Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
J. N. SHARMA
Vs.
RESPONDENT:
H.H. VIJAYAKUVERBA MAHARANI OF MORVI AND OTHERS
DATE OF JUDGMENT:
17/11/1965
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SUBBARAO, K.
SIKRI, S.M.
CITATION:
1966 AIR 1074 1966 SCR (2) 618
ACT:
Expenditure Tax Act 1957 (29 of 1957), s. 18--Assessee
dying before Act came into force--Whether expenditure
incurred by deceased liable to tax--Liability of legal
representatives to be assessed.
HEADNOTE:
The Expenditure Tax Act, 1957 was brought into force
with effect from April 1, 1958. The respondents executors
under the will of M--were served a notice under s. 13(2)- of
the Act requiring them to furnish a return in respect of the
expenditure incurred by M between April 1, 1957 and August
1957 the date of his death. The respondents objected that
the Act did not apply to M because he had died before the
date on which the Act came into force and on that account
the respondents as executors of his will were not liable to
submit the return demanded. The contention was overruled by
the Expenditure-tax Officer whereupon the respondents filed
a writ petition in the High Court praying that the
proceedings be quashed. The High Court held that the charge
under the Act in respect of expenditure incurred in the
relevant previous year to the assessment year 1958-59 was
not on the estate of any individual or any Hindu undivided
family: it was on the individual or the Hindu undivided
family incurring the expenditure, and as it was imposed for
the first time on April 1, 1958, unless the unit of
assessment Was in existence on the date when the Act came
into force, no tax could be levied. With certificate
granted by the High Court the Revenue came to this Court.
HELD : (i) In terms Subs. (1) of s. 18 imposes liability
upon the legal representatives of a person who dies, to pay
out of his estate, expenditure-tax assessed as payable by
such person, or any sum which would have been payable by him
if he had not died. There is nothing in the expression
’where a person dies’ or in the context in which it occurs
which suggests that it was intended thereby to restrict the
operation of the sub-section to cases of persons dying after
the Act was brought into force. [622 C-D]
(ii) In the context of the declared liability under
sub-s. (1) and the provisions of sub-s. (3) of s. 18 which
make sections 13, 14 and 15 ,of the Expenditure Tax
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
applicable to the executor, administrator or legal
representative, as they apply to any person, it would be
difficult to hold that the legislature has not expressed its
intention clearly so a.-, to render the estate of a deceased
person liable to be assessed to expenditure tax merely
because he had died before that date in which this Act was
brought into force. [625 D-E]
Ellis Reid v. Commissioner of Income-tax, 5 I.T.C. 100
:I.L.R. 55 Bom. 312 and Income-tax Commissioner Bombay v.
D.N. Mehta, 3 LT.R. 147, considered.
The judgment of the High Court had therefore to set
aside. [625 HI
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 841 of
1964.
619
Appeal from the judgment and order dated October 12,
1961 of the Bombay High Court in Misc. Application No. 379
of 1959.
A. V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar
and R . N. Sachthey, for the appellants.
N. A. Palkhivala, 0. P. Malhotra, J. B. Dadachanji, for
the respondents.
The Judgment of the Court was delivered by
Shah, J. The Expenditure-tax Act 29 of 1957 which
received the assent of the President on September 17, 1957,
was brought into force on April 1, 1958. The Act provides
for levy of tax on expenditure at the rate or rates
specified in the Schedule to the Act, for every financial
year commencing on and from the first day of April, 1958, in
respect of the expenditure incurred by any individual or
Hindu undivided family in the previous year.
His Highness Mahendrasinghji, Ruler of Morvi died on
August 17, 1957, having made a will appointing the
respondents to this appeal as executors of his estate. The
Expenditure-tax Officer issued a notice under S. 13(2) of
the Expenditure-tax Act, 1947, requiring the respondents to
furnish a return of the expenditure incurred by
Mahendrasinghji for the period between April 1, 1957 to
August 17, 1957. The respondents submitted that the Act did
not apply to Mahendrasinghji because he had died before the
date on which the Act came into force, and on that account
the respondents as executors of his will were not liable to
submit the return demanded. By letter dated November 19,
1959, the Expenditure-tax Officer rejected the contention
raised by the respondents.
