SHRIDHAR UDAI NARAYAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE two connected references arise out of one and the same proceeding taken under section 34 of the Income-tax Act. The assessee is a Hindu undivided family going by the name of Messrs. Shridhar Udai Narayan and until the 22nd of January, 1947, when Shridhar was the karta of the assessee family. For the year 1946-47 the karta Shridhar filed a return on December 18, 1946, showing a total income of Rs. 5,713 and on the basis of that return the tax was assessed by an order dated 13th May, 1947. This order was thus passed on the basis of the return filed by Shridhar but after he had died. Later on, proceedings for the assessment year 1947-48 came up before the Income-tax Officer and while dealing with those proceedings, he got definite information that income for the year 1946-47 had escaped assessment when the original assessment was made. He, therefore, issued a notice under section 34 of the Income-tax Act which was addressed to the Hindu undivided family Shridhar Udai Narayan. The notice was served on 6th of February, 1948, on the eldest male member of the family Udai Narayan Trivedi who according to the Tribunals statement of the case had become the karta of the family by that time. Udai Narayan had been born on 5th of July, 1930, so that on the date of service of the notice he was about 17 years and 7 months old. He had, therefore, not attained majority under the Indian Majority Act. In response to the notice served on him, Udai Narayan filed a return on 10th March, 1948, showing an income of Rs. 19,713 and in that return described himself as the karta of the assessee family. The Income-tax Officer did not accept the income shown in the return and computed the total income of the assessee at Rs. 47,745 and assessed the tax on that basis by his order dated 30th March, 1948. The assessee went up in appeal against that order to the Appellate Assistant Commissioner mainly on the ground that the notice which was served on Udai Narayan on 6th of February, 1948, had not been validly served as Udai Narayan on that date was not an adult member of the assessee family so that the proceedings for assessment in pursuance of that notice were void. This argument was accepted by the Appellate Assistant Commissioner and he set aside that assessment. Thereupon, there was an appeal before the Tribunal on behalf of the department and the Tribunal by its order dated July 13, 1950, held that the service of notice on Udai Narayan was legal and proper as he was an adult member of the assessee family on the date of service of the notice. On this finding the Tribunal remanded the case to the Appellate Assistant Commissioner for disposing of the appeal on merits. At this stage two different proceedings started. Against the appellate order of remand the assessee moved an application under section 66(1) praying that a question of law be referred to this court. The Tribunal accepted the application and has, therefore, referred to this court the following question :

(2.) IN dealing with the three questions which have been referred to us, we have to keep in view a distinction that appears to have been made in the various relevant Acts between the words adult and major. Amongst Hindus, the question when a person becomes a major and for what purposes used to be determined by the principles of Hindu law until the legislature intervened and passed the INdian Majority Act, 1875 (IX of 1875). Section 3 of that Act laid down that under certain circumstances a minor is to attain majority on completing the age of 21 years whereas in all other circumstances he is to be deemed to have attained majority when he shall have completed the age of 18 years and not before. Section 2 of that Act made a little exception of the cases in which the provisions of section 3 were to apply laying down that the provisions of this Act were not to affect the capacity of any person to act in matters of marriage, dower, divorce and adoption, of religions, of religious rights and usages of any class of citizens of INdia or the capacity of any person who before that Act come into force had attained majority under the law applicable to him. The language of section 2 appears to imply that, for matters not enumerated in that section, if a question arose whether a person had or had not attained majority, the determining factor would be the principle laid down in section 3 of that Act. The effect of this we shall consider at the appropriate time when we deal with the questions referred to us. At this stage what we have to notice is that though the INdian Majority Act had come into force in 1875 and the INcome-tax Act now current was passed in the year 1922, the INcome-tax Act in section 63 used the word adult and not the word major. IN section 63(2) of the INcome-tax Act, a provision has been made for addressing a notice or requisition in the case of a Hindu undivided family to the manager or any adult male member of the family. It appears to us that if the intention had been that the notice must be addressed to a person who had attained majority under the INdian Majority Act the legislature could very conveniently have used the expression any male member of the family who has attained majority, and when the legislature instead that the expression adult male member of the family it was intended that the expression adult male member of the family it was not be construed with reference to the provisions of the INdian Majority Act of 1875. The INdian Majority Act had been passed almost solely with the purpose of declaring when a citizen of INdia was to attain majority and if there had been the intention of the legislature that in the case of a Hindu undivided family who had attained majority care would have been taken to use language which would have clarified that position. INstead, the legislature used the word adult and the consequently in interpreting the meaning of the word adult we should not make a reference to the provisions of the INdian Majority Act.

