# Roshan Lal Mehra v. bhwar Das S. K. Das J

- **Citation:** [1962] 2 S.C.R. 983
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/roshan-lal-mehra-v-bhwar-das-s-k-das-j-2311
- **Pages:** 18

## Headnote

•
'
~ S.C.R.
SUPREME OOURT REPORTS
983
correct and the application of the tenant-appellant
for fixation of standard rent must now be determined in accordance with Jaw. It would be for the
competent authorities to consider now the effect· of
s.46 of the Delhi and Ajmer Rent Control Act,
1952 or of any other law bearing on the question
whirh may have come into existence since tl1en.
We would, therefore, allow this appeal and
set aside the orders of the Rent Controller, the
District Judge and the High Court dismissing the
application of the appellant. The application must
now be dealt with in accordance with law by the
authority competent to do so in the light of the
observat.ions made above.
In the result the appeals in all three categories
are allowed as indicated above. The appellants
in all the appeals will be entitled to their costs, but
there will be one Bl't of hearing fee for each of the
three categories of appeals.
Appeals allowed.
BALAJI
v.
INCOME-TAX OFFICER, SPECIAL INVESTIGATION CIRCLE
(P. B. GAJENDRAGADKAR, K. SUBBA
RAO,
M. HrnAYATULLAH, J.C. SHAH and
RAGHUBAR DAYAL, JJ.)
Income Tax-Cor11putation of total income of indiv·id11al- -
J 11clusion of income of wife and minor children jiorn patlntr·
ship-- l'on<'ititut·ional ·validity of' enactntent-lnd·ian lnculf~t-tax
Act, 1922 (JI of 1922), s. (16) (3) (a) (i) arul(ii)
Uonstitution of India, Arts. 14, 19 ( 1) (/) & (g).
The petitioner and his wife started businr>S in partnership and admitted their three minor sous to it.
Jn computing
the total income of the petitioner for the purpose of assessment
1961
Roshan Lal
Mehra
v.
bhwar Das
S. K. Das J .
1961
August 4.
··984
SUPREME _COURT REPORTS
(1962]
1961
. the Incom..:tax Officer, in~lirded the. shar~ of the income of·
_t~e 'wife and ~ree'_minor sons un_der, s.16(3)(a) (i) and
Balaji. .
(11) of the. Indian Income Tax Act, 1922. · The petitloner
v.
. moved the Supreme Court tinder Art. 32_ of the Constitution
Inrome-taz
chaJlenging the constitutionality the said provisions on the
Officer, Spe.cial . •grounds, (I) that they were, ultra 'vires 'the Legislature under
lnt"estigation.·' Entry 54 of the Federal Legislative List of the Government of·
Circle
· India ,Act, 1935, and (2) that they contravened the provisions •
of Arts. 14_apd_l9 (1) (f) and (g) of the Constitution.
.
/hid, ·that the En;ries in the Legislative Lis;s are n~t
i;ow.ers but' fields. of legislation an_d the widest import_ and.
SJgndicance should be attached to them. Thus interpreted,
there could be no' doubt that Entry 54 of the.Federal Legislative List must cover such legislation as the impugned provision intended to pre\Tent the evasion of taic.
_
_·
. Sardar Baldev Singh v
Commissioner of I ncorrte~ta:r, ·
Delhi and Ajmer. (1961) 1 S.CJi.. 482, referred to.
.
. . . , The t;,.o test~ -of· p~missible classification under Art .. 14
of the Constitution, as held by this Court, were (1) that the
· classification must be founded on an intelligent dilferentia
and (2} that the differentia must be . reasonably connected
with the object of the legislation. · ,
.
·
'
. So judged . it , could not be said that the differentia on
.whkh the impugned provision founded its classification had
no rational relation to it• object, namely, the p~evention of
the evasion of tax. The impugned provisi_on did not, therefore, violate Art. 14 of the Constitution.
·
It- WM_ not appropriate to apply American -~ecisions
dealing ,.,,ith evasion of taxes to similar cases . in India where
the conditions \\o'ere entirely different. · Since the Legislature, .
coQ'tlisant of the Widespread ·evasion Of taxes in this country,
en~cted the law for its prevention, ·it would no! be l;'roper ·
· for this court in the absence of counter-balancing crrcum-
. stances to hold on· the analogy .of American i;lecisions that
there .;as no need for such legislation.
. .
Albert A. 'Hoeper v. · Tax Commissioner of Wisconsin,
(1931} 76 L
Ed. 248, distinguished and held inapplicable'. _
B. M. Amina Umma v. Income

## Text

•
'
~ S.C.R.