The respondents then filed a petition in the High Court
of Bombay under Art. 226 of the Constitution praying that
the proceedings started by the Expenditure-tax Officer for
assessing and levying tax on the expenditure incurred by
the late Mahendrasinghji during the previous year be quashed
and that the Officer be restrained by an injunction from
taking further steps or proceedings under the Act. The High
Court held that the charge under the Act in respect of
expenditure incurred in the relevant previous year to the
assessment year 1958-59 was not on the estate of any
individual or any Hindu undivided family: it was on the
individual or the Hindu undivided family incurring the
expenditure, and as it was imposed for the first time on
April 1, 1958, unless the unit of assessment was in
existence on the date when the Act came into force, no tax
could be levied. With certificate granted by the High
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
Court, this appeal has been preferred.
620
Section 2(c) of the Expenditure-tax Act 29 of 1957
defines an assessee as meaning an individual or a Hindu
undivided family by whom expenditure-tax or any other sum of
money is payable under the Act, and includes every
individual or Hindu undivided family against whom any
proceeding under the Act has been taken for the assessment
of his expenditure. "Assessment year" under the Act means
the year for which tax is chargeable under s. 3, and
"previous year" is defined in relation to any assessment
year as meaning the previous year as defined in cl. (II) of
S. 2 of the Income-tax Act if an assessment were to be made
under the said Act for that year. The relevant part of s. 3
which is the charging section provides.
"(1) Subject to the other provisions
contained in this Act, there shall be charged
for every financial year commencing on and
from the first day of April, 1958, a tax
(hereinafter referred to as expenditure-tax)
at the rate or rates specified in the Schedule
in respect of the expenditure incurred by any
individual or Hindu undivided family in the
previous year:"
Section 13 deals with returns of expenditure for the purpose
of assessment of tax. It provides :
"(1) Every person whose expenditure for the previous6s
year was of such an amount as to render him liable to
expenditure-tax under this Act shall, before the thirtieth
day of June of the corresponding assessment year, furnish to
the Expenditure-tax Officer a return in the prescribed form
and verified in the prescribed manner setting forth his
expenditure for the previous year.
(2) If the Expenditure-tax Officer is of the opinion
that the expenditure of any person for any year is of such
an amount as to render him liable to expenditure-tax, then,
notwithstanding anything contained in sub-section (1), he
may serve a notice upon such a person requiring him to
furnish within such period, not being less than thirty days,
as may be specified in the notice, a return in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be required in
the notice relating to the expenditure of such persons for
the previous year mentioned in the notice.
(3)..................................
621
Section 14 enables a return to be made, if it is not
furnished within the time allowed, or to be modified, at any
time before the assessment is made. Section 15 confers
power upon the Expenditure-tax Officer to assess tax. If
the Officer is satisfied without requiring the presence of
the assessee or production by him of any evidence that a
return made under s. 13 or s. 14 is correct and complete, he
must assess the taxable expenditure of the assessee and
determine the amount payable by him as expenditure-tax. If
the Expenditure-tax Officer is not so satisfied, he may
serve a notice on the assessee requiring him either to
attend in person or to produce any evidence on which the
assessee may rely in support of his return. By sub-s. (3)
of S. 15 the Expenditure-tax Officer is authorised to
determine the taxable expenditure of the assessee and the
amount payable by him as expenditure-tax. By sub-s. (5) the
Expenditure-tax Officer is authorised to make the assessment
to the best of his judgment and to determine the amount
payable by the person as expenditure-tax on the basis of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
such assessment. Section 18 provides
"(1) Where a person dies, his executor, administrator
or other legal representative shall be liable to pay out of
the estate of the deceased person to the extent to which the
estate is capable of meeting the charge, the expenditure-tax
assessed as payable by such person, or any sum which would
have been payable by him under this Act if he had not died.
(2) Where a person dies without having furnished a
return under the provisions of section 13 or after having
furnished a return which the Expenditure-tax Officer has
reason to believe to be incorrect or incomplete, the
Expenditure-tax Officer may make an assessment of the
expenditure of such person and determine the expenditure-tax
payable by the person on the basis of such assessment, and
for this purpose may, by the, issue of the appropriate
notice which would have had to be served upon the deceased
person if he had survived, require from the executor,
administrator or other legal representative of the deceased
person any accounts, documents or other evidence which might
under the provisions of section 15 have been required from
the,deceased person.
(3) The provisions of section 13, section 14 and section 15
shall apply to an executor, administrator or-
622
other legal representative as they apply to any person
referred to in those sections.".
