COMMISSIONER OF WEALTH TAX, GUJARAT-III, AHMEDABADversusELLIS BRIDGE GYMKHANA ETC. ETC.

A    COMMISSIONER OF WEALTH TAX, GUJARAT-III, AHMEDABAD
                                           v.
                     ELLIS BRIDGE GYMKHANA ETC. ETC.

                                 OCTOBER 21, 1997

B                [SUHAS C. SEN ANDS. SAGHIR AHMAD, JJ.]


         Wealth Tax Act, 1957 : S.3-Unincorporated Club, an association of
    persons-Whether could be brought to tax as an 'individua/'-Held, No.

c          Section 3 of the Wealth Tax Act, 1957 provided for charging every
    individual, Hindu undivided family and company to tax under that Act. The
    respondent, an unincorporated club, was sought to be assessed as 'individual'       /
    to wealth tax for the assessment years 1970-71to1977-78. Its contention
    that it was not liable to be assessed under that Act at all was rejected by the
D   Wealth Tax Officer. The Appellate Assistant Commissioner took the view that
    the assessee could not be brought to tax under the Act. The Tribunal and the
    High Court ruled in favour of the assessee.

           It was contended in appeal for the Revenue that the expression
    'individual' occurring in section 3 of the Act was wide enough to include within
E   its scope an association of persons like clubs.

          Dismissing the appeal, the Court
                                                                                ,
          HELD : I. An unincorporated club being an association of ,.--'
                                                                         persons  can
    not be brought to tax as an individual under section 3 of the Wealth Tax Act,
F   1957. [635-G]

          2. The rule of construction of a charging section is that before taxing
    any person, it must be shown that he falls within the ambit of the charging
    section by clear words used in the section. No one can be taxed by implication.
    A charging section has to be construed strictly. If a person has not been
G   brought within the ambit of the charging section by clear words he cannot be
    taxed at all. [629-F)

          3. When the Wealth Tax Act was passed in 1957, Indian Income Tax
    Act, 1922 was in force. The scheme and structure of the Wealth Tax Act are
H   very similar to the Act of 1922. There is a great similarity of wording between
                                          626
        COMMR. OF WEALTH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA            627
the various provisions of the Wealth Tax Act and the corresponding provisions A
of the Indian Income Tax Act. In fact, some of the provisions of the Wealth
Tax Act are almost verbatim reproduction of the corresponding provisions of
the Indian Income Tax Act. But in the case of the charging section 3 of the
Wealth Tax Act the phraseology of the charging section 3 of the Indian Income
Tax Act has not been adopted. Unlike section 3 of the Indian Income Tax Act,
section 3 of the Wealth Tax Act does not mention a firm or an association of B
persons or a body of individuals as taxable units of assessment. Just like the
Indian Income Tax Act, 1922, in the Gift Tax Act, 1958, a contemporaneous
statute, and the Indian Income Tax Act, 1961, an association of persons or
body of individual; have been specifically brought in as units of assessment.
It is only under the Wealth Tax Act that the charge is on 'every individual C
Hindu undivided family and a company', and not on an association of persons
or a body of individuals or a firm. It can, therefore, be said that the legislature
deliberately excluded a firm or an association of persons from the charge of
wealth tax, and the word 'individual' in the charging section cannot be stretched
by implication or by ascribing an extended meaning to include entities which D
had been specifically left out of the charge.
                                          [631-D; 633-D-E; 631-A-B; 636-D-E)
      Commissioner of Wealth Tax v. Mu/am Club, 191 ITR 370; Orient Club
v. Commissioner of Wealth Tax, 136 ITR 697 and Orient Club v. Wealth Tax
Officer, 123 ITR 395, referred to.
                                                                                 E
      Wealth Tax Officer Calicut v. C.M Mammed Kayi, 129 ITR 307; Banarsi
Das v. Wealth Tax Officer, 56 ITR 224 (SC) and V. Venugopal Ravi Varma Rajah
v. Union of India, 74 ITR 49 (SC), distinguished.

      Coimbatore Club v. Wealth Tax Officer, 153 ITR 172, overruled.