SUPREME OOURT REPORTS
983
correct and the application of the tenant-appellant
for fixation of standard rent must now be determined in accordance with Jaw. It would be for the
competent authorities to consider now the effect· of
s.46 of the Delhi and Ajmer Rent Control Act,
1952 or of any other law bearing on the question
whirh may have come into existence since tl1en.
We would, therefore, allow this appeal and
set aside the orders of the Rent Controller, the
District Judge and the High Court dismissing the
application of the appellant. The application must
now be dealt with in accordance with law by the
authority competent to do so in the light of the
observat.ions made above.
In the result the appeals in all three categories
are allowed as indicated above. The appellants
in all the appeals will be entitled to their costs, but
there will be one Bl't of hearing fee for each of the
three categories of appeals.
Appeals allowed.
BALAJI
v.
INCOME-TAX OFFICER, SPECIAL INVESTIGATION CIRCLE
(P. B. GAJENDRAGADKAR, K. SUBBA
RAO,
M. HrnAYATULLAH, J.C. SHAH and
RAGHUBAR DAYAL, JJ.)
Income Tax-Cor11putation of total income of indiv·id11al- -
J 11clusion of income of wife and minor children jiorn patlntr·
ship-- l'on<'ititut·ional ·validity of' enactntent-lnd·ian lnculf~t-tax
Act, 1922 (JI of 1922), s. (16) (3) (a) (i) arul(ii)
Uonstitution of India, Arts. 14, 19 ( 1) (/) & (g).
The petitioner and his wife started businr>S in partnership and admitted their three minor sous to it.
Jn computing
the total income of the petitioner for the purpose of assessment
1961
Roshan Lal
Mehra
v.
bhwar Das
S. K. Das J .
1961
August 4.
··984
SUPREME _COURT REPORTS
(1962]
1961
. the Incom..:tax Officer, in~lirded the. shar~ of the income of·
_t~e 'wife and ~ree'_minor sons un_der, s.16(3)(a) (i) and
Balaji. .
(11) of the. Indian Income Tax Act, 1922. · The petitloner
v.
. moved the Supreme Court tinder Art. 32_ of the Constitution
Inrome-taz
chaJlenging the constitutionality the said provisions on the
Officer, Spe.cial . •grounds, (I) that they were, ultra 'vires 'the Legislature under
lnt"estigation.·' Entry 54 of the Federal Legislative List of the Government of·
Circle
· India ,Act, 1935, and (2) that they contravened the provisions •
of Arts. 14_apd_l9 (1) (f) and (g) of the Constitution.
.
/hid, ·that the En;ries in the Legislative Lis;s are n~t
i;ow.ers but' fields. of legislation an_d the widest import_ and.
SJgndicance should be attached to them. Thus interpreted,
there could be no' doubt that Entry 54 of the.Federal Legislative List must cover such legislation as the impugned provision intended to pre\Tent the evasion of taic.
_
_·
. Sardar Baldev Singh v
Commissioner of I ncorrte~ta:r, ·
Delhi and Ajmer. (1961) 1 S.CJi.. 482, referred to.
.
. . . , The t;,.o test~ -of· p~missible classification under Art .. 14
of the Constitution, as held by this Court, were (1) that the
· classification must be founded on an intelligent dilferentia
and (2} that the differentia must be . reasonably connected
with the object of the legislation. · ,
.
·
'
. So judged . it , could not be said that the differentia on
.whkh the impugned provision founded its classification had
no rational relation to it• object, namely, the p~evention of
the evasion of tax. The impugned provisi_on did not, therefore, violate Art. 14 of the Constitution.
·
It- WM_ not appropriate to apply American -~ecisions
dealing ,.,,ith evasion of taxes to similar cases . in India where
the conditions \\o'ere entirely different. · Since the Legislature, .
coQ'tlisant of the Widespread ·evasion Of taxes in this country,
en~cted the law for its prevention, ·it would no! be l;'roper ·
· for this court in the absence of counter-balancing crrcum-
. stances to hold on· the analogy .of American i;lecisions that
there .;as no need for such legislation.
. .
Albert A. 'Hoeper v. · Tax Commissioner of Wisconsin,
(1931} 76 L
Ed. 248, distinguished and held inapplicable'. _
B. M. Amina Umma v. Income-tax. Officer, Kozhikode,.
_(1954) 26 I.T.R. 137, approved.
·
·
Nor did the impugned provi!ion violate Art. 19(i} (f}
. . .
and (g} of the constitution.·
·
·
·
•
.
·. I
A tax' authorised by law· may be questioned as ~ffending
_ the fundamental frecdo:in · under Art. 1 \l of the Corutifution,
.,.,' -
...
2 s.c.R.