Power of the Parliament to enact legislation for
assessing tax against the representatives of a person who
died before the date on which the Act was brought into force
and for collecting it from his estate is not challenged. It
is however submitted that the Parliament has failed to set
up effective machinery for assessing tax against the estate
of a person who died during the previous year relevant to
the assessment year 1958-59 so as to render his estate
liable under the Act.
In terms, sub-s. (1) of S. 18, imposes liability upon
the legal representatives of a person who dies, to pay out
of his estate, expenditure-tax assessed as payable by such
person, or any sum "which would have been payable by him if
he had not died. There is nothing in the expression "Where
a person dies" or in the context in which it occurs which
suggests that it was intended thereby to restrict the
operation of the sub-section to cases of persons dying after
the Act was brought into force. Sub-section (2) sets up
machinery for assessing liability to tax where the person
liable to pay tax has died before submitting a return, or
after submitting a return, but before the assessment is
completed. It confers powers upon the Expenditure-tax
Officer exercisable against the legal representatives which
but for death of the person liable, would have been
exercised under s. 13 (2) and s. 15 against such person.
Sub-section (3) which makes the provisions of ss. 13, 14 &
15 applicable to legal representatives as they apply to any
person referred to in those sections clearly indicates that
the legal representatives of a person who had died are under
the same obligations as the deceased was to make a return
under s. 13(1), and that the Tax Officer is invested with
power to call for return from the legal representative of a
deceased person and to assess, which could have been
exercised against that person, if he had not died. The
scheme of s. 18 is that by sub-s. (1) liability of the
estate of a person who dies, to satisfy ’the tax liability
if his expenditure in the previous year exceeds the amount
which renders him liable to the expenditure-tax, is declar-
ed, and by sub-ss. (2) & (3) the Expenditure-tax Officer is
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
invested with power to require a return to be made by the
legal representative of a deceased person whose estate is
liable to pay ’the tax, or to deal with a return already
made, and to determine after assessment the tax payable.
The legal representative of the person dying may therefore
be called upon by the Tax Officer to make a return, and on
the return so made the expenditure-
623
tax or any other sum which would have been declared
payable,, if he had not died, may be assessed or determined,
and collected from the estate in the hands of the legal
representative. If the legal representative fails to make a
return, a best judgment assessment may be made by the Tax
Officer.
The operative terms of sub-s. (1) of s. 18 are identical
with the terms of s. 24B (1) of the Indian Income-tax Act,
1922. Section 24B was added in the Income-tax Act, 1922, by
the Income-tax (Second Amendment) Act 18 of 1933 with effect
from September 11, 1933, to remedy a lacuna which was
pointed out by the Bombay High Court in the machinery
provisions of the Income-tax Act insofar as they related to
assessment of tax against the estate of a person who died
before assessment was completed. In Ellis Reid v.
Commissioner of Income-tax(1), the Bombay High Court held
that where a person dies after the issue of a notice under
s. 22(2) of the Income-tax Act, 1922, to make a return of
his income, but before he makes a return, assessment
proceedings commenced against him under the Income-tax Act
cannot be continued and his legal representative will not be
liable to pay tax which such person may, if he had not died,
have been assessed to pay. In the view of the High Court
the definition of "assessee" applies only to a living
person, the expression used by the Legislature being "a
person by whom income-tax is payable" and not "a person by
whom or whose estate income-tax is payable’. With a view to
remove the defect pointed out by the High Court in the
scheme of the Act, s. 24B was inserted providing machinery
for assessment of tax against the estate in the hands of the
legal representative of a person liable to pay tax and for
levy and collection of tax from his estate. The Parliament
adopted the scheme of s. 24B with some variations in
enacting ss. 18(1) & (2) for rendering the estate of a
person who would, if he had not died, have been liable to
pay expenditure-tax. This is not denied. But counsel for
the respondent said that s. 18 of the Expenditure-tax Act
does not bring within the net of taxation cases of persons
who died before the Act was brought into force : it only
sets up machinery for enforcing liability against the estate
of a person dying after the Act is brought into force.
Counsel placed strong reliance upon income-tax Commissioner,
Bombay v. D. N. Mehta (2) decided by the Bombay High Court,
and submitted that Parliament having adopted the same
phraseology as was used in I s. 24B (1) of the Income-tax
Act, it may be inferred that it was intended to give
legislative recognition to the interpretation of
(1) 5 I.T.C. 100 : I.L.R. 55 Bom. 312.