      4. Section 21AA inserted into the Wealth Tax J\ct by the Finance Act F
1981 to prevent evasion of tax by bringing to tax net wealth of an association
of persons where individual shares of the members of the association in the
income or assets or both of the association on the date of its formation or any
time thereafter were unknown or indeterminate, directly goes against the
contention of the Reyenue. It is only in such an eventuality that an assessment G
can be made of an association of persons, otherwise not. There is no finding
of fact in the instant case that particulars of members of the Club were
unknown of their interest in the assets of the club were indeterminate.
Explanatory notes issued by the Central Board of Direct Taxes on June 29,
1981 clarifying the Finance Bill, 1981 recognised that the charge of wealth
tax was on individuals and Hindu undivided families and not on any other body H
    628                      SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A of individuals or association of.persons. In a normal case, in assessment of
   an individual, his wealth from every source will be added up and computed in
                                                                                       -
   accordance with provisions of the wealth Tax Act to arrive at the net-wealth
   which has to be taxed. So, if an individual has any interest in those bodies or
 · associations will be added up in his wealth. It is only where such addition is
B not possible because the shares of the individual in a body holding property is
   unknown or indeterminate, resort will be taken to section 21AA, and
   association of individuals will be taxed as association of persons. In any case,
   section 21AA was not in force during the relevant assessment years 1970-
   71to1977-78. The respondent Club could not, therefore, be assessed as an
   association of persons in these assessment years. [640-B; 641-C-D]
c         CfVfL APPELLATE JURISDrCTrON: Civil Appeal No. 650of1988.
         From the Judgment and Order dated 18.8.87 of the Gujarat High Court
    in W.T.R. No. 15of1985.
                                        wrTH
D         C.A. Nos. 3210-14/88, 1544/93, 1649/93, 5340-48/93, 5393/94, 948/95, 8347/
    95, 1796-1799/96, SLP (C) Nos. 2490/84, C.A. Nos. 4674/95, 2517/96, 9096/96,
    3532-38/88, SLP (C) Nos. 7246-7250/97 C.A. Nos. 2366-2375/94 SLP (C) Nos.
    16259-16275/94.
                                        wrTH
E         C.A. No. 658193.
                                        WlTH
          C.A. Nos. 7420-22of1997.
          K.N. Shukla, T.A. Ramachandran, Ms. Renu George, B.K. Prasad, P.
F   Parmeswaran, D.S. Mehra, S.N. Terdol, K.J. John, Ms. Manju Mishra, R.A.
    Perumal, S. Sukumaran, S.K. Pasi, Mrs. Janki Ramachandran, Mukul Mudgal,
    (Mrs. M. Karanjawala,) (NP), S.S. Khanduja, Y.P. Dhingra and B.K. Satija for
    the appearing parties.
          The Judgement of the Court was delivered by

G         SEN, J. This is an appeal from an order passed by the High Court of
    Gujarat in which following question of law was answered in the affirmative
    and in favour of the assessee:
           "Whether on the facts and in the circumstances of the case, the
           Appellate Tribunal has been right in law in holding that the assessee
H          is not liable to Wealth Tax under Wealth-tax Act, 1957 for the
         COMMR. OF WEALTH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN, J.]        629

            assessment year in question?"                                                A
          The assessment years involved are 1970-71to1977-78. The assessee is
    a club. It filed its return of wealth being called upon to do so for the aforesaid
    assessment years but contended tiiat it was not liable to be assessed under
    the Wealth Tax Act, 1957 at all. The Wealth Tax Officer rejected the claim of
    the assessee. The Appellate Assistant Commissioner was of the view that the          B
    assessee could not be brought to tax under the Act because of the earlier
    decision of Gujarat High Court in the case of Orient Club v. Wealth Tax
    Officer, 123 ITR 395. The Tribunal dismissed the appeal upholding the order
    of the Appellate Assistant Commissioner. The question of law raised by the
    Revenue was answered by the High Court also in favour of the assessee.               C
          The club was not incorporated under the Companies Act, 1956. The
    case of the Revenue is that the club will have to be assessed as an "Individual"
    under the Wealth Tax Act. Section 3 which is the charging section of the Act
    is as under :
            "3. (!) Subject to the other provisions contained in this Act, there         D
            shall be charged for every assessment year commencing on and from
            the first day of April, 1957 but before the first day of April, 1993, a
            tax (hereinafter referred to as wealth-tax) in respect of the net wealth
            on the corresponding valuation date of every individual, Hindu
<           undivided family and company at the rates or rate specified in Schedule      E
            I.
            (2)      xxx                 xxx                    xxx"
          Three units of assessment have been mentioned in the charging section;
    "individual, Hindu undivided family and company", The contention of the
    Revenue is that "individual" has to be understood broadly so as to include           F
    an association of persons like clubs.

          The rule of construction of a charging section is that before taxing any
    person, it must be shown that he falls within the ambit of the charging section
    by clear words used in the section. No one can be taxed by implication. A
    charging section has to be construed strictly. If a person has not been              G
    brought within the ambit of the charging section by clear words, he cannot
    be taxed at all.
          Unlike Income Tax Act which is also a direct tax, the charging section
    does not speak of a body of individuals or an association of persons or a
    firm. If the legislative intent was to tax the wealth of a body of individuals       H
    630                         SUPREME COURT REPORTS (1997] SUPP. 4 S.C.R.

