P L D 1965 Supreme Court 472 (PLP)

FAZLE‑AKBAR, J.‑This appeal by special leave raises a question as to the interpretation of the word `individual occurring in section 16 (3) (a) (ii) of the Income‑tax Act and it arises under the following circumstances: The assessee Mst. Khatija Begum and two others, namely, Muhammad Idrees and Muhammad Anwar, were partners of a registered firm known as Messrs Shakil Impex, Karachi. Subsequently, Aftab Ahmad and Muhammad Iqbal, two minor sons of Mst. Khatija Begum were admitted to the benefits of partnership in the firm. In computing total income of Mst. Khatija Begum for the assessment year 1953‑54, the Income‑tax Officer included in her total income the shares of the income of her minor sons Aftab Ahmad and Muhammad Iqbal on the ground that the word 'individual' in section 16 (3) (a) (ii) of the Income‑tax Act (hereinafter referred to as 'the Act') included a person of either sex. His order was upheld on appeal both by the Appellate Assistant Commissioner and the Income‑tax Appellate Tribunal. At the instance of the assessee the Tribunal referred to the High Court of West Pakistan at Karachi a question of law arising out of its order, under section 66 (1) of the Act together with a statement of the case. The referred question was: "Whether in the circumstances of the case the assessing authority acted correctly in including the income of the minor sons along with that of the mother under section 16(3) (a) (ii) of the Income‑tax Act, 1922, for the year ending March 1953." The answer to the above question depended on the interpretation of the word 'individual' occurring in the said section 16(3)(a)(ii). The High Court of West Pakistan being of the opinion that the word 'individual' as used in that section applied only to a male answered the question in the negative. It may be mentioned here that in the case of Akbari Begum v. Commissioner of Income‑tax, East Bengal (1959 Tax. (Vol. I) 312), the High Court of East Pakistan answered a similar question in the affirmative. Thus there is conflict in decisions between the High Courts o4B East and West Pakistan. The conclusion of the High Court of East Pakistan is based mainly on the ground that a term occurring more than once in the same Act, must be given the same meaning unless a contrary intention appears from the provisions of the Act. As the learned Judges found no indication of such intention in the Act, they held that section 16 ~3) must have the same connotation as the word 'individual' in section 3 of the Act. The above observations no doubt, find some support from the following passage in Maxwell's Interpretation of Statutes, 10th Edition, page 522: "It is at all events reasonable to presume that the same meaning is implied by the use of the same expression in every part of an Act." The same author observes further on "But the presumption is not of much weight. The same words may be used in different sense in the same statute and even in the same section." The following observations of this Court in the case of Government of West Pakistan v. Wali Muhammad Habib (P L D 1961 S C 215) are also pertinent: "The main purpose of interpretation is to ascertain the mind of the Legislature from the words used by it, and in doing so it is a well‑accepted rule that we must read the words in the context in which they are used, for, the meaning of a word read out of its context may well be totally different and in different context or in different association of words may equally well have a sense which has the effect of limiting or restricting its ordinary or popular sense. The rule of noscitur a sociis is too well‑established to be doubted now. Construction of words with reference to the company in which they are found, is not a method unknown to law. Thus words, which precede or succeed the word to be interpreted, may legitimately be looked at to ascertain its true meaning, for, we are likely to know it better from the associate terms in the company of which the word has been used. No doubt prima facie the word `individual' both in section 3 and section 16(3) of the Act should be held to have the same meaning unless some considerations inherent in the context militates against that view. Section 3 which is a charging section says: "

3. Where any act of Parliament enacts that income‑tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income, of the previous year or the previous years, as the case may be, of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually;" Section 16 (3) is as follows: "(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 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; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration; and (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both." Examining the two provisions in their context it will be seen that the word `individual' has much wider connotation than the words `any individual' in section 16(3). The latter section talks only of such individual capable of having a wife or a minor child It is thus clear that the words `any individual' in section 16(3) have been used in a much restricted sense than the word `individual' h2l section

