[1938] 006 ITR 157 (ALL) [1938] TAXMAN (S)

[1938] 6 ITR 157 (ALL.)

HIGH COURT OF ALLAHABAD

Kedar Narain Singh

Commissioner of Income-tax

COLLISTER AND BAJPAI, JJ.

MISCELLANEOUS CASE NO. 415 OF 1935

JANUARY 4, 1938

JUDGMENT

Bajpai, J.—This is a reference under section 66(2) of the Indian Income-Tax Act by the Commissioner of Income-tax, Central and United Provinces. The facts as found by the revenue authorities, may be summarised:—

The Ausanganj Estate is under the superintendence of the Court of Wards, Ghazipur. The proprietor of the estate and the ward is Mst. Rani Dulhin Ram Kunwar, who is the widow of Babu Sri Narain Singh, the last male owner of the estate. The assessee is Babu Kedar Narain Singh, the daughter's son of the Rani and he by virtue of his relationship is regarded as the prospective heir to the estate. He has been assessed to income-tax for the year ending the 31st March 1934 on an income of Rs. 6,498 along with other income about which there is no dispute. It is, however, said that the sum mentioned above ought not to have been included in the income of the assessee for the year in dispute. This amount is paid to him under Section 25 of the Court of Wards Act. That provision reads as follows:—

"The Court of Wards may from time to time determine what sums shall be allowed in respect of the expenses of any ward and of his family and dependants "

and the contention of the assessee is that the alleged income is actually the amount of personal expenses of the petitioner incurred by the Court of Wards under section 25 of the Court of Wards Act, as the petitioner is a dependant of the ward. The Income-tax Officer, the Assistant Commissioner of Income-tax and the Commissioner of Income-tax are of the opinion that the assessee is liable to be taxed on the above income, but on the application of the assessee the following question has been formulated by the Commissioner of Income-tax and referred to us for opinion:—

"Whether under all the circumstances of this case taken together and with due regard to the provisions of section 25 of the Court of Wards Act and section 41 of the Income-tax Act the petitioner is liable to be assessed to income-tax under the Indian Income-Tax Act, 1922 "

Section 41 of the Act simply says that "in the case of income, profits or gains chargeable under this Act which are received by the Court of Wards....................the tax shall be levied upon and recoverable from such Court of Wards....................in the like manner and to the same amounts as it would be leviable upon and recoverable from any person on whose behalf such income, profits or gains are received, and all the provisions of this Act shall apply accordingly". This section has really no bearing on the point that has got to be determined; it deals only with the liability of the Court of Wards in respect to the income of the ward which comes into its hands. There are really two questions that arise in connection with this reference. The first is whether the sum of Rs. 6,498 can be regarded as the income of the assessee, and if this question is answered in the affirmative, the next question is whether the assessee can claim any exemption. Now, an attempt to define the word 'income' has baffled the Legislature and Judges. The Act itself does not define it, and in Section 6 the best that has been done in this respect is to say what heads of income, profits and gains shall be chargeable to income-tax, and under these heads we und the following sub-heads:—

(i) Salaries.

(ii) Interest on securities.

(iii) Property.

(iv) Business.

(v) Professional earnings.

(vi) Other sources.

Although in the succeeding provisions an attempt has been made to describe the first five sub-heads, section 12 deals with the omnibus sub-heading of 'other sources', and all that could be said there was that 'other sources' included "income, profits and gains of every kind and from every source to which this Act applies". It is, therefore, clear that the word 'income' is an expression of elastic ambit, and courts when considering whether any particular sum can be said to be the income of an assessee have attempted either to bring it in, or to exclude it from, a certain description which they have chosen to give, to the word 'income' but they have always qualified the said description by saying that it is not exhaustive. It is, however, clear that the words "income, profits and gains" used in the Act are used in a disjunctive sense, and the word 'income' is not limited by the words "profits and gains". As observed by their Lordships of the Privy Council in the case of Maharaja Kumar Gopal Saran Narain Singh v. Commissioner of Income-tax, Bihar and Orissa, "anything which can properly be described as income is taxable under the Act unless expressly exempted". That perhaps is the best definition, although it may be said to be tautologies.

There can be no doubt that the entire income of the Ausan-ganj Estate is taxed in the hands of the Court of Wards, and in one sense it may be said that any sum paid to the assessee in respect of his expenses as a dependant of the ward has been taxed, but the main question is whether the Income-tax Department is offending against the rule of double taxation in the true sense of the term for it must be conceded that an income which has been taxed may again be taxed, when it is spent by the original assessee in the shape of salaries and allowances paid by the assessee to its servants or dependants. The real point is whether the sum of Rs. 6,498 represents only the expenses of the ward and retains that character all along or whether at some stage it becomes the income of the assessee in the course of transmission. The marginal note to Section 25 is "allowances for ward and his family", and although the marginal note may not be taken into account in order to interpret the section itself, there can be no doubt that the section may be paraphrased as follows :

"The Court of Wards may from time to time determine the allowances of the ward and of his family and dependant in respect to their expenses".