A or an association of persons or a firm, the Legislature would have said so in
   so many words as was done in the Indian Income Tax Act, 1922 or Income
   Tax Act 1961. Under Section 3 of the Indian Income Tax Act, 1922, the charge
   was on "Individual, Hindu undivided family, company, local authority, firm
   and other association of persons or the partners of a firm or the members of
  the association individually". When the Wealth Tax Act, 1957 was passed, the
B Legislature decided to specify only "individual, Hindu undivided family and
  company" as units of assessment. It will not be right to presume that the
  Legislature was unaware of the wording of the charging provisions of Indian
  Income Tax Act, 1922 when the Wealth Tax Act was enacted. The Legislature
  must be presumed to have known the large number of cases that were heard
C and decided on the scope of the charging section under the Indian Income
  Tax Act and the meaning ascribed to "association of.persons" therein. The
  Legislature, however, decided to exclude "firms, association of persons and
  body of individuals" from the ambit of the charge of Wealth Tax. What has
  been specifically left out by the Legislature cannot be brought back within
  the ambit of the charging section by implication or by ascribing an extended
D meaning to the word "individual" so as to include whatever has been left out.
          It has also to be noted that the charge under the Gift-Tax Act, 1958, a
    contemporaneous statute is on a gift made by a "person". "Person" has been
    defined by Section 2 (xviii) as under :
E          " 'person' includes a Hindu undivided family or a company or an
           association or a body of individuals or persons, whether incorporated
           or not"
          Moreover, in the Income Tax Act, 1961, Section 4 which is the charging
    section imposes a tax on the total income of every person. 'Person' has been
p   defined by Section 2 (31) of the Act as under :
           "(31) 'person' includes-
           (i)    individual,
           (ii)   a Hindu undivided family,
G          (iii) a company,
           (iv) a finn,
           (v) an assoc1at1on of persons or a body of individuals, whether
                incorporated or not,
H          (vi) a local authority, and
     COMMR. OF WEAL TH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN, J.] 631

        (vii) every artificial juridical person, not falling within any of the     A
               preceding sub-clauses."
       It will be seen from the above that just like the Indian Income Tax Act,
 1922, in the Gift Tax Act, 1958 and the Income Tax Act, 1961, an association
of persons or body of individuals have been specifically brought in as units
of assessment. It is only under the Wealth Tax Act, the charge is on "every        B
individual, Hindu undivi~ed family and a company" and not on association
of persons or a body of in'dividuals or a firm. If the language of Section 3 of
the Wealth Tax Act is contrasted with the provisions of other cognate statutes
it will clearly appear that the intention of the Legislature was not to treat an
association of persons or a body of individuals or a firm as an unit of
assessment for the purpose of imposition of Wealth Tax. There is no other          C
explanati.on why these units of assessment which have been specifically made
taxable under the Indian Income Tax Act, 1922, the Gift Tax Act, 1958 and
Income Tax Act, 1961 have been left out of the charging section of the Wealth
Tax Act.

      It is also to be noted that when the Wealth Tax Act was passed in 1957,      D
Indian Income Tax Act, 1922 was in force. The scheme and structure of the
Wealth Tax Act are very similar to the Act of 1922. In fact, some of the
provisions of Wealth Tax Act are almost verbatim reproduction of the
corresponding provisions of the Indian Income Tax Act, 1922.
       The charge of wealth tax imposed by Section 3 is in respect of the net      E
wealth on the corresponding valuation date of every individual, Hindu
undivided family and the Company. Valuation date has been defined by
Section 2( q) to mean the last day of the previous year as defined in Section
3 of the Income-tax Act, if an assessment was to be made under that Act for
that year. Proviso (i) to Section 2(q) lays down that where in the case of an      F
assessee there are different previous years under the Income-tax Act for
different sources of income, the valuation date for the purposes of this Act
shall be the last day of the last of the previous year. This proviso was deleted
by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1.4.1989.
      Section 2(b) defines Appellate Tribunal to mean the Tribunal constituted     G
under Section 252 of the Indian Income-tax Act. Various authorities under the
Act like Chief Commissioner, Commissioner, Additional Commissioner of
Income Tax, Assistant Commissioner of Income Tax have been given the
meanings respectively assigned to them under Section 2 of the Income-tax
Act. Section 16(3) of the Indian Income-tax Act, 1922 lays down that in
computing the total income of any individual for the purpose of assessment,        H
     632                      SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

