JUDGEMENT
P.N.BHAGWATI, J. -
(1.)THIS reference raises a short question of law relating to the applicability of section 4(i) of the Expenditure -tax Act, 1957. The assessee is the Hindu undivided family of Sheth Motilal Karsondas (hereinafter referred to as 'the assessee -Hindu undivided family'). The assessee -Hindu undivided family consisted of three brothers, namely, Hiralal, Haridas and Devidas, together with their respective sons. In or about 1943 there was a partial partition as regards property between the three branches of the assessee -Hindu undivided family and some of the properties belonging to the assessee -Hindu undivided family were divided amongst the three branches. The result was that three smaller Hindu undivided families came into existence, one of Hiralal and his sons, the other of Haridas and his son and the third of Devidas and his son. So far as the other undivided properties were concerned, the assessee -Hindu undivided family continued to subsist with Hiralal as the karta. In the course of assessment of the assessee -Hindu undivided family to expenditure -tax for the assessment year 1959 -60, for which the corresponding account year was Samvat year 2014, the Expenditure -tax Officer included in the taxable expenditure of the assessee -Hindu undivided family, the expenditure incurred by the smaller undivided families of Hiralal, Haridas and Devidas on the ground that such expenditure being expenditure incurred by the coparceners of the assessee -Hindu undivided family was liable to be included in computing the taxable expenditure of the assessee -Hindu undivided family be reason of section 4(ii) of the Expenditure -tax Act, 1957. The assessee -Hindu undivided family carried the matter in appeal to the Appellate Assistant Commissioner but the Appellate Assistant Commissioner agreed with the view taken by the Expenditure -tax Officer that the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas was includible in the taxable expenditure of the assessee -Hindu undivided family under section 4(ii). This led to the filing of a second appeal by the assessee -Hindu undivided family to the Tribunal. Before the Tribunal it was concealed on behalf of the revenue that section 4(ii) had no application since the properties allotted to the smaller Hindu undivided families of Hiralal, Haridas and Devidas on partition could not be said to be properties transferred directly or indirectly to the coparceners by the assessee -Hindu undivided family so as to attract the applicability of section 4(ii). But the revenue relied on section 4(i) and contended that, by reason of that provision, the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas was liable to be included in computing the taxable expenditure of the assessee -Hindu undivided family. Now, at no stage prior to the hearing of the appeal before the Tribunal, section 4(i) had been invoked by the revenue and the assessee -Hindu undivided family, therefore, objected to the revenue being allowed to rely on section 4(i) for the first time at the hearing of the appeal before the Tribunal but the Tribunal overruled the objection and entertained the contention based on section 4(i). The Tribunal, however, took the view that the case did not fall within section 4(i) and negatived the claim of the revenue to include the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas in computing the taxable expenditure of the assessee -Hindu undivided family by relying on section 4(i). The revenue thereupon applied for a reference of the question of law arising out of the order of the Tribunal and on the application, the Tribunal referred the following question of law for the opinion of this court :
'Whether, on facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas could not be included in the taxable expenditure of the assessee under section 4(i) of the Expenditure -tax Act ?'
(2.)THE Tribunal also, at the instance of the assessee -Hindu undivided family framed a further question of law arising out of the order of the Tribunal, namely :
'Whether, in any event, the expenditure incurred by the Hindu undivided family of Hiralal, the karta of the assessee -Hindu undivided family, can be included in the taxable expenditure of the assessee -Hindu undivided family in view of the definition of 'dependent' in section 2(g) (ii) of the Expenditure -tax Act ?'
and referred it to this court for its opinion along with the main question referred at the instance of the revenue.
The main controversy between the parties turns on the true interpretation of section 4(i) but, in order to appreciate its true scope and ambit, it is necessary to refer to a few relevant provisions of the Expenditure -tax Act, 1957. Section 2(c) defines 'assessee' to mean an individual or a Hindu undivided family by whom expenditure -tax or any other sum of money is payable under the Act and there is an inclusive part of the definition which says that the assessee shall include every individual or Hindu undivided family against whom any proceeding under the Act has been taken for the assessment of his expenditure. It would thus be seen that the assessee under the Act may be either an individual or a Hindu undivided family. Section 2(g) then defines who is a 'dependent' within the meaning of the Act. It says that :
''Dependent' 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; and (ii) where the assessee is a Hindu undivided family - (a) every coparcener other than the karta; and (b) any other member of the family who under any law or order or decree of a court, is entitled to maintenance from the joint family property.'
'Expenditure' is defined in section 2(h) to mean 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 provision of the Act is required to be included in the taxable expenditure. Section 3, which is the charging section, provides that, subject to the other provisions contained in the Act, there shall be charged for every financial year commencing on and from the first day of April, 1958, a tax (hereinafter referred to as 'expenditure -tax') at the rate or rates specified in the Schedule in respect of the expenditure incurred by any individual or Hindu undivided family in the previous year. The charge to expenditure -tax thus attaches to the expenditure incurred by the assessee who may be an individual or a Hindu undivided family. Now, obviously, the expenditure incurred by the smaller Hindu undivided families of Hiralal, Haridas and Devidas cannot be said to be expenditure incurred by the assessee -Hindu undivided family and, therefore, if there were no other provision in the Act apart from section 3, such expenditure could not have been chargeable to expenditure -tax. But section 4 artificially includes within the taxable expenditure of the assessee certain categories of expenditure incurred by the others. These categories of expenditure are set out in clauses (i) and (ii) of section 4. We are not concerned with section 4(ii) since no reliance was placed upon it on behalf of the revenue before the Tribunal and here also it has not been invoked on behalf of the revenue and, rightly so, since in the first place expenditure incurred by the smaller Hindu undivided families of Hiralal, Haridas Devidas, on partition, out of the income of which presumably the expenditure in question has been incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas be said to be properties transferred directly or indirectly to the coparceners by the assessee -Hindu undivided family. The revenue has staked its claim to include the expenditure incurred by the three smaller Hindu undivided families only on section 4(i) and it is to that provision that we must, therefore, turn for determining the validity of that claim.
Section 4(i), as it stood at the material time, provided :
'Unless otherwise provided in section 5, the following amounts shall be included in computing the expenditure of an assessee liable to tax under this Act, namely : - (i) any expenditure incurred, whether directly or indirectly by any person other than the assessee in respect of any obligation or personal requirement of the assessee or any of his dependents to the extent to which the amount of all such expenditure in the aggregate exceeds Rs. 5,000 in any year'.
(3.)WE may point out at this stage that, prior to its amendment by Central Act 12 of 1959, section 4(i) contained the following words, namely, 'which, but for the expenditure having been incurred by that other person, would have been incurred by the assessee' immediately after the words 'or any of his dependents' but they were deleted by the Central Act 12 of 1959, and section 4(i) as it stood in the relevant assessment year was as set out above without these words. The question is whether the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas can be said to be expenditure incurred by any person other than the assessee -Hindu undivided family in respect of any obligation or personal requirement of the assessee -Hindu undivided family or any of its dependents. If it is, it would be liable to be included within the taxable expenditure of the assessee but not otherwise.