SUPREME COURT REPORTS
985
A tax law, llke any other law, must also satisfy that~(i) the
appropriate legislature was competent to enact it and (ii)
that it did not infringe any of the fundamental rights.
Md. Yasin v.
The Town Area Committee, Jalalabad,
(1952) S.C.R. 572, Himmatlai Harilal Melita v. State of
llfadhya Pradesh, (l9j4) S.C.R. 1122, K. K. Kochuni v.
State of Madras, (1%0) 3 S:C.R. 887 and K. T. Moopil Nair
'v. State of Kerala, (19Gl) 3 S.C.R. 77, referred to.
Even so, the restriction imposed by the imp\lgned
provision m~st be ~eld to ?e reasonabl~. Although the mode
of taxation it provided might be a little hard on a husband
or a father in. the case of genuine partnerships, that was
sufficiently offset by the resulting benefit to the public as
also by the fact that the additional payment of tax made by
the husband or the father on the income 0f the wife or minor
children would ultimately be borne by them in the final
accour~ting bet\veen them.
'
State of Madras v. V. G. Row.,
(1952) S.C.R. 597,
referred to.
ORIGINAL ,JURISDICTION : Petition No.
240
of 1960.
Petition under Art. 32 of the Constitution of
India for the enforcement of Fundamental Rights.
T. Jf. Tliakar, S. N. Andley and Ramesliicar
Nath, for the petitioner.
H. N. Sanyal, Additional
India, · K. N. Rcijagopal 8astri
for the respondents.
Solicitor-General of
and P. D. }lfenon,
1961.
August 4,
has.delivered by
Judgment of the Court
•
SUBBA RAO, J.-This writ petition filed under
Art. 32 of the Constitution raises the question of
the constitutional validity of s. 16(3)(a)(i) of the
Indian Income.tax Act, 1922 (Act XI of HJ22),
(hereinafter called the Act).
/
ThP~facts are ~ot. in dispute a.i:d Ill:ay b.e briefly
narrated.
The pec1t10ner, J3alaJ1, his six sons,
1961
Balaji
v.
Income-tax
Officer, Special
Investigalion
Circle
Subba Rao .J.
1961
Balaji
v.
Income-tax
Officer, Special
Investigation
Circle
Subba Rao J.
986
SUPREME COURT REPORTS
[1962]
and hill wife, by name Godawaribai, constituted
a Joint Hindu family.
The family was a trading
family and it had, besides business in moneylending, considerable agricultural
lands.
On
November 23, 19·16, two of his sons became divided
from the family. In the year 1951, through the
intervention of mediators the other members of
the family were also divided and another major
member started a separate business on his own.
Thereafter, the petitioner and his wife formed
themselves into a partnership to carry on their
business and admitted their three minor sons to
the benefits thereof. On September 22, 1952, a
partnership deed was executed giving an equal
share to each of the partnera. On the basis of the
partnership deed, in respect of the assessment year
1952-53 the petitioner filed two applications before
the In<'ome-tax Officer, Wardha, one under s. 25-A
of the Act for recognizing the partition, and
the other under s. 26-A for registration of the firm.
Both the applications were finally ordered by the
Income-tax Appellate .Tribu,nal, Bombay, by its
order <lated September 3, 1958, that is, the parti.
tion was recognized and the firm was granted
regi~tration. For the assessment years 1953-.54
and 1954-55 i.lso, the Income-tax Department
registered the firm under s. 26-A 0f the Act.
The
assessment proceedings in respect of the saicj. three
years are pending before the concerned Income-tax
authorities. For the assessment year 1955-56 also,
the Income-tax Officer allowed the registration of
the firm, 'but determined the total income of the
petitioner at Rs. 2,44,625 as
against the total
income returned by him at Rs. 58,232.
The
disparity arose because, while the assessee excluded
from his total income the income of the partnership falling to the shares of his wife and three
minor sons, the Income-tax Officer included the
share income of his wife and three minor sons in
the said business in the total income of the petitionev
1.'he petitioner, by the present petition1
'
,.
•
•
2 S.C.R.
SUPREME COURT REPORTS
987
challenges the constitutional validity of s.16( 3 )(a)
(i) and (ii) of the Act, and prays fo'.r a declaration
that the said provisions are ultra vires the Constitution and for the issue of a writ of certiorari quashing the assessment order dated .Marc~ 15, 1960, and
for the issue of a writ of pr'.ohibit10n restraining
the respondents from including the share income
of his wife and minor children from the part11e1 -
ship firm in his total income and taxing the same
in his hands.
The first question raised is
whether the
appropriate Legislature had t.he competence to
enacts. l6(3)(a)'(i) and (ii) of the Act. It would
be convenient at the outset to read the re~evant
part of the said section.
