TMI Blog1961 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... flow therefrom to the public, namely, the prevention of evasion of income-tax, and also by the fact that, by and large, the additional payment of tax made on the income of the wife or the minor children will ultimately be borne by them in the final accounting between them. In these circumstances, we cannot say that the provisions of section 16(3) of the Act impose an unreasonable restriction on the fundamental rights of the petitioner under article 19(1)(f) and (g) of the Constitution. Appeal dismissed. - 240 OF 1960 - - - Dated:- 4-8-1961 - Judge(s) : P.B. GAJENDRAGADKAR., K. SUBBA RAO., M. HIDAYATULLAH., J.C. SHAH., RAGHUBAR DAYAL JUDGMENT The judgment of the court was delivered by SUBBA RAO J.----This writ petition filed under article 32 of the Constitution raises the question of the constitutional validity of section 16(3)(a)(i) of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter called the Act). The facts are not in dispute and may be briefly narrated. The petitioner, Balaji, his six sons, and his wife, by name Godawaribai, constituted a joint Hindu family. The family was a trading family and it had, besides business in money-lending, considerabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enact section 16(3)(a)(i) and (ii) of the Act. It would be convenient at the outset to read the relevant part of the said section. 16. (3) In computing the total income of any individual for the purpose of assessment, there shall be included--- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly-- (i) from the membership of the wife in a firm of which her husband is a partner ; (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner." Section 16 provides for the computation of total income of a person and describes what sums are to be included and what sums are to be excluded therefrom. Under sub-clauses (i) and (ii) of clause (a) of sub-section (3) of the said section, the shares in the profits of the firm received by the wife and the minor children shall be included in the total income of the individual. Under the said sub-clauses an individual is made liable to pay tax in respect of the income of his wife and minor children, though the said liability is confined to the circumstances mentioned therein. Learned counsel for the petitioner contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents the tax imposed being evaded. If it were not to be so read then the admitted power to tax a person on his own income might often be made infructuous by ingenious contrivances." This decision holds that the said entry can sustain a law made to prevent the evasion of tax. The short question, therefore, is whether section 16(3)(a)(i) and (ii) is a provision made by the Legislature to prevent evasion of tax. Under the relevant provision of the Income-tax Act, if a firm is registered, the share of each partner in the profit of the firm would be added to his other income and charged as part of his total income. After 1956, the position is the same except in one regard with which we are not now concerned. This provision was intended for the benefit of partners of a business, for it made them liable only to pay tax on their own income. But it gave an effective handle to evade taxation in another direction. A husband or a father could nominally take his wife or his minor sons in partnership with him so that the tax burden might be lightened, for, if the income was divided between a number of people, the income derived by an individual therefrom might fall, under the limits of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the standpoint of imposition of tax, the difference between an individual and his wife doing business in partnership, and between an individual and his wife doing business separately, and an individual doing business in partnership with his wife and an individual doing business in partnership with a third party, male or female, and between an individual who has admitted his minor children to the partnership business and an individual who is doing business in partnership with his major children or outsiders, would have any reasonable basis. This argument ignores the object of the legislation. We have held that the object of the legislation was to prevent evasion of tax. A similar device would not ordinarily be resorted to by individuals by entering into partnership with persons other than those mentioned in the sub-section, as it would involve a risk of the third party turning round and asserting his own rights. The Legislature, therefore, selected for the purpose of classification only that group of persons who in fact are used as a cloak to perpetrate fraud on taxation. It was then said that there might be genuine partnerships between an individual and his wife and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting judgment, justified his view on the ground that the statute was the outcome of thousand years of history indicating that husband and wife were one and also for the reason that it had a tendency to prevent tax evasion. Prima facie the majority view supports the contention of learned counsel for the petitioner, but a deeper scrutiny reveals fundamental differences between that decision and the present case. There, there was no question of any partnership between husband and wife, and the income of the wife was added to that of the husband, with the result that he had to pay not only increased rate on his income but also a portion of the tax otherwise payable by his wife ; in the present case, the impugned provisions do not impose any such general liability but confine it only to a case where the husband takes his wife in partnership. There is a greater scope for fraudulent evasion by constituting a fictitious partnership along with one's wife and minor children than, in a case of separate income of the spouses derived from different sources. That apart, the present social and economic position of women in India as compared with their compeers in America, even as it existed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on the income of his wife and children who are in law distinct legal persons. The learned Additional Solicitor-General broadly contended that a tax imposed by authority of law cannot be questioned on the ground that the law infringes the provisions of article 19 of the Constitution. We cannot see any justification for this contention in any of the constitutional provisions. The relevant provisions of the Constitution read : "265. No tax shall be levied or collected except by authority of law." "13. (1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void... (3) In this article, unless the context otherwise requires,---- (a) ' law ' includes any Ordinance, order, bye-law, rule, regulation notification, custom or usage having in the territory of India the force of law (b) ' laws in force ' includes laws passed or made by a Legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his court in Kunnathat Thathunni Moopil Nair v. State of Kerala. There, the petitioners impugned the constitutionality of the Travancore-Cochin Land Tax Act (XV of 1955) as amended by the Travancore-Cochin Land Tax (Amendment) Act (1 of 1957) and Sinha C.J., speaking for the court, held that the Act was void as infringing not only article 14 of the Constitution but also article 19(1)(f) thereof. The learned Chief justice, after considering the relevant provisions of the Act and having regard to the unreasonable nature of the restrictions, came to the conclusion that the provisions of the Act were unconstitutional, viewed from the angle of the provisions of article 19(1)(f) of the Constitution. We cannot, therefore, accept the broad contention of the learned Additional Solicitor-General that a tax law cannot be questioned on the ground that it infringes article 19 of the Constitution. Even so the learned Additional Solicitor-General contended that the provisions of section 16(3)(a)(i) and (ii) of the Act constituted only reasonable restrictions on the exercise of the rights conferred under article 19(1)(f) and (g) of the Constitution, in the interest of the general public. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have contributed capital to the business ; but the provisions do not in any way affect their rights and even the liability inter se between the husband and the wife or the minor children, as the case may be, in respect of the tax paid. It is true that in computing the total income of an individual for the purpose of assessment, their income in their capacity as partners shall be included in the income of the individual but the section does not prevent the husband or the father, as the case may be, from debiting against them in the partnership accounts that part of the tax referable to the share or shares of their income. It may be that a father or a husband may have to pay tax at a higher rate than ordinarily he would have to pay if the addition of the wife's or children's income to his own brings his total income to a higher slab. But it may not necessarily be so in a case where the income of the former is not appreciable ; even if it is appreciable, he can debit a part of the excess payment to his wife and children. In short, the firm, though registered, would be treated as a distinct unit of assessment, with the difference that, unlike in the case of a registered firm, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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