IA   the income of a wife or minor child of such individual will have to be included
     ifthe wife is member ofa firm of which the husband is a partner or ifa minor
     is admitted to the benefit of the partnership of which the father of the minor
     is a partner. There were also provisions for including in the income of an
     assessee income from assets transferred directly or indirectly to his wife
B    otherwise than for adequate consideration or in connection with an agreement
     to live apart. Lastly, Section 16(3) provides that an income from assets
     transferred by a person for the benefit of his wife or a minor child or both
     otherwise than for adequate consideration will be included in the income of
     the person concerned. Similar provisions have been made in Section 4(1)(a)
     of the Wealth Tax Act.
c            Section 8 of the Wealth Tax Act provides thai the Income Tax authorities
      specified under Section 116 of the Income Tax Act shall be the Wealth Tax
     authorities for the purposes of the Wealth Tax Act and every such authority
      shall exercise the powers and perform the functions of the Wealth Tax authority
      in respect of any individual, Hindu Undivided Family or a Company, and for
D    this purpose his jurisdiction shall be the same as he had under the Income
     Tax Act by virtue of orders or directions issued under Section 120 of that Act
     or under any other provisions of that Act. Section 88 confers power of
     transfer of cases on the Commissioner from one officer to another. This
     provision is almost identical with the provisions of sub-section (7A) of
E    Section 5 of the Income Tax Act. Chapter IV of the Wealth Tax Act deals with
     assessment and the provisions are similar to the corresponding provisions of
     the Income Tax Act. A return of wealth has to be filed by an assessee if his
     net wealth exceeded the maximum amount which is not chargeable to wealth
     tax in the prescribed form and verified in the prescribed manner on or before
     the "due date". Explanation to Section 14 clarifies that "due date" in relation
F    to assessee under this Act shall be the same date as tliat applicable to an
     assessee under the Income Tax Act under the Explanation to sub-section ( 1)
     of Section 139 of the Income Tax Act.

           Just as in the Income Tax Act, 1922 Section 15 of the Wealth Tax Act
G provides that if any person does not file a return within the time prescribed
     by the statute ·or having furnished a return, discovers any omission or wrong
     statement in the return, he may furnish a revised return at any time before the
     expiry of one year from end of the relevant assessment year or before the
     completion of the assessment whichever is earlier. There are provisions for
     provisional assessment under Section l 5C similarly to Section 238 of the
H    Indian Income Tax Act, 1922. Section 16 which deals with assessment is
     COMMR. OF WEAL TH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN, J.] 633

similar to Section 23 of the Income Tax Act. After completion of assessment      A
if the assessing officer has reason to believe that the net wealth chargeable
to tax has escaped assessment, he is empowered to issue a notice under sub-
section ( 1) of Section 17. These provisions are similar to corresponding
provisions of Section 34 of the Income Tax Act of 1922. The penalty provisions
in Section 18 are similar to provisions of Section 28 of the Income Tax Act.     B
Provisions for appeal against an order of assessment of penalty are provided
by Section 23. There are also provisions for further appeal to the Appellate
Tribunal. The Commissioner has been given power to revise orders on his
own motion or on an application made by the assessee under Section 25. All
these provisions are almost identically worded with the corresponding
provisfons of the Income Tax Act, 1922. A reference lies from an order of the    C
Appellate Tribunal to the High Court under Section 27 in respect of any
question of law arising out of the appellate order. From the order passed by
the High Court on reference, an appeal lies to the Supreme Court under
Section 29.

      All these provisions go to show that the Wealth Tax Act, has been          D
drafted on the same lines as the Indian Income Tax Act, 1922. There is great
similarity of wording between the various provisions of Wealth Tax Act and
corresponding provisions of Indian Income Tax Act, 1922. But in the case
of the charging Section 3 of the Wealth Tax Act, the phraseology of the
charging Section 3 oflndian Income Tax Act, 1922 has not been adopted.           E
Unlike Section 3 of the Income Tax Act, Section 3 of the Wealth Tax Act does
not mention a firm or an association of persons or a body individuals as
taxable units of assessment.