Section 16.
(3) In computing the total
income of any individual for the purpose of assessment, there shall be included-
( a) so much of the income of a wife or
a minor child of such individual as arises
directly or indirectly-
( i) from the membership of the wife
in a firm, of which her husband is a
partner;
(ii) from the admission of the minor
to the benefits of partnership in a firm of
which such individual is a partner.
Section 16 provides for the computation of total
income of a person and describes what sums are
to be inoluded and what sums are to be excluded
therefrom. Under sub-els. (i) aud {ii) of cl. (a) of
irub-s. (3) of the said section, the shares iu the
profits of the firm received by the wife and the
minor childreu shall be included iu the total iucome
of the iudividual. Under the said sub-clauses an
individual is made liable to pay tax in respect
.,
6f tl:.e income of his wifr and minor children,
1961
Balaji
. v.
Income•tax
Officer, Special
I nvMtigalion
Circle
Subba RaoJ,
StrPRE.ME COURT REPORTS
[1962]
1961
though the said liability is confined to the cn·cumstances mentioned therein.
Balaji
v.
1 nconie .. tax
l.ij/icei-, Special
Inve,,tigation
Circle
Suhba Rao J.
Learned counsel for the petitioner contended
that Entry 54 in the Federal Legislative List of
the Guvernment of India Act, 1935, did not confer
on the Legislature any power to tax A on the
ineom l of B and, therefore, the sub-section was
nltm vires the Legislature.
Entry 54 of the
Federal Legislative List ran : "Taxes on income
other than agricultural income".
The said Entry
i~ identical with item 82 of List I of the Seventh
f.lchedule to the Constitution.
The argument is
that income-tax is a tax imposed upon a person in
relation to his income and, therefore, A can onlv
. be taxed on his income and not on the income df
B. Learned counsel for the respondents, on the
other hand, would contend that the express terms
of the Entry did not restrict the lagislative power
to tax only the income of the person assessed, that
what could be taxed under that Entry was "income" and, therefore, nothing prevented the
L<'gislitture from imposiug the incidence of the tax
on a person other than the 1ierson whose income
was to be assessed. Alternatively, he would make
a distinction .between the taxability of the income
and the machinery for its collection, and contlmd
that, though the income of the wife and the minor
sons was only taxable, there was nothing illegal
in imposing the immediate incidence on the father,
as there was sufficient intimate nexus between
the individual, his wife a:nd minor sons, doing
business in partnership, leaving the ultimate
liability inter se to be settled between themselves.
This question was directly raised in B. J-I. Amina
Umma v. Income-tax Officer, Kozhikode (') aud was
answered in favour of the Income-tax Department.
The same question was posed before, this Court
in Sardar Bcildev Singh v. Commissioner
of
Income
Tax, Delhi and Ajmtr (') and was left
(I) (1954)261.T.R.137.
(2) (1961) I S.C.R.482,493.
•
•
•
•
2 S.C.R.
SUPREME COURT REPORTS
989
open. A final decision lJy this Court on such an
important question at the earliest point of time is
highly desirable, but, with some relnct.ance, we
are leaving open this qneslion once again, as the
petition can be satisfactorily disposed of on a
narrower Lasis.
It is well settled that the Entri('s in the Lists
are not powers but ;ire only fields uf legislation,
and that wicle~t import and significance must be
given to the language used by Parliament in the
various Entries. Sarkar, J., speaking for this
Court, observed in Sardar Baldev Si:ngh's Case (1)
thus:
" So entry 54 should be read not only
as authorising the imposition of a tax but
also as authorising an enactment which
prevents the tax imposed being evaded. If
it wen' not tu be so read, then the admitted
power to tax a person on his own income
might often be made infructuous by ingenious
contrivances."
This decision holds that the said Entry can sustain
a law made to prevent the evasion of tax.
The short question, therefore, is whether s.1'3
(3)(a)(i) and. (ii) is a provision made by the Legislature to prevent evasion uf tax. Under the relevant
provision of the Income-tax Act, if a firm is register-
._
eel, the share of each partner in the profit of the
firm would be added to his other income and charged
as part of his total income. After 1966, the position is the same except in one regard with which we
are not now concerned. This provision was intended for the benefit of partners of a business, for it
made th(em liable only to pay tax on their own income.
But it gave au effective handle to evade
taxation in another direction. A husband or a
father could nominally take his wife or his minor
sons in partnership with him so that tax burden
-.
(1) (1961) 1 S.C.R. 482, 493.
1961
Balaji
v.
