SESHACHALAPATI, J. - (1.) : This is a petition under Art. 226 of the Constitution of India for the issue of a writ of certiorari or any other appropriate writ or order to quash the notice dt. 30th Nov., 1962, issued to the petitioners by the respondent, the Addl. GTO, Guntur. The petitioners 1, 2, 5 and 6 are the sons and the petitioners 3 and 4 the daughters of late G. V. Srinivasa Rao, who was a leading advocate in Guntur. Sri Srinivasa Rao acquired considerable properties. On 4th April, 1958, Sri Srinivasa Rao, gifted certain properties to his daughters, petitioners 3 and 4, of the value of Rs. 10,000. By an affidavit dt. 26th March, 1958, he declared his intention to treat his self-acquired properties referred to in the affidavit as properties belonging to the family consisting of himself and his four sons. On 27th March, 1958, he effected a partition of the said properties between himself and his sons by a registered instrument.
(2.) ON information received of certain dispositions by late Srinivasa Rao the GTO having appropriate jurisdiction, issued a notice under S. 13(2) of the GT Act to late Srinivasa Rao to furnish a return for the asst. yr. 1959-60. With respect to that notice late Srinivasa Rao filed a return declaring only the gifts made by him to his daughters on 4th March, 1958, and cash gift to his purohit. The properties referred to in the affidavit dt. 26th March, 1958, of late Srinivasa Rao were claimed as joint family properties which were already partitioned and, therefore, not liable for the gift-tax. Sri Srinivasa Rao died on 9th Jan., 1962. On 31st Oct., 1962, the First Addl. GTO, Guntur, passed an order under S. 15(3) of the Act holding that the properties gifted by Srinivasa Rao to his daughters and purohit on 4th March, 1958, and the self- acquisitions converted into joint family properties on 26th March, 1958, and partitioned on 27th March, 1958, less the 1/5th share of Srinivasa Rao were liable to the payment of gift-tax. He determined that the total value of the gifts were in the order of Rs. 2,16,915 and directed the payment of Rs. 15,629.80 ps. as tax. It would appear that the demand notice was served on the 2nd petitioner, Sri Brahmanda Rao, on 11th Nov., 1962, who signed the acknowledgement for G. V. Srinivasa Rao. By a letter dt. 19th Nov., 1962, Mr. Brahmanda Rao informed the respondent that his father had died on 9th Jan., 1962, and that he had made certain dispositions of properties that fell to his share in partition and therefore a fresh demand may be made on the parties regarding the gift-tax. The respondent thereupon raised a fresh demand on the donees on 30th Nov., 1962. On 6th Dec., 1962, the 1st petitioner, Sri G. V. Krishna Rao, informed the respondent that an appeal was being preferred to the AAC under S. 22 of the GT Act and that, therefore, the collection of the tax may be kept in abeyance till the disposal of the appeal. Similar letters were filed by the petitioners 2, 4 and On 29th Dec., 1962, Sri G. V. Chalapati Rao, the 5th petitioner, wrote to the respondent to let him know how much portion of gift-tax he had to pay on his share and suggesting that the gift-tax payable may be divided between all the parties concerned and demands made and that he would pay his portion of the tax before 15th Feb., 1963. On 9th Jan., 1963, the respondent issued notice to the petitioners and the purohit after discussing the matter with their chartered accountant apportioning the tax payable between the parties and calling upon them to pay the proportionate tax on or before 10th Feb., 1963. This writ petition was filed on 7th Jan., 1963, and was admitted on 9th Jan., 1963. In C.M.P. No. 235 of 1963, interim stay was directed against the operation of the notice dt. 30th Nov., 1962.
(3.) IN the course of a full and able argument, Mr. Y.G. Krishnamurty, the learned counsel for the petitioners, has raised several contentions. The first contention is that the GT Act so far as it deals with taxes on lands and buildings falls within the scope of item 49 of the State List (List II) to Schedule VII of the Constitution and that Parliament has no legislative competence to enact a law providing for the taxation of gifts of lands and buildings. IN support of this contention, reliance was placed on the decision of the Mysore High Court in D. H. Nazarath vs. GTO (1962) 45 ITR 194 (Mys) : TC35R.126. IN that case, the learned judges held that the power conferred on the State legislature by entry 49 of List II of the Schedule VII to the Constitution to make laws with respect to taxes on lands and buildings includes the power to tax gifts of lands and buildings and therefore within the exclusive power of the State legislature. The GT Act, 1958, in so far as it purports to provide for taxes on lands and buildings was held to be ultra vires the powers of Parliament. The learned judges in the above case proceeded on the footing that an entry in the lists to the Schedule VII to the Constitution should be given its widest possible amplitude and that the aforesaid principle refers not only to the general items but also to entries relating to taxation. It was observed that the residuary entry 97 in List I should not ordinarily be invoked and should be invoked only as a last resort and that the power to tax property necessarily includes the power to tax a right or incidence of ownership. It is a well settled principle that the entries in the legislative lists should not be interpreted in a narrow and pedantic sense and that the language of the entries must be held to comprehend ancillary and subsidiary matters. The power to enact incidental or ancillary legislation is included in the grant of a substantive power and follows without express provision therefor. Vide Attorney- General Jor Ontario vs. Attorney-General for Canada (1894) AC 189 and Small vs. Smith (1885) 10 App Cas 119. Even construing the entries liberally, it cannot be said that the tax on gifts is comprehended by entry 49 of the State List. In Jupudi Sesharatnam vs. GTO (1960) 38 ITR 93 (AP) : TC35R.127, a Bench of this Court consisting of Chandra Reddy, Chief Justice and Ansari J., after a close and detailed examination of the relevant heads of enumerated powers in the lists in the context of decided cases, observed thus : ". . . we find it difficult to import transfer and alienation of agricultural land into 'lands' in entry 49. The latter item concerns itself with an altogether different head of legislation, that is, tax on the ownership of property. The object of this item is the levy of a tax on the ownership of property as such, while gift-tax is a tax on a particular use of the property or the exercise of a single power subsidiary to ownership. The owners of a property may put it to several uses. A gift inter vivos is one of the several rights a person may have in a property. This form of tax attaches itself to a transfer of property, while the tax envisaged in entry 49 is incidental to the ownership irrespective of any use to which it may be put." ;