      The position has been placed beyond doubt by insertion of Section
21AA in the Wealth Tax Act itself. This amendment was effected by the            F
Finance Act, 1981 with effect from 1.4.1981. It provides for assessment of
association of persons in certain special cases and not otherwise. Section
21AA is:

       "Assessment when ass~ts are ·held by certain association of persons       G
       21AA. (1) Where assets chargeable to tax under this Act are held by
       an association of persons, other than a company or co-operative
       society or society registered under the Societies Registration Act,
       1860 (21of1860) or under any law corresponding to that Act in force
       in any part of India, and the individual shares of the members of the     H
    634                     SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A          said association in the income or assets or both of the said association
           on the date of its formation or at any time thereafter are indeterminate
           or unknown, the wealth-tax shall be levied upon and recovered from
           such association in the like manner and to the same extent as it would
           be leviable upon and recoverable from an individual who is a citizen
           of India and resident in India for the purposes of this Act.
B
           (2) Where any business or profession carried on by an association of
           persons referred to in sub-section (I) has been discontinued or where
           such association of persons is dissolved, the Assessing Officer shall
           make an assessment of the net wealth of the association of persons
           as if no such discontinuance or dissolution had taken place and all
c          the provisions of this Act, including the provisions relating to the
           levy of penalty or any other sum chargeable under any provisions of
           this Act, so far as may be, shall apply to such assessment.

           (3) Without prejudice to the generality of the provisions of sub-
           section (2), if the Assessing Officer or the Deputy Commissioner
D          (Appeals) or the Commissioner (appeals) in the course of any
           proceedings under this Act in respect of any such association of
           persons as is referred to in sub-section (I) is satisfied that the
           association of persons was guilty of any of the acts specified in
           section 18 or section I Sa, he may impose or direct the imposition of
E          a penalty in accordance with the provisions of the said sections.

           (4) Every person who was at the time of such discontinuance or
           dissolution a member of the association of persons, and the legal
           representative of any such person who is deceased, shall be jointly
           and severally liable for the amount of tax, penalty or other sum
F          payable, and all the provisions of this Act, so far as may be, shall
           apply to any such assessment or imposition of penalty or other sum.

           (S) Where such discontinuance or dissolution takes place after any
           proceedings in respect of an assessment year have commenced, the
           proceedings may be continued against the persons referred to in sub-
G          section (4) from the stage at which the proceedings stood at the time
           of such discontinuance or dissolution, and all the provisions of this
           Act shall, so far as may be, apply accordingly."

         It will be seen that assessment as an association of persons can be
    made only when the individual shares of members of the association in the
H   income or assets or both of the association on the date of its formation or
    COMMR. OF WEALTH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN,J.]          635
any time thereafter are indeterminate or unknown. It is only in such an             A
eventuality that an assessment can be made on an association of persons,
otherwise not. Sub-section (2) of Section 2 lAA deals with cases of such
associations as mentioned in sub-section (1). That means only association of
persons in which individual shares of the members were unknown or
indeterminate can be subjected to wealth tax. Sub-section (3) also deals with
association of persons referred to in sub-section (I). Sub-sections (4) and         B
(5) deal with some consequences which will follow the members of an
association of persons spoken of in sub-section (I) in the case of
discontinuance or dissolution.

      It is not the case of the Revenue before us that the members of the club      C
were unknown or that their interest in the assets of the club was indeterminate.
In fact, no argument was advanced on this aspect of the matter in any of the
cases that have come for hearing along with this case. In fact, a list of
members of the club should be readily available. In any event, there is no
finding of fact that particulars of members were unknown or their interest in
the assets of the club were indeterminate.                                          D
       In our view, Section 21AA far from helping the case of the Revenue
directly goes against its contention. An association of persons cannot be
taxed at all under Section 3 of the Act. That is why an amendment was
necessary to be made by the Finance Act, 1981 whereby Section 21AA was
inserted to bring to tax net wealth of an association of persons where individu~I   E
shares of the members of the association were unknown or indeterminate.

       We were referred to a large number of cases. It is riot necessary to deal
with them in detail. It may be noted that the Gujarat High Court in the case
of Orient Club v. Wealth Tax Officer, 123 ITR 395 and the Bombay High Court F
in the case of Orient Club v. Commissioner of Wealth Tax, 136 ITR 697 were
of the view that the charging provision of the Wealth Tax Act had not treated
a firm or an association of persons as a taxable unit. An unincorporated
members' club was a society of persons and did not have any existence apart
from the members of which it was composed. An unincorporated club being
an association of persons could not be brought to tax as an individual under G
the Wealth Tax Act. The Kerala High Court in the case of Commissioner of
Wealth Tax v. Mu/am Club, 191 ITR 370 has taken a similar view.

     A contrary view was taken by the Madras High Court in the case of
Coimbatore Club v. Wealth Tax Officer, 153 ITR 172 where it was held that
the expression "individual" occurring in Section 3 of the Act was wide              H
    636                       SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A enough to include within its scope a plurality of individuals fonning a single
    collective unit even though fonned without any profit motive.

