PATWARDHAN M N Vs. COMMISSIONER OF EXPENDITURE TAX

JUDGEMENT

(1.) THIS is a reference under S. 25(1) of the Expenditure -tax Act at the instance of the assessee and relates to the assessments for the asst. yrs. 1959 -60 and 1960 -61, the corresponding previous years for which were the years ended on 31st May, 1958, and 31st May, 1959, respectively. The question raised on the reference is in respect of the inclusion of certain expenditures incurred by the wife and two minor sons of the assessee in the expenditure of the assessee for the purpose of expenditure -tax.

(2.) THE assessee is an individual. During the previous years in question, the assessee's wife, Smt. Indumati Raje, and his minor sons, Shrimant Ganpatrao and Shrimant Gangadharrao, incurred expenditure, which was not exempt from the expenditure -tax. The total amount of expenditure incurred by them for the first year was to the extent of Rs. 27,842 and for the second year to the extent of Rs. 27,603. The wife as well as the minor children had their own sources of income and the expenses incurred by them were out of the said income. The Expenditure -tax Officer held that they were " dependants" of the assessee under S. 2(g)(i) and the expenditure was, therefore, liable to be included in the expenditure of the assessee under S. 4(ii). He, accordingly, clubbed these amounts to the expenditure of the assessee and brought them to tax. The AAC disagreed with the view taken by the Expenditure -tax Officer. In his opinion since these persons had adequate resources of their own, which had come to them not through the assessee but through others and the expenses incurred by them were out of their own resources, they could not come within the definition of " dependants" of the assessee. Sec. 4(ii), therefore, was not available for bringing the expenditure incurred by them within the taxable expenditure of the assessee. He, accordingly, allowed the assessee's appeals and directed the deletion of the amounts. Against the decision of the AAC the Department appealed to the Tribunal. The Tribunal held, on a construction of S. 2(g)(i) and S. 4(ii), that the wife and the minor sons of the assessee were his dependants within the meaning of S. 2(g)(i) and the expenditure incurred by them was includible in the expenditure of the assessee for the purposes of the expenditure -tax irrespective of whether they had their own resources or not in view of the provisions of S. 4(ii). The Tribunal, accordingly, allowed the appeal of the Department and directed the restoration of the amounts, which had been excluded by the AAC. At the instance of the assessee it has then referred the following question of law on the present reference :

(3.) THE Expenditure -tax Act, under its charging section, levied a tax in respect of the expenditure incurred in the previous year by an individual or an HUF, which were the assessable entities under the Act. The expenditure, which was made liable to tax under the Act, included certain expenditures incurred by the third parties for the assessee or his dependants or by the dependants of the assessee in certain circumstances. Certain exemptions and deductions were allowed under the Act and the taxable expenditure computed under the provisions of the Act was made liable to tax at the rates specified by the Finance Act applicable to the relevant year. " Assessee" under the Act meant an individual or an HUF by whom expenditure -tax or any other sum was payable under the Act. " Taxable expenditure" meant the total expenditure of the assessee which was liable to be taxed under the Act. The word " dependant" in the original Act was defined as follows :