TMI Blog1984 (1) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... and HUFs and as the club did not fall within these categories of assessable units or entities, it is not liable to be assessed to wealth-tax. The club also put forward the objection that it could not be included within the expression " individual " occurring in s. 3 of the Act as it had been assessed for purposes of income-tax as an association of persons and the property of the club was also not held by a body of individuals. In these proceedings, the club seeks to have the notices quashed on the ground that it is not a taxable unit or entity under s. 3 of the Act and all the notices issued are, therefore, without jurisdiction. In the common counter filed by the respondent, the issue of notices under the Act is sought to be supported on the basis that the club should be regarded as an " individual " for purposes of the Act, as the expression " individual " is not confined only to a human being, but is wide enough to take in a group of persons forming a single collective unit or entity and owning property. Alternatively, it was claimed that even on the footing that the club can be treated as an association of persons, such an entity or unit is also comprehended within the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of its membership, its management and the method and manner of its holding and administering its properties as could be gathered from the affidavit. The club appears to have been in existence as a members' club for several years past functioning under the rules and by-laws framed by the members. The strength of the club shall not exceed more than 200. The management of the club is vested in a committee consisting of the president, vice-president and some members. The club is not registered under any law for the time being in force. The admission to the club is restricted and the enjoyment of the benefits and amenities provided by the club is confined to its members. The club is not a profit-making organisation or association as it has no profit motive and its income from property and interest income had been assessed up to 1976-77 under the I.T. Act, treating it as an "association of persons ". The properties are, according to the club, owned by the members. We may briefly advert to the status of a non-proprietary members' club. Principally, it is a body or group of individuals, each of whom contributes to the coffers of the collective entity known as the club for defraying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aggregate value of ill assets as computed in accordance with the provisions of the Act is in excess of the aggregate value of all the debts on the valuation date. " Valuation date " is defined in s. 2(q). Chapter II of the Act provides for the charge of wealth and deals with the assets subjected to such a charge. Chapter III of the Act deals with the authorities created under the Act. Assessment is dealt with under Chap. IV. Section 14 of the Act imposes an obligation on the part of every person whose net wealth on the valuation date was of such an amount as to render him liable to wealth-tax to submit a return. Section 14(2) of the Act enables the WTO to serve a notice upon a person if he is of opinion that the net wealth of that person is of such an amount as to render him liable to wealth-tax under the Act requiring him to furnish within period of thirty days the particulars of net wealth of such a person on the valuation date in the prescribed form. Section 16(i) of the Act provides that if the WTO is satisfied that the return under s. 14 is complete, then, he may assess the net wealth of the assessee and determine the amount of tax. If the WTO is not so satisfied with the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnated as a club. The word " individual ", though used in the singular in s. 3 of the Act, would take in not only a human being but a plurality of individuals or human beings as well, banded or tied together by common aim or joint interest and forming a single collective unit. Giving the word " individual " occurring in s. 3 of the Act the ordinary and wider meaning, there being no indication in that section to limit its meaning in any manner, the expression " individual " appears to comprehend human beings (individuals) who have constituted themselves into a single distinct collective unit or entity known as the club, for pursuing its aims or objects without any motive for profit. We now proceed to a consideration of this aspect from different viewpoints. The constitutional validity of the levy of wealth-tax on HUFs in the light of entry 86 of List I of Sch. VII to the Constitution of India came to be considered in a number of cases. The earliest of them was Mahavirprasad Badridas v. Yagnik, 2nd WTO [1959] 37 ITR 191 (Bom). Entry 86 of List I of Sch. VII reads as "Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e v. WTO [1962] 44 ITR 94 (All) [FB]. After referring to the use of the expression " individual " in entry 86, the Supreme Court stated that if individuals constitute themselves into a group and such a group owns capital assets, it is not easy to understand why the value of such assets should not be included within the legislative field covered by entry 86 and it is inconceivable that the word " individual " in entry 86 was introduced with the