CET Vs. SHETH MOTILAL KARSONDAS

JUDGEMENT

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

(2.) THE Tribunal also, at the instance of the assessee -Hindu undivided family framed a further question of law arising out of the order of the Tribunal, namely :

(3.) WE may point out at this stage that, prior to its amendment by Central Act 12 of 1959, section 4(i) contained the following words, namely, 'which, but for the expenditure having been incurred by that other person, would have been incurred by the assessee' immediately after the words 'or any of his dependents' but they were deleted by the Central Act 12 of 1959, and section 4(i) as it stood in the relevant assessment year was as set out above without these words. The question is whether the expenditure incurred by the three smaller Hindu undivided families of Hiralal, Haridas and Devidas can be said to be expenditure incurred by any person other than the assessee -Hindu undivided family in respect of any obligation or personal requirement of the assessee -Hindu undivided family or any of its dependents. If it is, it would be liable to be included within the taxable expenditure of the assessee but not otherwise.