           In our judgment, the Kerala High Court in the case of Commissioner of
     Wealth Tax v. Mu/am Club, (supra), the Bombay High Court in the case of
    Orient Club v. Commissioner of Wealth Tax, (supra) and the Gujarat High
B   Court in the case of Orient Club v. Wealth Tax Officer, (supra) have come
    to a right decision. The judgment of the Madras High Court in the case of
    Coimbatore Club, (supra) to the contrary is erroneous. The Madras High
    Court has overlooked the significance of omission of finns or association of
    persons or a body of individuals from the charging section even though these
C   entities were specifically made taxable under various direct tax enactments
    from 1922 to 1961. Moreover, the Wealth Tax Assessment of an individual will
    involve computation of "net wealth". All the assets belonging to an individual
    will have to be included. If an individual is a partner of a firm or member of
    an Association of persons, the value of his share in these entities will have
    to be included in his individual assessment. We have already examined the
D   scheme of the Wealth Tax Act and also the object behind the insertion of
    Section 2 IAA. All these will go to show, the legislature deliberately excluded
    a finn or an association of persons from the charge of wealth tax and the word
    "individual" in the charging section cannot be stretched to include entities
    which had been deliberately left out of the charge.
E
          Strong reliance was placed on the judgment of this Court in Wealth Tax
    Officer, Calicut v. C.M Mammed Kayi, 129 ITR 307. In that case, the
    question was whether Mapilla Marumkkathayam tarwads of North Malabar -
    Muslim undivided families governed by the Marumakkathayam Act (Madras
    Act 17 of 1939) - fell within the expression "individual" and were assessable
F   to tax under section 3 of the Wealth Tax Act, 1957.

          The contention in that case was about the constitutionality of the
    charging Section of the Wealth Tax Act. The challenge was on two grounds;
    (a) that Parliament was not competent to include an Hindu Undivided Family
G   in the charging Section 3 of the Act in view of Entry 86, List I of the Seventh
    Schedule of the Constitution and (b) that the charge of wealth tax on an
    Hindu Undivided Family under Section 3 of the Act was violative of Article
    14 of the Constitution. Entry 86 in List I of tfie Seventh Schedule of the
    Constitution is "Taxes on the capital value of the assets, exclusive of agricultural
    land, of individuals of companies; taxes on the capital of companies". The
H   High Court rejected the challenge on the first ground and held that Parliament
     COMMR. OF WEALTH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN, J.]          637

was competent to include an Hindu Undivided Family in Section 3 of the Act             A
as constituting a body or group of individuals coming within the term
"individuals" in entry 86. However, the challenge on the ground of Article 14
was upheld. The High Court was of the view that there was discrimination
as between an Hindu Undivided Family and Muslim Mapilla Tarwads which
were also undivided families and, therefore, the charging section so far as it         B
governed undivided families was hit by Article 14. The Department came up
in appeal before this Court and by a judgment dated February 17, 1964, this
Court set aside the judgment and order of the High Court and remanded the
case back to the High Court to consider whether Article 14 applied to the case
or not after giving the parties further opportunity to put forward their cases
supported by facts and figures.                                                        C
       On remand, out of the two contentions initially advanced by the assessee,
the first relating to the constitutionality of the Act in relation of Entry 86, List
I had become academic because the point was dealt with and overruled by
this Court in the case of Banarsi Das v. Wealth Tax Officer, 56 ITR 224 (SC).          D
Therefore, only the second contention regarding validity of the charge imposed
by Section 3 survived. A Special Bench of three Judges ultimately rejected
the challenge and held that Section 3 was not violative of Article 14. But the
three judges, by different reasonings held that non-HUFs like Mapilla Tarwads
fell altogether outside the scope of the charge of Section 3. The Revenue              E
once again came up in appeal to this Court. The Court drew distinction
between canons of construction applicable to entries in the legislative lists
and canons of construction applicable to construction of a charging section
in a taxing statute. It was explained :

        "It cannot be disputed that the canon of construction applicable to            F
        entries in the three Legislative Lists occurring in a Constitution would
        be different from the canon of construction that would apply to terms
        or .expressions used in a taxing statute. The object of an entry in any
        legislative list is to demarcate as wide a legislative field as possible
        by the use of compendious words or expressions while the rule of               G
        construction applicable to a taxing statute must ensure that "the
        subject is not to be taxed unless the language of the statute clearly
        imposes the obligation" [per Lord Simonds in Russel v. Scott, (1948)
        AC 422 (HL)]."

