A. P. SEN J. -
(1.) UNDER section 27 (1) of the Wealth-tax Act, 1957 (XXVII of 1957) the Income-tax Appellate Tribunal, Bombay, has, at the instance of the the assessee, referred to this Court for its opinion, the following question of law:-
"Whether the Wealth-tax Act in so far as it levies tax on Hindu undivided family is ultra vires the powers of Parliament and is it discriminatory in imposing a higher burden of tax on members of the Hindu undivided family and consequently void and unenforceable."
The question referred is a composite one.
(2.) WHEN the case was stated, the Tribunal presumably acted on the dictum laid down by the Judicial Committee of the Privy Council in Raleigh Investment Co. Ltd. v. Governor-General in Council, AIR 1947 PC 78=(1947) LR 74 IA 50, namely, the Act contained effective machinery for the review of the assessment on grounds of law, including the question whether a provision of the Act was ultra vires. Their Lordships of the Supreme Court have, however, departed from that view in R. S. Venkataraman v. State of Madras, (1966) 60 ITR 112. The law now is that a tribunal, which is a creature of a statute, cannot question the vires of the provisions under which it functions. We, therefore, hold the reference to be incompetent. Nevertheless, we would like to state our answer to the questions referred as the parties may like to pursue the matter further.
With regard to the first aspect, the legislative competency of the Parliament to enact the measure is now unassailable, in view of the recent pronouncement of their Lordships of the Supreme Court in Banarsi Dass v. Wealth-tax Officer, (1965) 56 ITR 224. Their Lordships have held that the expression "individual" in Entry 86 of List I of the Seventh Schedule to the Constitution, is comprehensive enough to include the body of individuals, known as the Hindu undivided family, and that section 3 of the Wealth-tax Act, in so far as it levies a charge of wealth tax in respect of the net wealth of a Hindu undivided family, is intra vires the Parliament because it was competent to legislate on the subject. We would, accordingly, answer the question.
On the second aspect, learned counsel appearing for the assessee, contends that the charging section suffers from the vice of discrimination as it discriminates between a group of persons constituting themselves a Hindu undivided family by imposing on them a higher burden of tax by treating them as a unit of taxation and other groups of persons inviting a lower incidence of tax, and for this submission reliance is placed on a decision of the Kerala High Court in Khan Bahadur C. K. Mammed Keyi v. Wealth-tax Officer, Calicut, (1962) 44 ITR 277. We are unable to accept the contention.
(3.) IT is now well settled that although a taxation law cannot claim immunity from the equality clause of the Constitution, nevertheless, the Legislature is competent to "classify" persons or properties into different categories and tax them differently. [See, Raja Jagannath Baksh Singh v. State of Uttar Pradesh, (1962) 46 ITR 169]. IT follows, as a necessary corollary, that if the classification thus made is rational the taxing statute cannot be challenged merely because different rates are prescribed for different categories of persons or subjects.
There is a rational classification of wealthy assessees into three distinct categories "individuals, Hindu undivided family and company", and they are taxed differently because they are differently circumstanced. The joint Hindu family is a peculiarity of Hindu society and it cannot be put in the frame-work of any of the well-known juridical concepts, namely, individual person or corporation. A Hindu undivided family is not like a corporation and it cannot, therefore, be said that it has a legal entity quite distinct and apart from that of those who constitute it. A true concept of a Hindu undivided family was set out by Lord Westbary in Approvier's case, (1866) 11 MIA 75, at p. 89, in the following words which have become classical:
"According to the true notion of an undivided family in Hindu law, no individual member of that family, whilst it remains undivided, can predicate of the joint and undivided property, that he, that particular member, has a certain definite share."
The essence of a coparcenary under the Mitakshara School of Hindu law is unity of ownership. As the Privy Council stated in Katama Natchiar v. The Rajah of Shivagunaga, (1863) 9 MIA 543, at p. 611: "there is community of interest and unity of possession between all the members of the family." [See, Mulla's Hindu Law, 13th Edn., p. 244]. Their traditional characteristics make the members of a Hindu undivided family incomparable with others. They constitute a class by themselves. The expression "Hindu undivided family" is a familiar one.;