COMMISSIONER OF EXPENDITURE TAX II Vs. SHETH MOTILAL KARSONDAS

JUDGEMENT

(1.) THIS reference raises a short question of law relating to the applicability of s. 4(i) of the Expenditure-tax Act, 1957. The assessee is the HUF of Sheth Motilal Karsondas (hereinafter referred to as " the assessee-HUF".) The assessee-HUF 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-HUF and some of the properties belonging to the assessee-HUF were divided amongst the three branches. The result was that three smaller HUF's 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-HUF continued to subsist with Hiralal as the Karta. In the course of assessment of the assessee-HUF to expenditure-tax for the asst. yr. 1959-60, for which the corresponding account year was Samvat year 2014, the Expenditure-tax Officer included in the taxable expenditure of the assessee-HUF, 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-HUF was liable to be included in computing the taxable expenditure of the assessee-HUF by reason of s. 4(ii) of the Expenditure-tax Act, 1957. The assessee-HUF carried the matter in appeal to the AAC but the AAC agreed with the view taken by the Expenditure-tax Officer that the expenditure incurred by the three smaller HUF's of Hiralal, Haridas and Devidas was includible in the taxable expenditure of the assessee-HUF under s. 4(ii). THIS led to the filing of a second appeal by the assessee-HUF to the Tribunal. Before the Tribunal it was conceded on behalf of the Revenue that s. 4(ii) had no application since the properties allotted to the smaller HUF's of Hiralal, Haridas an Devidas on partition could not be said to be properties transferred directly or indirectly to the coparceners by the assessee-HUF so as to attract the applicability of s. 4(ii). But the Revenue relied on s. 4(i) and contended that, by reason of that provision, the expenditure incurred by the three smaller HUF's of Hiralal, Haridas and Devidas was liable to be included in computing the taxable expenditure of the assessee-HUF. Now, at no stage prior to the hearing of the appeal before the Tribunal, s. 4(i) had been invoked by the Revenue and the assessee-HUF, therefore, objected to the Revenue being allowed to rely on s. 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 s. 4(i). The Tribunal, however, took the view that the case did not fall within s. 4(i) and negatived the claim of the Revenue to include the expenditure incurred by the three smaller HUF's of Hiralal, Haridas and Devidas in computing the taxable expenditure of the assessee-HUF by relying on s. 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 :