3. Furthermore, the purpose of the two sections is so' different that it cannot be presumed that the word `individual' is used in section 3 in the same sense which it bears in section 16(3). Now the question is: Whether in its context section 16(3) imposes a further restriction on the word `individual' so as to confine it to a male individual only. This subsection (3) is divided in three parts. The first part talks of "any individual whose income has to be computed for the purpose of assessment"‑this part controls both clauses (a) and (b). Second part, that is, clause (a) says that "so much of the income of a wife or minor child of such individual as arises directly or indirectly" from four specific cases enumerated as (i), (ii), (iii) and (iv) shall be included in that individual's income. The third part, that is, clause (b) lays down the mode of computing a partner's share in the profit and loss of the firm and there the expression used is "by such individual for the benefit of his wife or a minor child or both". From the words `her husband' and `the husband' occurring in sub‑clauses (i) and (iii), respectively, there can be no doubt that they refer only to a male individual. It has however, been contended that in the context in which the word `such individual' is used in sub‑clauses (ii) and (iv) and clause (b) it can be interpreted to include both male and female. The effect of the construction insisted upon would lead to the interpretation of the word `such individual' in the same subsection as meaning two different thins in two different contexts, that is, when it is used in connection with wife it would mean a male and when used in connection with a minor child, it would mean both male and female. If really such was the intention of the Legislature, it could have easily said so. The manner in which the words `any individual' and `such individual' have been used in clauses (a) and (b) and also in the sub‑clauses it will be difficult to say that they are free from ambiguity. Now it is well‑settled that "the words of a statute, when there is doubt about their meaning, are to be understood in the sense in which they best harmonize with the subject of the enactment and the object) which the Legislature had in view." See Maxwell on Interpretation of Statute. The same author also says that: "To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act, to consider according to Lord Coke (i) what was the law before the Act was passed (ii) what was the mischief or defect for which the law had not provided; tiii) what remedy Parliament has appointed; and (iv) the reasons of the remedy." The above has been taken from the well‑known decision in Heydon's case ((15841) 76E R 637). It will therefore, be quite legitimate to examine in this case the legislative history of imposition of this artificial liability to taxation. Before the enactment of subsection (3) of section 16 in 1937 there was no provision for inclusion of the income of a wife or a minor child in the computation of the total income of an individual. In numerous cases the husbands, with a view to evade the higher incidence of taxation used to enter into nominal partnerships with their wives and fathers admitted their minor children to the benefits of the partnership of which they were members. This fact is fully borne out from the following extracts of the Income‑tax Enquiry Report of the year 1936: "(a) Wife's income.‑Our attention has been drawn to the extent to which taxation is avoided by nominal partnerships between husband and wife and minor children. In some parts of the country, avoidance of taxation by this means has attained very serious dimensions. The obvious remedy for this state of affairs so far as husband and wife are concerned is the aggregation for assessment of their incomes, but such a course would involve aggregation in a quite different class of cases, i.e., where the wife's income arises from sources unconnected with the husband . . . . . We recommended, therefore, that the income of a wife should be deemed to be, for Income‑tax purposes the income of her husband, but that where the income of the wife is derived from her personal exertions up to a certain limit, say Rs. 500, should not be so included . . . . . (b) Income of the minor children.‑There is also a growing and serious tendency to avoid taxation by the admission of minor children to the benefits of partnership in the father's business. Moreover, the admission is, as a rule, merely nominal, but being supported by entries in the firm's books, the Income‑tax Officer is rarely in a position to prove that the alleged participation in the benefits of partnership is unreal We suggest that the income of a minor should be deemed to be the income of the father (i) if it arises from the benefits of partnership in a business in which the father is a partner or (ii) if, being the income of a minor other than a married daughter, it is derived from assets transferred directly or indirectly to the minor by his or her father or mother, (iii) if it is derived from assets apportioned to him in the partition of a Hindu Undivided Family." The Government, after duly considering the recommendations enacted section 16 (3). The aims and objects of the amending Act have been stated in these terms: "Reference is made in sections 1 and 4 of Chapter III of the Income‑tax Enquiry Report, 1936, to the practice of avoiding taxation by means of nominal partnerships between husband and wife or parent and minor child or by the nominal transfer of assets to a wife or minor child (or to an association consisting of husband and wife) when there is no substantial separation of the interests of the assessee and the wife or child. These practices are reported to have become very widespread already, with considerable detriment to the revenue, and there is little doubt that if they are not checked there will be progressive deterioration. The proposals in the report regarding the aggregation of the incomes of husband and wife go beyond the immediate necessities of the case and to that extent their adoption would involve the admission of a now principle which the Government of India do not desire to establish in advance of the general public discussion of the report which has been arranged; and the present Bill has been so drafted as to deal only with the abuses to which I have referred." From the above it is clear that by this amending Act the Legislature intended to include the income of a wife or a minor child in the computation of the total income of the assessee husband or assessee father for the purpose of assessment. It therefore, seems really doubtful that the Legislature also intended to include within the connotation of the words `any individual' or `such individual' a female. If it really intended to do so, it did not express its intention with irresistible clearness, It is a well‑established principle that the provisions relating to imposition of tax are to be construed strictly and that if two interpretations are possible the one that favours the tax‑payer must be adopted. We are therefore, unable to give extended meaning attributed to the word `individual'. In our opinion the High Court has rightly held that the words `any individual' or such individual' in section 16 (3) in their context bear rigid and narrow meaning and therefore, cannot be interpreted in their broad and generally accepted sense. It may be further pointed out that adoption of such a narrower and restricted meaning best harmonises with the context and also promotes in the fullest manner the policy and object of the Legislature. We are .therefore, satisfied that the decision reached by the learned Judges of the High Court of West Pakistan was correct and the referred question was rightly answered by them in the negative. We may mention here that in the case of Income‑tax Commissioner of Madhya Pradesh and Bhopal v. Mst. Sodra Devi ((1957)321TR615) the Supreme Court of India has also interpreted the word `individual' in section 16 (3) in a narrow and restricted sense. For the reasons stated above we dismiss this appeal with costs. A. H. Appeal dismissed.