      The Court further held that the point in controversy has to be examined          H
    638                       SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A having regard to the general scheme of the Wealth Tax Act which was to
    assess all persons who had wealth beyond the statutory limit. The presumption
    would be equality of incidence rather than exemption of a few. Secondly, it
    was observed that the term "individual" can be read in plural and as such
    would include a body or group of individuals like a Map ilia Tarwad. Thirdly,
B   there was no warrant for suggesting that the two terms of "individuals" and
    "Hindu Undivided Family" had been used in antithesis with each other.
    Section 3 being the charging provision was merely concerned with specifying
    different assessing units for the purpose of assessment of wealth. There
    could be no dispute that the Legislature was competent to select persons,
                                                                                            I
    properties, transactions and objects for the imposition of a levy and for that
C   purpose classify as many different assessing units as it could reasonably
                                                                                            '
    think necessary and that is how the three assessing units "individual" "Hindu
    Undivided Family" and "Company" (which was later omitted) came to be
    specified in Section 3. The Court concluded :

D           "In our view, the specific mention of an HUF in the section does not
            result in the exclusion of group of individuals who only form a unit
            by reason of their birth like a Map ilia tarwad from the operation of the
            section. It is difficult to accept the argument that if the term "individual"
            was intended to include joint families or undivided families it was
            redundant to specify HUFs."
E
           The Court thereafter pointed out that this conclusion accorded with
    legislative history of the taxing statutes in the country. Mapilla Tarwads have
    been consistently treated and taxed in the status of "individuals" under
    various taxing statutes. Reference was made to the Expenditure Tax Act, 1957
F   under which a similar question was considered by this Court in the case of
    V. Venugopala Ravi Varma Rajah v. Union of India, 74 ITR 49 (SC). In that
    case, the question was whether a Mapilla Tarwad in North Malabar had to
    be treated as Hindu undivided family for the purpose of levy of expenditure
    tax. Expenditure tax was levied in respect of "expenditure incurred by any
G   individual or Hindu undivided family in the previous year" (Section 3 of the
    Expenditure Tax Act). It was held by this Court thai Mapilla Tarwad could not
    be assessed to tax in the status of Hindu undivided family. However, it was
    liable to pay tax as an individual. It was pointed oui :

           "Under the taxing Acts the scheme of treating Hindu undivided family
H          as a distinct taxable entity has been adopted for a long time, e.g., the
     COMMR. OF WEALTH TAX, GUJARAT•. ELLIS BRIDGE GYMKHANA [SEN, J.) 639

        Indian Income-tax Act, 1869 (IX of 1869), the Indian Income-tax Act,       A
         1870 (IX of 1870), the Indian Income-tax Act, 1871 (XII of 1871 ), Act
        No. VIII of 1872, Act No. II of 1886, Act No. VII of 1912, Act No. XI
        \)f 1922, Act No. 43 of 1961, have treated a Hindu undivided family
        as a distinct, taxable entity. Similarly, under the Wealth-tax Act, 1957
        (27of1957), and the Gift-tax Act, 1958 (18of1958), the Hindil undivided    B
        family is made a unit of taxation. Under the Business Profits Tax Act,
        1947 (21of1947), and the Excess Profits Tax Act, 1940, also the Hindu
        undivided family was made a unit of taxation. For the purposes of
        these Acts Mapilla tarwads governed by the Marumakkathayam law
        have been regarded as individuals."
                                                                                   c
                                                          (Emphasis supplied)

      On the basis of the reasoning given in the case of Venugopala (supra),
this Court had no difficulty in holding that having regard to the legislative
history of revenue laws, Mapilla Tarwad had to be assessed to tax as an            D
"individual".

     The Court laid special emphasis on the aforesaid passage in the
judgment of Venugopala 's Case and reiterated that for the purpose of various
tax laws set out in that passage "Mapilla tarwads governed by the
Marumakkathayam law have been regarded as individuals".                            E

       This judgment took note of the fact that long before the Wealth Tax Act
was passed, Mapilla Tarwad families had been treated as distinct taxable
entities and had been taxed as individuals under various tax laws for a very
long time. Therefore, "individual" in Section 3 of the Wealth Tax Act must be      F
given the same meaning as was given in various other tax laws so as to
include a Mapilla Tarwad family.

      This judgment really goes against the contention made on behalf of the
Revenue. The Court first laid down that a charging section of a taxing statute
has to be strictly construed. The Court found that the charging section of         G
various taxing statutes had imposed tax on Hindu Undivided Families as well
as on "individuals". It has been held under various fiscal statutes that Mapilia
Tarwads cannot be taxed as a Hindu undivided family but will have to be
taxed as an "individual''. If "individual" is understood under the Wealth Tax
Act, in the same sense in which it has been understood in various fiscal           H
    640                    SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A statutes, then "individual" under Section 3 of the Wealth Tax Act will include
    a Mapilla Tarwad. But in the various tax Acts mentioned in that judgment
    "individual" has not been interpreted to include a firm or an association of
    persons.