If this paraphrasing is not violent in any respect, then the sum can be treated as an allowance paid by the Court of Wards to the assessee and would stand on the same footing as, for instance, the salary paid to the tutor of a ward. The discretion of the Court of Wards may not be questioned in any civil court, (Vide section 53 of the Act), and it may not be possible for anybody to say that the Court of Wards was wrong in treating the assessee as a dependant of the ward or in fixing for him an allowance of Rs. 6,498 a year, but it is not possible to say that this sum is only an expense of the ward and does not become an income of the assessee. This sum is within the absolute control of the assessee and neither the Rani nor the Court of Wards can call upon him to render account in respect thereto. We are, therefore, of the opinion that this sum was rightly treated as income by the revenue authorities.

The next question is whether the assessee is entitled to claim exemption in respect of this sum. Before the Income-tax Officers it was contended that the sum received by him was agricultural income, but this contention was not advanced before us. The assessee is only a reversioner of the estate and not the owner thereof during the lifetime of the present incumbent, and the allowance having been paid out of the agricultural and taxed income of the estate may be taxed again when it passes from the owner of the estate to the assessee, for in his hands the character of the income has been changed. If it is treated as a gift, it would be liable to tax and would not be exempted under section 4(3)(vii) because it is not an isolated gift and is not an income of a casual and non. recurring nature, but is a gift of a periodical and regular kind, even if it be said to be made to the assessee by the ward out of considerations of love and relationship.

The chief contention that is advanced before us is that the assessee can claim exemption under section 14(1) of the Act which says that the tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family. In this connection we have to consider whether the assessee can be treated as a member of a Hindu undivided family. Ordinarily, a married daughter is not a member of the family of her father or mother, nor can the daughter's son be said to be such a member, but it is said that the expression 'undivided Hindu family' used in section 14 differs from what is called a Hindu coparcenary body which is a much narrower body and which includes those male members who take by birth an interest in the coparcenary property. This may be conceded and is indeed supported by authority, see the case of Vedathanni v. Commissioner of Income-tax, Madras (I.L.R. 56 Mad. page 1) and the case of the Commissioner of Income-tax Bombay v. Laxminarayan (I.L.R. 59 Bom. p. 618). In the latter case Rangnekar, J., observed that under the Hindu Law an undivided family is composed of (a) males and (b) females. The males are (1) those that are lineally connected in the male line (2) collaterals (3) relations by adoption and (4) poor dependants, and the learned Judges referred to Mayne's Hindu Law at page 344, where the learned author speaks of it as "the whole body of such a family consisting of males and females...........some of the members of which are coparceners, that is persons who on birth would be entitled to demand a share, while others are only entitled to maintenance" and to what has, been said in the same book at page 347 that "now it is at this point that we see one of the most important distinctions between the coparcenary and the general body", and then finally a reference was made [to the description of a Hindu undivided family as given by Dinshaw Mulla in his Principles of Hindu Law, 7th Edition, at page 230, in these words: "A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters''. Accepting all that was said by the learned Judge, it is clear that the assessee is neither lineally connected in the male line, nor collateral nor a relation by adoption, and the best that can be said is that he is a poor dependant, and it is in that category that the assessee is brought by learned counsel for the assessee, and reliance once again is placed on the fact that under section 25 of the Court of Wards Act the assessee is receiving something for his allowance and the allowance is paid to him because he is a dependant of the ward. It is difficult to consider the assessee as a poor dependant in the sense in which that expression is used in the judgment of the learned Judge of the Bombay High Court, and the learned Commissioner says that the assessee "is regarded as the prospective heir to the estate" and it is in that capacity that the allowance is paid to him so that he may live up to the standards of the future owner of a big property. The assessee cannot at all be regarded as a poor dependant in the sense in which that term is understood in Hindu Law, and the expression 'dependants' used in section 25 of the Court of Wards Act is a wholly different expression. Only those members of a Hindu undivided family can claim exemption under section 14(1) of the Act who either on partition would be entitled to demand a share or are entitled to maintenance under the Hindu Law and who therefore might be said to have an interest in the joint income of the family. The assessee is entitled neither to claim partition nor to claim maintenance as of right nor has the sum in question been received by him by virtue of his position as a member of the Hindu undivided family and, therefore, the exemption provided in section 14(1) is not available to him.

Our answer, therefore, to the question formulated by the Commissioner mentioned in an earlier portion of our judgment is in the affirmative, and, we direct that a copy of our judgment shall be sent under the seal of the Court and the signature of the Registrar to the learned Commissioner of Income-Tax, Central and United Provinces. The assessee must pay the costs of the reference. The hearing of the case lasted for a day, and we allow six weeks' time to counsel for the Department to file his certificate. We fix the fee for the counsel for the Department at Rs. 200.