PINGLE VENKATRAMA REDDY DIED Vs. INCOME TAX AND EXPENDITURE TAX OFFICER INCOME TAX CUM WEALTH TAX CIRCLE NO 1 HYDERABAD

JUDGEMENT

(1.) In this petition the petitioner prayed for the issue of a writ of prohibition or any other appropriate writ or direction restraining the respondent, the Income-tax and Expenditure-tax Officer, Income-tax cum Wealth tax circle No. 1 Hyderabad, from making the levy of expenditure-tax for the assessment year 1960-61 and pass such other order or orders as this court may deem fit.

(2.) Pending the writ petition, the sole petitioner died and one of the executors appointed under his will is brought on record as the 2nd petitioner. On 6-3-62 the respondent issued a notice under Section 15 of the Expenditure Tax Act (hereinafter referred to as the Act) calling upon the petitioner to furnish statements of expenditure in respect of the Joint family of which the petitioner is said to he the karta as also the statements of expenditure incurred by his two sons. It is alleged in the affidavit or the petitioner filed in support of this writ petition that his two sons are divided in status from him and us between themselves. In his reply dated 15-3-62, the petitioner stated that there was division between him and his two sons, who represented their respective branches and that in respect of one item known as Bharatkhand Cotton Mills property, though there was no physical division by metes and bounds, there had been a complete and final division of the said property also into separate and distinct shares and that the petitioner and his two sons had become the exclusive owners of a defined portion or share. It WAS also alleged in the alternative that, even if the said division is deemed to be a partial partition, the expenditure incurred by the petitioners two sons and their respective branches from out of the income realised by them from out of their separate shares cannot be included in the expenditure of the notional joint family. The stand taken on behalf of the petitioner before the respondent was that there was a complete partition of all the properties of the joint family. Though the Bharatkhand Cotton Mills properly was not subjected at that stage to a physical division, there was nevertheless a final and conclusive division into separate portions. It is further alleged that there was consequently a partition which attracts the operation of Section 19 of the Act. Again, it is claimed that, even assuming that there was only a partial partition, each member had become absolutely entitled to a separate share and the income thereof and the income realised by each member or each branch is exclusively his or theirs and the expenditure from out of the said separate income is, therefore, not the expenditure of the undivided family though it may be said that there was by legal fiction an undivided family in existence for the purpose of levy of tax. In reply to the petitioners letter dated 15-3-62 the respondent intimated by his letter dated 16-3-62 his view that, in view of the specific provision embodied in Section 4(ii) of the Expenditure Tax Act, he was unable to subscribe to the petitioners view that the expenditure incurred by the member of the joint family on partial partition cannot be brought within the ambit of Section 4(ii) of the Act. The respondent, therefore, requested the petitioner to file all the necessary statements in support of the expenditure tax returns filed by the petitioner for the assessment years 1959-80, 1960-61 and 1961-62 showing the expenditure incurred by all the members of the family out of the income or property transferred in partial partition. In that letter, the respondent stated that, if the petitioner feels aggrieved after the completion of the assessments he is entitled to seek recourse to appeals against them. The petitioner was, therefore, asked to attend the office on 24-3-62 at 11 A. M. with all the necessary information so as to enable the respondent to finalise the expenditure assessments without fail.

(3.) Next, the petitioner received a notice on 11-1-83 calling upon him to furnish the particulars on 16-1-63 of the expenditure incurred by the divided sons of the petitioner. In reply, the petitioner stated that his sons are living separately and one of them is at Bangalore and while asking for time, confirmed once again his objections to the procedure and to the legality and jurisdiction of the proposed law. In paragraph 6 of the affidavit, it is alleged that the action of the respondent in seeking to levy an assessment on the basis of the computation of the expenditure of the divided branches also as taxable expenditure is wholly ultra vires, without jurisdiction and is besides, productive of harassment and hardship. It is alleged that the respondent is acting in excess of his jurisdiction and is assuming a jurisdiction not vested in him on the basis of a misconstruction of the provisions of Section 4(ii) of the Act. According to the petitioner, the expression transferred directly or indirectly to the dependent by the assessee cannot be construed, on a proper understanding, to include property allotted at a partition among the members of the family though the division is not by metes and bounds. It is submitted that the requirements for the application of Section 4(ii) are, firstly, that there should be a transfer and secondly, that the transfer should be in favour of a dependent of the family and that, in the present ease, there is no transfer and the divided sons are not dependents of the family.