object of excluding from its scope, a large and extensive area, which would be covered by the HUF. Reference was made to and reliance was placed on the earlier decision in CIT v. Sodra Devi [1957] 32 ITR 615 (SC), for the purpose of showing that the word " individual " was interpreted by the Supreme Court as including a group of persons forming a unit. A Full Bench of the Kerala High Court in Mammad Keyi v. WTO [1966] 60 ITR 737, by a majority took the view that a group of individuals constituting the members of a Mapilla Marumakkathayam tarwad would be within the expression " individual " occurring in s. 3 of the Act. On further appeal to the Supreme Court in WTO v. Mammed Kayi [1981] 129 ITR 307, the Supreme Court pointed out that the enume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apparent that the expression cannot be so narrowly construed as to exclude a body or group of persons knit together and forming a single collective unit and owning property. In other words, the expression " individual " would include within its scope a plurality of individuals or body of individuals constituted into a single collective unit with ties of common aims or joint interest and owning property. We now proceed to a consideration of the interpretation of the expression " individual " occurring in the Indian I.T. Act, 1922. A very wide interpretation of that word had been given so as to include a group of persons forming a unit, a corporation created by a statute, co-operative society, a university, Bar Council or trustees of a Baronetcy trust incorporated under the Baronetcy Act, etc. In one of the earliest cases in CIT v. Currimbhoy lbrahim, AIR 1932 Bom 106, it was argued that a corporation created with a perpetual succession and a common seal under the style and title of the trustees of the Sir Currimbhoy Ibrahim Baronetcy under a private Act passed by the Governor-General of India in Council would not fall within the scope of s. 3 of the Indian I.T. Act, 1922. That a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y would, it seems to me, be to disregard the scheme of the Act and to rob the word of an accepted meaning. A Bar Council created under the provisions of the Indian Bar Councils Act (XXXVIII of 1926) has been held to be an individual or association of persons within the meaning of s. 3 of the Indian I.T. Act, 1922, and, therefore, its income was taxable in CIT v. Madras Bay Council [1943]11 ITR 1 (Mad). The question whether the word " individual " in s. 16(3)(a)(iii) of the Indian I.T. Act, 1922, includes also a female and the income of the minor sons derived from a partnership to the benefits of which they have been admitted is liable to be included in the income of the mother, who is a member of that partnership, arose for decision in CIT v. Sodra Devi [1957] 32 ITR 615 (SC). Considering the scope of the expression " individual the Supreme Court pointed out at page 620 as follows : " Whereas the word 'individual' is narrower in its connotation being one of the units for the purposes of taxation than the word 'assessee', the word 'individual' has not been defined in the Act and there is authority for the proposition that the word 'individual' does not mean only human being but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the decision in Andhra Pradesh State Road Transport Corporation v. ITO [1963] 47 ITR 101 (AP) was affirmed on appeal by the Supreme Court in Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524 (SC), and though the view taken by the High Court was affirmed, the argument that the Andhra Pradesh State Transport Corporation was not an individual for purposes of the Indian I.T. Act, 1922, was not even attempted to be put forward. In Abhay L. Khatau v. CWT [1965] 57 ITR 202 (Bom), the question arose whether group or body of trustees could be assessed as " individual " under s. 3 of the Act. In holding that groups of trustees forming a single collective unit would be within the scope of the expression " individual " and they cannot be assessed as an association of persons, it was pointed out that the omission to include in the provisions of the Act those units and entities enumerated in the Indian I.T. Act, 1922, would not have the effect of totally excluding such units, if the words found in the provisions of the W.T. Act are sufficiently wide in their ambit to include even those taxable units or entities which have been additionally enumerated under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference was also made by the Supreme Court to its earlier decisions in CIT v. Sodra Devi [1957] 32 ITR 615 and V. Venugopala Ravi Varma Rajah v. Union of India [1969] 74 ITR 49 (SC), to the effect that joint trustees could be assessed as individuals under the Act and the view expressed by Abhay L. Khatau v. CWT [1965] 57 ITR 202, was accepted as correct by the Supreme Court. Again, in Assam Financial Corporation v. CWT [1974] 94 ITR 404 (Gauhati), s. 3 of the Act was held not restricted in its application to human beings, but that it included a corporation like the financial corporation constituted under the Central or State Act. It was pointed out that though ss. 4 and 6 relate to human beings and not to a group of persons forming a unit or corporation, yet that would not militate against the generic meaning of the expression " individual " occurring in s. 