thereafter, in another Orient Club's case [1982] 136 ITR 697, the Bombay High Court followed the Gujarat High Court's decision (Orient Club v. WTO [1980] 123 ITR 395). Thus, by the time a different view was expressed by the Madras High Court, there were at least three decisions of three High Courts holding that the term "individual" in section 3 of the Act would not bring within its compass an" association of persons" or a "body of individuals" such as a club registered under the provisions of the Societies Registration Act, In the meanwhile, Parliament had occasion to amend the provisions of the Wealth-tax Act, in some respects, such as excluding agricultural lands from the purview of " assets" (as per the Finance (No. 2) Act of 1980), as to the mode of computing "assessable value" of assets, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declare, by general or special order, to be company. Therefore, it means that qua an association of persons or a body of persons, whether incorporated or not, it is open to the Board of Direct Taxes to declare by special or general order that such an association or body is a company and then by virtue of the inclusive definition in section 2 (h) (iii), it will be treated as a company for all purposes of the Wealth -tax Act and will become an assessable entity. The fact that the words 'association of persons are not unknown to Parliament in the context of the Wealth-tax Act is also borne out by the provisions of section 4 which deals with net wealth of an individual to include certain assets. Under section 4 in computing the net wealth of an individual, there shall be included, as belonging to that individual, under sub-clauses (a) and (b), the value of the assets which on the valuation date are held by a person or an association of persons to whom such assets have been transferred by the individual, etc., etc. So the Legislature did use the words 'association of persons' when it wanted to use them in a particular context. Similarly, in section 4(1)(b), in computing the net wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court, in Orient Club's case [1982] 136 ITR 697 referred to the general pattern of the Act and pointed out at p. 706 : "The provisions of section 4(1)(b) read with rule 2 will indicate that though the Act and the Rules contemplate that the interest of a partner in a partnership firm and of a member of an association of persons is to be included in the net wealth of that 'individual', i.e., the partner or the member of the association of persons, as the case may be, an association of persons as such is not treated as a taxable unit under the Act ; it is the partner or a member of an association of persons as an individual who alone is treated as a taxable unit. Reading the provisions of sections 3 and 4 and the definition of 'company' in section 2(h) of the Act, the position which emerges appears to be that while a firm or association of persons is not treated as a taxable unit and the member of an association of persons or a partner in the case of a partnership firm is individually taxable as taxable unit, some institutions, associations or bodies which may be included within the definition of 'company' by virtue of a general or special order to be made by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers for the time being are jointly entitled to all the property and funds and it is only on dissolution that the individual interest of the members becomes capable of realisation." It is necessary to note here that the distribution of the assets on dissolution of the society depends on the statutory provisions and, in some of the statutes the profits available on dissolution have to be given to some other society (vide section 14 of the Societies Registration Act, 1860, and section 23 of the Karnataka Societies Registration Act, 1960). The High Court also referred to several decisions wherein the word "individual" was understood as comprising a body of individuals under different contexts and held that it was not possible to extend those decisions to interpret section 3 of the Wealth-tax Act. We, respectfully, agree with the reasoning of the Bombay High Court. The words used in the legislative entries in Schedule VII to the Constitution are indicators of fields of legislation and, therefore, are to be construed widely to enable Parliament or the State Legislatures to legislate in respect of those subject matters ; that is why the word "individual" in entry 86 of List I was in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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