Incame-tax
Officer, Special
I tW€8tigation
Oirc/,e
Subba Rao J,
19()1
Balaji
v.
Income-tax
Officer, Special
ln~estigation
Oircle
Subba Rao J.
990
SUPREME COURT REPORTS
(1962]
might be lightened, for, if the income was divided
between a number of people, the income derived by
an individual therefrom might fall under the limits
of taxable income or under a less onerous slab
This device enables an assessee to secure the entire
income of the businAss but at the same time to
evade income-tax which he would have otherwise
been liable to pay.
The Income-tax El).quiry
Co=ission of 1936 made certain recommendation to
prevent evasion of tax in such cases. The Legislature
accepted those recommendations and the loopholes
were sought to be plugged by enacting the said
sub-section.
Sub-section (3)(a)(i) and (ii) was
therefore enacted for preventing evasion of tax and
was well within the competence of the Federal
Legislature.
The constitutional validity of the said provision
was next questioned on the ground that i't violated
the doctrine of equality before the law enshrined in
.Art.14 of the Constitution. Under Art. 14, ''The State
shall not deny to any person equality before the law
•
•
•
or the equal protection of the laws within the territory of India." But decisions of this Court permitted
classification if there was reasonable basjs for the
differentiation. It was held that what Art. 14 prohibited was .class legislation and not reasonable
classification for the purpose of legislation. Two
conditions were laid down for passing the test of
permissible classification, namely,fi) the classification
,_
must be founded on an intelligible differentia which
distinguishes persons or things that are grouped
together from others left out of the group, and (ii)
that the differentia must have rational relation to
the object sought to be achieved by the statute in
question. Under the impugned sub-section, an
individual is taxed on the income of his wife or his
minor children, if he carries on business in partnership with his wife or if he admits his minor sons to
the benefits
of the partnership, whereas an ,
individual, if he carries on busine88 in partnership ~ -
S.C.R. SUPREME COURT REPORTS
991
with a third party, whether a man or a woman, or
even with his major children, or if he and his wife
or children carry on business separately, will be
liable only to pay tax on his share o{ the partnership income, that is, for the purpose of this subsection, the former is put in a category different
from the latter. It cannot be Raid that there is no
differentia between the two groups; but what is
contended is that the said differentia has no rational
relation to the object sought to be achieved by the
statute in question. It was asked how, from the
standpoint of imposition of tax, the difference
between an individual and his wife doing business
in partnership, and between an individual and his
wife doing business separately and an individnal
. doing business in partnership with his wife and an
individual doing business in partn~rship with a
third party, male or female, and between an individual who has admitted his minor children to the
partnership business and an individual who is doing
business in partnership with his major children or
outsiders, would have any reasonable basis. This
argument ignores the object of the
legislation.
We have held that the object of the legislation was
to prevent evasion of tax. A similar device would not
ordinarily be resorted to by individuals hy entering
into .partnership with persons other than those
mentioned in the sub-section, as it would involve
a risk of the third-party turning round and asserting his own rights. The Legislature, therefore,
selected for the purpose of classification only that
group of persons who in fact are used as a cloak to
perpetrate fraud on taxation.
It was then said that there might be genuine
partuerships between an individual and hiS wife
and, therefore, there is no reasonable relation
:Jetween the classification and the object sought to
be achieved, at any rate to the extent of those
. genuine oases.
But then. .jg no c1assillcativn
-. between genuine and non-genuine c11iseii: the classi1961
Balaji
".
Income-tax
Officer, Sp•cial
Investigation
Circle
Subia Rao J.
1961
Ba.!nji
v.
I 11come-tax
Offerer, 1Spc,.£al
I nve._<1U gati'.on
G'ircl?.
992
SUPREME COURT REPORTS
[1962]
fication is between
cases of partncrsl1ip between
husband, wife and/or minor chil<lren, whether
genuine or not, and partnerships between others.
In demarcating a group, the net was cast a littfo
wider, but it was necessary, a~ any further subclassification as genuine and non-genuine partnerships might defeat ·the purpose of the Act.
Subba Raa J.
Strong reliance is placed upon the decision
of the Supreme Court of America in Albert A.
Hoeper v. Tax Cornrnissi'.oner of Wi8consin (1) and it
is, therefore, necessary to consider it in some detail.
There,. the appellant niarried
a widow.
Both
the parties had separate incomes and made separak
returns. Under the relevant tax Act, the incomes of
the wife were added to the income of the husband
for the purpose of taxation. The result was to
increase the rate of the appellant's income-tax and
to charge him with a tax otherwise payable by his
wife. It wa~ contended that the said law deprived
the tax-payer of the due prbcess and equal protection of the law. Roberts, J., who expressed the
majority view, accepted the contention and struck
out the law.