(3.) WE may in this connection refer to the views expressed by the Court of Appeal in Rex v. Commissioners of Taxes for the Newmarket Division of Suffolk (Ex parte Huxley). In that case also the question had arisen whether Huxley, who had not attained the age of 21 years which was the age of majority in England, could be directly taxed in respect of income which he was receiving as a jockey. Cozens-Hardy M. R. held : It is to my mind almost absurd to suggest that a jockey making a large income, and, I presume, assisted by clerks or other servants, has not the requisite discretion to enable him to deliver, or procure to be delivered, all proper particulars, and, if necessary, to instruct legal advisers to protect his rights when dealing with the question whether Huxley had or had not the requisite discretion to make the return and to defend proceedings or to appeal under the income-tax law in England. It was held on this principle that under the charging section of the income-tax law where the word used was person that word would include an infant who had not attained the age of 21 years and direct taxation of income in his hands would be permissible under the circumstances mentioned above. Lord Justice Phillimore dealing with the question of incapacity of an infant who had not attained the age of 21 years held that the word incapacity may be rightly confined to the case of an infant who does not receive or control his own property and who is, therefore, incapable of making a return. Lord Justice Warrington expressed his view by saying that an infant who controls and manages his own concern may well be treated as capable of doing what is required under the Income-tax Act. These principles were laid down by the Court of Appeal in England on interpretation of the provisions of the income-tax which was in force in England and, though those provisions are not identical with the provisions of the Indian Income-tax Act, it does appear to us that the two income-tax laws at least in this respect are very similar and the principle laid down in England would be for this reason applicable in India also. In England, income of every person was made chargeable while the income of every individual has been made chargeable in India, and the question of charging the income of a minor directly in his hands would, therefore, arise in England on determination of the question whether he is covered by the word person and in India whether he is covered by the word individual and it seems to us that the difference in the two words individual and person is not such as to make any difference in the view to be taken in interpreting these words. In England also, there were provisions for charging the income of a minor in the hands of a guardian and there the criterion laid down was that a guardian was to be charged if he was in the control and management of the property of the minor. In India, as we have indicated earlier, a guardian is to be charged in respect of the income of his ward if he is entitled to receive or is in actual receipt of the income of the minor. Both in England and in India, therefore, the criterion for charging the income of a minor in the hands of a guardian is whether the guardian is in a position to control and manage that income. In India, the control and management is expressed by saying that he should be either entitled to receive the income or should be in actual receipt of the income. In England, it was laid down by saying that he should be in the control and management of the property of the minor. Neither in India nor in England was any provision made for charging the income in the hands of a guardian who had no control or management of the income of the minor or where no guardian had existed. The case before us is, therefore, similar to the case of Huxley which was dealt with by the Court of Appeal in the case cited above and the principle laid down, therefore, strengthens the view which we have expressed earlier on interpretation of the provisions of the Indian Income-tax Act that charge of tax on the basis of the return filed by Udai Narayan on behalf of the Hindu undivided family would be valid as he was the eldest male member of the Hindu undivided family, which had no male member who had attained majority, and who was in the actual control and management of the income of the family. Consequently, the second question is answered in the affirmative.