RAJKUMARSINGHJI Vs. COMMISSIONER OF EXPENDITURE TAX
LAWS(MPH)-1967-8-9
HIGH COURT OF MADHYA PRADESH
Decided on August 17,1967

RAJKUMARSINGHJI Appellant
VERSUS
COMMISSIONER OF EXPENDITURE TAX Respondents

JUDGEMENT

Bhave, J. - (1.) IN the matter of assessment of Shri Rajkumarsinghji of INdore under the Expenditure-Tax Act, 1957. (hereinafter referred to as the Act), for the assessment years 1959-60, 1960-61 and 1961-62 the Appellate Tribunal has made this consolidated reference under Section 25(1) of the Act. The question referred to us for decision is :-- "Whether, on the facts and in the circumstances, the word 'dependant' in Section 2(g)(i) of the Expenditure-Tax Act included a wife and a minor child notwithstanding the fact that they incurred their respective expenditure out of their own income and persona] property?"
(2.) THE facts as found by the Tribunal are that the assesses inherited large properties. A partition thereof was effected on 21st August 1957 under which the wife of the assessee and his children, including two minors, were awarded extensive properties. In the assessment period in question, the wife and the two minors incurred certain expenditure out of the property allotted to them; the assessee himself did not incur any expenditure for or on their behalf. THE said expenditure was taken to be the expenditure assessable in the hands of the assessee by the departmental authorities and the Tribunal upheld that decision. THE Tribunal has, construing Section 4(ii) and Section 2(g)(i) of the Act, held that expenditure of the wife and minors incurred from whatever source is taxable in the hands of the assessee. Before stating the contentions advanced by learned counsel for the parties it is necessary to refer to the material provisions of the Act. Section 2(c) of the Act defines "assessee" as meaning "an individual or a Hindu undivided family by whom expenditure or any other sum of money is payable ....." The definition of "dependant" given by Section 2(g), as amended by Act No. 12 of 1959, is thus :--" 'dependant' means -- (i) where the assessee is an individual, his or her spouse or minor child, and includes any person wholly or mainly dependant on the assessee for support and maintenance; (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;" Section 3 provides that subject to the other provisions contained in the Act, for every financial year commencing on and from the first day of April, 1958, expenditure-tax at the specified rate is payable by an individual or Hindu undivided family on the expenditure incurred in the previous year. Section 4 of the Act, which deals with the amount to be included in taxable expenditure, as amended by Act No. 12 of 1959, stands thus:-- "4. Amount to be included in taxable expenditure:-- 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 dependants to the extent to which the amount of all such expenditure in the aggregate exceeds Rs. 5,000 in any year; (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 dependant by the assessee. Explanation-- For the removal of doubts it is hereby declared that nothing contained in this section shall be deemed to require the inclusion in the expenditure of the assessee of any expenditure incurred by any other person for or on behalf of the assessee by way of customary hospitality or which is of a trivial or inconsequential nature." Sections 2(g) and 4, before they were amended in 1959, ran as follows:-- "2(g) 'dependant' means-- (i) where the assessee is an individual, his or her spouse or child wholly or mainly dependant on the assessee for support and maintenance; (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." "4. Amounts to be included in taxable expenditure. 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 dependants which, but for the expenditure having been incurred by that other person, would have been incurred by the assessee, to the extent to which the amount of all such expenditure in the aggregate exceeds Rs. 5,000 in any year; (ii) any expenditure incurred by any dependant of the assessee for the benefit of the assessee or of any of his dependants nut of any gift, donation or settlement or trust or out of any other source made or created by the assessee, whether directly or indirectly. Explanation-- for the removal of doubts it is hereby declared that nothing contained in this section shall be deemed to require the inclusion in the expenditure of the assessee of any expenditure incurred by any other person for or on behalf of the assessee by way of customary hospitality or which is of a trivial or inconsequential nature." Before the Tribunal it was urged on behalf of the assessee that the nexus for the chargeability of the tax was the expenditure of the assessee and that of any person dependant on him and not the expenditure of a person independent of the assessee. If the wife and the minors had resources of their own, the expenditure incurred by them out of their own resources could not be treated as the expenditure of the assessee; the clause "wholly or mainly dependant on the assessee for support and maintenance" in the amended definition of Section 2(g)(i) necessarily governed not only "any other person" but also "his or her spouse or minor child". It was urged that the effect of amendment introduced in 1959 in Section 2(g) was only to add one more category to the list of dependants, but the test that the spouse or the minor child should also be wholly or mainly dependant on the assessee was not abandoned. This submission did not find favour with the Tribunal. it held: "Looking into the section as it stood before its amendment in 1959 and comparing it with the provision as it now stands it would be clear that whereas in the earlier provision, for a spouse or child to be classified or held as a dependant, he, she or it must be wholly or mainly dependant on the assessee, the word 'minor' before the word 'child' and the words 'and includes any person' have been incorporated in the new section. That is, whereas under the old section even if the child happened to be a major it would be a dependant if it had wholly or mainly dependant on the assessee for support and maintenance, after the change the child had to be a minor to be classified as dependant. A third category of entities are introduced by including 'any person' within the ambit of the word 'dependant' For that person to be a dependant he must be wholly or mainly dependant on the assessee for support and maintenance. It may be that even after the amendment even a major child would come under 'other person', if it was wholly or mainly dependant on the assessee. There is a comma after spouse or minor child and the plain and natural meaning of the clause would be only that whether a spouse or a minor child is mainly dependant on the assessee for support and maintenance or not, the spouse or minor child would be dependant within the meaning of the section. In other words the test of dependancy would not be applicable to the case of a spouse or a minor child."
(3.) IT was argued by Shri Chitale, learned counsel for the assessee, that under the Expenditure-Tax Act an 'individual' is an assessee, both the spouses can, therefore, be made assessee and in assessment proceedings initiated against them the expenditure of the one may lawfully be included in the expenditure of the other and thus the same expenditure will be included twice for assessment if the interpretation put by the Tribunal were to be accepted as correct. Learned counsel pointed out that the Legislature left the definition of 'assessee' unchanged and even the charging section (Section 3) only referred to an individual as a unit and not the individual together with his or her spoust and minor children as a unit. IT was therefore submitted that the contention advanced on behalf of the Revenue that the amendments made in 1958 were for the purpose of making the assessee together with his or her spouse and minor child as the unit for assessment of tax could not be accepted and the interpretation put by the Tribunal on Section 2(g)(i) was not warranted. Learned counsel further urged that, as is obvious from the second part of Clause (ii) of Section 4, that expenditure incurred by the dependants is to be included in computing the expenditure of the individual which comes from or out of any income or property transferred, directly or indirectly, to the dependant by the assessee. In other words, under the Act all expenditure incurred by the individual out of his own resources including the expenditure incurred by him on his dependants together with the expenditure incurred by the dependants out of sources made available to them by the individual is made liable to tax and nothing more; the expenditure incurred by a dependant out of his or her or its own property cannot be included in computing the expenditure of an assessee. IT was said that the reading of the Tribunal of the definition of 'dependant' did not in any way alter the construction sought to be put by him on Section 4. Shri Adhikari, learned counsel appearing for the Revenue, commended to us for acceptance the interpretation put on the definition of 'dependant' by the Tribunal and contended that the latter part of Clause (ii) of Section 4 applied only to the expenditure incurred by the dependants of the Hindu undivided family and not to the expenditure incurred by dependants of an individual, and therefore the expenditure incurred by a dependant from whatever source would be included in the expenditure of the individual assessee.;


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