The learned Judge observed
thus:·
"We have no doubt that, because of the
fundamental conceptions which underlie our
system, any attempt ,by a state to measure
the tax on one person's- property or income by
reference to the prope'rty or income of another
is contrary to due process of law as guaranteed by the 14th Am.iinclment.
That which
is not in fact the taxpayer's income cannot be
made such by calling it income."
The Court of Appeal in that case assigned two
reasons
for
sustaining
the provisions :
one
was that the provi!lions
under attack
wer
necessary to prevent frauds and evasions of tax
by married persons, ;ind the other was that it was
(l} (1931) 76 L. Ed. 24S, 251.
~
2 s.c.R. SUPREME OOURT REPORTS
993
a regulation of marriage. The first reason was not
accepted by the Supreme Court on the ground that
the claimed necessity could not justify the otherwise unconstitutional exaction ; and the second
reason was rejected for the reason that it could
hardly be claimed that a mere difference in social
relations so altered the taxable status of one receiving income as to justify a different measure for
the tax. Holmes, J., in his dissenting judgment,
justified his view on the ground that the statute
was the outcome of thousand years of history
indicating that husband and wife were one and
also for the reason that it had a tendency to
prevent tax evasion. Prima facie the majority
view supports the content.ion of learned counsel
for the petitioner, but a deeper scrutiny reveals
fundamental differences between that decision and
the present case. There, there wM 110 question of
any pertnership between husband and wife, and the
income of the wife was adclP<l to that of the husband
with the result that he had
to
pay
not
only
increased
rate
on
his
income
hut
also a portion of the tax otherwise payble by
wife ; in the present case, the impugnerl provisions
do not impose any such general liability but confine
it onlv to a case where the husband takes bis wife
in pa'ftnership.
There is a greater scope for
fraudulent
evasion by
constitnting
fictitious
pm'tnership along with one's wifo allfl minor
ehildrcn than in a ease of separate income of the
spouses derived from diffon:nt sources. That apart,
the pr('sent social and economic poAit~on of womPn
in India as compared with their eompecrs in
America, even as it existed in H131, is so low that
it would be inapprnprinte to apply the decision
1.iade in Americ1i to s, similar case arising in Int.1.ia.
A wife in India, partieuhrly if she be illit.m nfr---
a large majority of them are illiterate-would onlinarily he iu economic matters a tool in the hamlfl
of her husband. Many things a.re done in h0r
1961
Balofii
v.
I ncome·l/Jx
Officer, Sptcitil
Investigation
Circle
Subba Rao J.
1961
Balaji
v.
Income-tax
Offiosr, Special
I nvestigatioo
Circle
Subba Rao J.
994
SUPREME COURT REPORTS
[1962]
name without her knowledge of the same. When
the Legislature of this country, which is assumed to
know the conditions of the people and their requirements, with the awareness of this particular widespread fraudulent device in the matter of evasion
of taxes, made a law to prevent the said fraud, it is
difficult for this Court in the absence of any counterbalancing circumstanceg to hold, on the analogy
drawn from American decisions, that the need for
such a law is not in existence. On the contrary
there is a direct decision of the Madras High Court
in B .. M. Amina Umma v. Income Tax Officer, Kozhikode (1 ) sustaining the said provision on the ground
of reasonable
classification.
Rajagopalan,
J.,
speaking for the division bench, after considering
the relevant decisions on the subject, observed
thus:
"The reasonableness or otherwise of a
classification has to be decided with reference
to all the circumstances of the case including
the social and economic structure prevalent
in the area where the taxing statute is in
operation .......... An attempt to prevent by
legislation an evasion of just tax liability and
the necessary classification to give effect to
that object cannot, in our view, be termed
unreasonable."
With respect we give our ful~ lJ.SSe~t to the ~id
observations. We, therefore, reiect this content10n.
The next attack on the validity of the provisions is based upon Art. 19 (1) (f) and (g) of the
Constitution.
The said constitutional provisions
read:
Art. 19 ( 1) : All citizens shall have the right-
(f) to acquire, hold and dispose of property;
and
(I) (1954) 26 I.T.R. 137, 150.
'
2 S.C.R.
SUPREME COURT REPORTS
(g) to practise any profession, or to carry on
any occupation, trade or business.
It was argued that as the husband is statutorily
made to pay certain amount as tax on the income of
his wife, to that extent, he is deprive6 of his property by the State action and, therefore, his fundamental right under s. 19 (1) (f) is infringed. The
impugned statutory provision, the argument proceeds, is an unreasonable restriction on the said
right, as the husband is compelled to pay tax on
the income of his wife and children who are in law
distinct legal persons.