3 of the Act, and, therefore, ss. 3, 4 and 6 could stand together. Indeed, it is further seen from this decision that the argument that nothing in ss. 4, 6, 14 and 15 of the Act can abridge the meaning of the expression " individual " occurring in s. 3 of the Act had been sustained on the basis of the judgment of the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient Club v. WTO [1980] 123 ITR 395 (Guj). The question arose whether the word " individual " would cover a group or body of individuals and it was held that s. 2(h)(iii) and s. 4(1)(b) read with rule 2(1) of the Rules indicated that s. 3 of the Act by the use of the expression " individual " was not intended to cover a body of individuals or an association of persons and, therefore, such an entity was not an assessable entity as an " individual " under the Act. In coming to this conclusion, reliance was placed upon s. 2(h)(iii) of the Act to bring in, having regard to its nature and objects, an institution, association or body whether incorporated or not, within the meaning of the expression " company ". No doubt, provision has been made under s. 2(h)(iii) of the Act to enable the Board to label as a company, any institution or association or body, but that cannot constrict the meaning to be given to the expression " individual " occurring in s. 3 of the Act as excluding all institutions, associations or bodies, which can be declared by the Board to be company under s. 2(h)(iii) of the Act. The mere enabling power in the Board to declare any institution, association or body as a " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interpreted in such a manner as to comprehend a single, collective unit of a body or group of persons. It may be that ss. 5 and 21 of the Act indicate that group or body of trustees would be comprehended within the expression " individual ", but that again by itself could not be taken as an indication that the expression " individual " in s. 3 of the Act does not cover within its fold a single collective unit of a group or body of persons. In view of the above-said observations of the Supreme Court, we are unable to share the view that merely because provision is made under s. 4(1)(h) of the Act or rule 2 of the Rules, that is an indication that " individual in s. 3 of the Act would not cover a group or body of individuals. We are, therefore, unable to persuade overselves to accept the reasoning in Orient Club v. WTO [1980] 123 ITR 395 to uphold the claim made by the petitioner. In Orient Club v. CWT [1982] 136 ITR 697 (Bom), the court proceeded to uphold the claim of a club that its status is not that of an " individual " within the meaning of s. 3 of the Act on the ground that s. 4(1)(b) of the Act and rule 2(1) of the Rules would exclude the applicability of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. It is difficult to accept the argument that if the term 'individual' was intended to include joint families or undivided families, it was redundant to specify Hindu undivided families. In the context of the argument that the term 'individual' can refer only to a single human being, it will be apposite to refer to what the Supreme Court has observed in CIT v. Sodra Devi [1957] 32 ITR 615 (SC). At page 620 of the report, the Supreme Court has said: '...the word " individual " has not been defined in the Act (Indian Income-tax Act, 1922), and there is authority for the proposition that the word " individual " does not mean only a human being, but is wide enough to include a group of persons forming a (natural) unit'." A close and careful reading of the aforesaid observations of the Supreme Court along with the passage earlier referred to clearly established that the court was dealing with the construction of the expressions " individual ", " Hindu undivided family ", etc., in s. 3 of the Act generally and had also interpreted them in a manner which accorded with the decision in CIT v. Sodra Devi [1957] 32 ITR 615, so as to include a group or body of individuals. The use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a club could not be treated as a taxable unit under the Act are practically the same as given in Orient Club v. CWT [1982] 136 ITR 697 (Bom). Inasmuch as that decision merely follows the earlier decision, what we have said with regard to the earlier decision would be equally applicable and we are not able to persuade ourselves to that line of reasoning. Thus, on a consideration of the meaning of the expression " individual " occurring in s. 3 of the Act in the light of the interpretation put upon it in the decisions referred to earlier in this judgment, we are of the opinion that the expression " individual " occurring in s. 3 of the Act would take in a plurality of individuals, which, in turn, would include body or group of individuals forming a single collective unit knit together by ties of common aims and joint interest and not any profit motive but owning property. In the view we have taken, we are not inclined to consider whether a members' club would really fall within the scope of the expression " association of persons ". The petitioner club being such a unit as would be subject to the provisions of the Act as an " individual we dismiss all these writ petitions. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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