          That the charging section of the Wealth Tax Act does not impose a
B
    charge on a firm or association of persons has been made clear by explanatory
    notes on the provisions relating to direct taxes issued by the Central Board
    of Direct Taxes on June 29, 1981 clarifying the Finance Bill, 1981. The idea
    behind introduction of the new Section 21AA was explained in the following
    words:
c
           "21.1. Under the Wealth-tax Act, 1957 individuals and Hindu undivided
           families are taxable entities but an association of persons is not
           charged to wealth-tax on its net wealth. Where an individual or a
           Hindu undivided family is a member of an association of persons, the
D          value of the interest of such member in the association of persons is
           determined in accordance with the provisions of the rules and is
           includible in the net wealth of the member.

           21.:i. Instances had come to the notice of the Government where
           certain assessees had resorted to the creation of a large number of
E          associations of persons without specifically defining the shares of the
           members therein with a view to avoiding proper tax liability. Under the
           existing provisions, only the value of the interest of the member in the
           association which is ascertainable is includible in his net wealth.
           A'ccordingly, to the extent the value of the interest of the member in
F          the association cannot be ascertained or is unknown, no wealth-tax
           is payable by such member in respect thereof.

           21.3. In order to counter such attempts at tax avoidance through the
           medium of multiple associations of persons without defining the shares
           of the members, the Finance Act has inserted a new Section 21AA in
G
           the wealth-tax Act to provide for assessment in the case of
           associations of persons which do not define the shares of the members
           in the assets thereof. Sub-section (I) provides that where assets
           chargeable to wealth-tax are held by an association of persons (other
           than a company or a co-operative society) and the individual shares
H          of the members of the said association is income or the assets of the
     COMMR. OF WEALTH TAX, GUJARAT v. ELLIS BRIDGE GYMKHANA [SEN, J.] 641

        association on the date of its fofll}ation or at any time thereafter, are   A
        indeterminate or unknown, wealth-tax will be levied upon and recovered
        from such association in the like manner and to the same extent as it
        is leviable upon and recoverable from an individual who is a citizen
        of India and is resident in India at the rates specified in Part I of
        Schedule I or at the rate of 3 per cent, whichever course is more           B
        beneficial to the revenue."

      It will appear from this notification that the Central Board of Direct
Taxes clearly recognised that the charge of wealth tax was on individuals and
Hindu undivided families and not on any other body of individuals or
association of persons. Section 21 AA has been introduced to prevent evasion        C
of tax. In a normal case, in assessment of an individual, his wealth from every
source will be added up and computed in accordance with provisions of the
Wealth Tax Act to arrive at the net-wealth which has to be taxed. So, if an
individual has any interest in a firm or any other non-corporate body, then
his interest in those bodies or associations will be added up in his wealth,        D
It is only where such addition is not possible because the shares of the
individual in a body holding property is unknown or indeterminate, resort will
be taken to Section 21 AA and association of individuals will be taxed as
association of persons.

       In the instant case, we are concerned with assessment years 1970-71 to       E
1977-78. Section 21AA was not in force during the relevant assessment
period. There was no way that a club could be assessed as an association
of persons in these assessment years. It is not even the case of the Revenue
that individual member's interest in the club was indeterminate or unknown.
                                                                                    F
       In view of the aforesaid, the appeal must fail. The question referred by
the tribunal was correctly answered by the High Court in the affirmative and
in favour of the assessee. The appeal is dismissed. There will be no order as
to costs.

C.A. Nos. 3210-14/88, 1544/93, 1649/93, 5340-48/93,5393/94, 948/95, 8347/95,        G
1796-1799/96, SLP (C) No. 2490/84, C.A.. Nos. 2517/96, 9096/96, SLP (C) Nos.
7246-7250/97, C.A. Nos. 2366-2375/94, SLP (C) Nos. 16259-16275/94 with C.A.
No. 658/93.

      In view of our decision in C.A. No. 650of1988, the above appeals and          H
    642                        SUPREME COURT REPORTS (1997) SUPP. 4 S.C.R.

A Special Leave Petitions are also dismissed with no order as to costs.
          C.A. Nos. 4674/95, C.A. Nos. 3532-38/1988 & C.A. Nos. 7420-22of1997
    arising out ofS.L.P. Nos. 4658-60/1990.

             Leave granted.
B
             The appeals are allowed.

    P.S.S.                              Appeals and Petitions dismissed/allowed.