The
learned
Additional
Solicitor-General
broadly contended that a tax imposed by authority
of law cannot be questioned on the ground that the
law infringes the provisions of Art. 19 of the constitution. We cannot see any justification for this
contention in any of the constitutional provisions.
The relevant provisions of the Constitution read :
Art. 265 : No tax shall be levied or
collected except by authority of law. '
Art. 13 (1) : All laws in force in the
territory of India immediately before the
commencement of this Constitution, in so far
as they are inconsistent with the provisions of
this Part shall, to the extent of such inconsistency, be void.
(3) In this Article, unless the context
otherwise requires,-
( a) 'law' includes any Ordinance, order,
bye-law, rule, regulation, notification, custom
or usage having in the territory of India the
force of law ;
(b) 'law in force' includes laws passed
or made by a Legislature or other competent
authority in the territory of India before the
1961
Balaji
v.
I ncome-taa:
Officer, Special
Invutigation
Circle
Subba llao J.
1961
Balaji
v.
Income-tax
Officer, Special
Investigation
Circle
Subba Bao, J,
996
SUPREME COURT REPORTS
(1962]
commencement of this Constitution and not
previously repealed, notwithstanding that any
such law or any part thereof may not be then
in operation either at all or in particular
areas."
A combined and plain reading of the said provisions
makes it abundantly clear that a law which is inconsistent with any of the provisions of Part III is
void. It cannot be denied that a law providing for
levy and collection of taxes is a law within the
meaning of Part III of the Constitution, and therefore it must stand the test laid down by Art. 13 of
the Constitution. The 'law' in Art. 265 of the
Constitution must be a valid law. A law to be
valid must not only be one passed by the Legislature in exercise of a power. conferred on it, but
must also be one that does not infringe the funda·
mental rights declared by the Constitution. When
a licence fee was imposed by a munieipality under
a bye-law framed in excess of the power conferred
on it by the provisions of the U. P. Municipalities
Act, this Court in Mohammad Yas'in v. The Town
Area Committee, Jalalabad (1 ) held that the enforcement of the said bye-law against a citi_zen constituted an infringement of his right under Art. 19
(l)(g) of the Constitution. Where a Sta,to sought
to impose s!Lles-tax in exercise of a power conferred
under a provision which was nltra vires the State
Legislature, this Court held in Himmatlal Harilal
Mehta v. The State of Madhya Pradesh(') that a
threat by the said State to realise tax from the
asscsse~ without the authority of law by using the
coercive machinery of the impugned Act was a
sufficient infrigement of bis fundamental right under
Art. l!J(l)(g) of the Constitution. The same principle must necessarily apply even in a case where
the law imposing a tax is void as offending the
fundamental rights under tlw Constitution. This
(1)
(1952) S.C.R. 572.
(2) (1954) S.C.R. 1122.
~ ·
I
2 S.C.R.
SUPREME COURT REPORTS
997
Court in Kamllipprl'l'n Kottamthil Kochuni ~ 1lfoopi'.l
Nair v. State of Jlfodr1is ('),after considering the
earlier decisions obserwd thus :
"It is, thcreforo, maHifost that the law
must rnt,isfy two tests before it can be '' valid
la\r, namely, (1) that the apprnpriate legislature has compet<'ncy to make the law ; (2)
that it does not take away or abridge any of
the fundamental rights enumerated in Part III
of the Constitution."
Section 16 (3)(a) of the Act must, therefore, pass
both the tests rmd tf it violates any of the provisions
of Art. 19, to the extent it is· inconsistent with the
said prnvisions, it will be void.
This view is in
consonance witli that expressed by this Court in
Kunnathat Thatlmnni Moopil Nair v. The /itate of
K erala (2). There, the petitioners im11ugned the
constitutionality of the Travancore-Cochin Land
f
Tax Act, XV of 1955, as amended by the
Travancore-Oochin
Land
Tax
(Amendment)
Act, X of 1957, and Sinha, C. J., speaking for
the
Court
held
that the Act was void as
infringing not only Art. 14 of the Constitution
·but also Art. 19 (1) (f) thereof. The learned Chief
~ustice, airer considering the relevant proviRions
of the Act and having regard to the unreasonable
nature oL the restrictions, came to the conclusion
that the provisions of the Act were unconstitutional,
viewed from tlie, angle of the provisions of Art. 19
( 1 )(f) of the Constitution.
'" We'eannot, th.frefore, accept broad contention
of the learned, Additional Solicitor-General that
a tax law. cannot be questioned on the ground that
it infringes Art. 19 of the'Constitutirm.