(2) 3 I.T.R. 147
624
s.24 insofar as it is applicable to the Expenditure-tax Act.
In D. N. Mehta’s case(1) one Avabai died on May 6, 1932
after she was served with a notice requiring her to make a
return of her income under s. 22(2) of the Indian Income-tax
Act, 1922. Section 24B was thereafter inserted in the
Income-tax Act on September 11, 1933. In proceedings for
assessment of income-tax against her legal representatives
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
it was contended that Avabai had died before the date on
which the amendment was made, her estate was not liable to
be taxed under the machinery incorporated in the Act in S.
24B. This contention found favour with the Bombay High
Court in D. N. Mehtas case(1). Beaumont, C.J., delivering
the judgment of the Court observed :
".......... that S. 3 of the Income-tax
Act charges the tax upon every one coming
within the purview of the Act who was alive at
the beginning of the financial year, but in
the case of a person dying before assessment,
that liability was inchoate only, and
crystallized into an enforceable liability for
the first time on the passing of the Amendment
Act. It is therefore not quite accurate to
say that the Amendment Act merely deals with
machinery; it does for the first time impose
an enforceable liability. The principle which
must always be applied in construing a taxing
Act is that the Government must show that the
tax sought be recovered has been imposed in
language which admits of no reasonable doubt.
The opening words of each sub-section to
Section 24-B : "Where a person dies", though
the use of the present tense is not altogether
appropriate on any reading of the Art, seem to
me more appropriate to future than to past
deaths. If the Legislature had intended the
Act to have a retrospective effect, it would
have been very easy to have said, "dies
whether before or after the passing of this
Act". Inconvenience and hardship might lie
caused by making the tax payable out of an
estate which has been distributed on the basis
of the then existing law."
Counsel for the respondent maintained that as with this
judicial interpretation of s. 24B before it, the Parliament
adopted the same phraseology and scheme in enacting s. 18(1)
of the Expenditure-tax Act, Parliament must be deemed to
have intended to enact the rule laid by the Bombay High
Court in its application to the Expenditure-tax Act. It was
open to the Parliament,
(1) 3 I.T. R. 147.
625
said counsel, to use adequate phraseology such as "dies
whether before or after the passing of this Act" and the
Parliament not having done so, it must be deemed to have
accepted the interpretation placed by the Bombay High Court
and to have evinced an intention not to render the estate of
the person, who died before the date on which the Act was
brought into force, liable to expenditure-tax.
We are unable to agree with this contention. The
expression "Where a person dies" standing by itself in s. 18
does not suggest that thereby it was intended to refer only
to death of the person liable after the Act was brought into
force : and read with the remaining clauses in the context
of sub-ss. (2) & (3) it is clear that the Parliament
intended to attract the entire charge to tax and machinery
prescribed by ss. 13 & 15 so as to render the estate of a
person dying before the Act liable to satisfy the tax or
other liability which would have been assessed or imposed
upon him if he had not died. In the context of the declared
liability under sub-s. (1) and the provisions of sub-s. (3)
of s. 18, which make sections 13, 14 and 15 of the
Expenditure-tax Act applicable to the executor,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
administrator or legal representative, as they apply to any
person, it would be difficult to hold that the Legislature
has not expressed its intention clearly so as to render the
estate of a deceased person liable to be assessed to
expenditure-tax merely because he had died before the date
on which the Act was brought into force.
The argument of inconvenience has no substance. A
person who has rendered himself liable to pay tax on the
expenditure incurred by him in the previous year may, not
being aware of the proposal to enact a statute like the
Expenditure-tax Act, part with his estate. But on that
account he cannot set up a defence against the levy of the
tax that he has parted with the estate. Nor can the legal
representative of a deceased person set up a plea that
because the estate is distributed, he should not be rendered
liable to pay the expenditure-tax which has been imposed by
the statute.
We are unable therefore to agree with the High Court
that by enacting s. 18 of the Act the Parliament has not
rendered the estate of a person liable to expenditure-tax,
if such person had died before the date on which the Act was
brought into force.
The appeal is therefore allowed and the order passed
by the High Court is set aside, and the petition filed by
the respondents is dismissed with costs in this Court and
the High Court.
Appeal allowed.
626