\
Even. 'so the learned· 1.~dditfonaj f:lolit:iturGeneral
co1itended that
the
prov~io11s
of
(I) (1960) 3 S.C.R. 887, 911.
(~) (1961) 3 S.C.R. 77.
.
1961
Balaji
Income-tax
Officer, Special
Investigation
Circle
Subba Rao J
1961
Balaji
v.
Income-tax
Officer, Special
I nvNJtigation
Circle
Subba Rao J.
9198
SUPREME COURT'R,EPORTS
(1962)
s. 16 (3) (a) (i) and (ii) of the Act constituted only
reasonable restrictions on the exercise of the rights
conferred under Art. 19(l)(f) and (g) of the Constitution, in the interest of the general public.
Learned counsel for the petitioner argued that
the restrictions are not reasonable for the following
reasons: (i) the husband is made to pay tax on the
income which his wife derived from the business,
that is, a tax is levied on one person on the income
of another; (2) such an imposition not only
prevents a husband from taking his wife as a
partnPr in his business but also
prevents
a
wife, who has got a business of her own, from
taking her husband as a partner in the business ;
(3) the husband has to pay a tax at a rate
higher than that he would have to pay if the
income
of
the wife was not added to his
income ; ( 4) the same situation is created inter Be
between a parent and his minor children vis-avis their joint business. Learned, counsel, therefore,
contended that the provisions prevented the honest
pooling of resources of the members of a family so
intimately ('onnected with each other to the detriment of the family prosperity, and that it amounted to an unreasonable restriction on the said fundamental rights. There is some plausibility in this
argument, but if an overall picture of the situation is
taken, the reasonab!Cness of the restrictions will be
apparent. In the State of 1Wadra8 v. V. G. Row (1)
Patanjali Sastri, C. J., lays down the following test
of reasonableness:
"The nature of the right alleged to have
been infringed, the underlying purpose of the
restrictions imposed, the extent and urgency
of the evil sought to be remedied thereby, the
disproportion of the imposition, the prevailin~ conditions at the time, should all enter
into the judicial verdict."
So judged, can it be said that the restrictions imposed
(I) (1952) S.C.R. 597.
\
t
2 S.C.R. SUPREME COURT REPORTS
999
under the impugned provisions are not reasonable? The object sought to be achieved was to prevent the prevalent abuse, namely, evasion of tax:
by an individual doing business under a partnership nominally entered with his wife or minor children. The scope of the provisions is limited only
to a few of the intimate members of a family who
ordinarily are under the protection of the assessee
and are dependants of him. The persons selected by
the provisions, namely, wife and minor ehildren,
cannot also be ordinarily expected to carry on
their business independently with their own funds
when the husband or the father is alive and when
they are under his protection. Doubtless some of the
b-aid partnerships may be genuine and the wife or
minor children may have contributed capital to the
business ; but the provisions do not in any way
affect their rights and even the liability inter se
between the husband and the wife or the minor
children, as the case may be, in respect of the tax
paid. It is true that in computing the total income of
an individual for the purpose of assessment, their
income in their capacity as partners shall be included
in the income of the individual; but the section does
not prevent the husband or the father, as the case
may be, from debiting against them in the partnership accounts that part of the tax referable to the
share or shares of their income. It may be that a
father or a husband may have to pay tax
at a higher rate
than ordinarily he would
have to pay if the addition of the wife's or
children's income to his own brings his total
income to a higher slab. But it may not necessarily be so in a case where the income of the former is not appreciable ; even if it is appreciable, he
can debit a part of the excess payment to his wife
~.nd children. In short, the firm, though registered,
would he treated as a distinct unit of assessmPnt,
with the difference that, unlike in the case of a registered firm, the entire income of the unit is added
to the personal income of the father or the husband
1961
Balaji
v.
Income-tax
Officer, Special
Investigation
Circle
Subba RaoJ.
1961
Balaji
v.
lncome•tax
Officer, Special
Investigation
Circle
Subba Rao J.
1000
SUPREME COURT REPORTS
[1962)
as the case may be.
This mode of taxation may be
a little hard on a husband or a father in the case of
genuine partnership with wife or minor children, but
that is offset, to a large extent, by the beneficient
results that flow therefrom to the public, namely,
the prevention of evasion of income-tax, and also by
the fact that, by and large, the additional payment
of tax made on the income of the wife or the minor
children will ultimately be borne by them in the
final accounting between them. In these circumstances, we cannot say that the provisions of s. 16(3)
of the Act impose an unreasonable restriction
on the fundamental rights of the petitioner under
Art. 19 (0 (f) and (g) of the Constitution.
In the result, the petition fails and is dismissed
with costs.
Petition dismissed.
!
I