Commissioner of Income Tax vs Mahari and Sons

B.P. Saraf, J.—By this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') made at the instance of the Commissioner, the Tribunal, Gauhati Bench, has referred the following question of law to this Court for opinion: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the income earned by a Khasi family as a unit would be entitled to exemption u/s 10(26) of the income tax Act, 1961, as in the case of the income of an individual Khasi?

The assessee is a Khasi family. The relevant assessment year is 1980-81. The income of the assessee during the relevant previous year was Rs. 1,02.230, i.e., far in excess of the taxable limit. The assessee did not submit any return of income voluntarily u/s 139(1) of the Act. It did not do so even in compliance with a notice u/s 139(2). The assessee, however, appeared before the ITO. through its authorized representative, in response to a notice u/s 142(1) of the Act for production of books of account and documents and submitted that the assessee family was not liable to be taxed under the Act as its total income was exempt by virtue of section 10(26) of the Act. The claim of the assessee was rejected by the ITO on the ground that the exemption was available only to the individual members of the Scheduled Tribes and not to the family comprising such members. The ITO treated the assessee family as a ''body of individuals'' end assessed it u/s 144 of the Act on a total income of Rs. 1,02,230. The assessee preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) upheld the order of the ITO so far as it related to the assessee being treated as a BOI, but reversed the same so far as it related to rejection of the claim of the assessee for exemption u/s 10(26) of the Act and held that the income of the assessee family was exempt from income tax u/s 10(26). The order of the Commissioner (Appeals) was upheld by the Tribunal. Aggrieved by the order of the Tribunal, the Commissioner filed an application before the Tribunal u/s 256(1) and the Tribunal, on being satisfied that a question of law did arise out of its order, has referred the aforesaid question of law to us for opinion. 2. Section 10 deals with incomes which are not to be included in the total income of a person for the purpose of tax under the Act. Clause (26) thereof, as substituted by the North-Eastern Areas (Reorganisation) (Adaptation of Laws on Union Subjects) Order, 1974, with effect from 21-1-1972, reads as follows:

Incomes not included in total income.-- In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included -

(1) to (25) ****

(26) in the case of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the States of Nagaland, Manipur and Tripura or in the Union Territories of Arunachal Pradesh and Mizoram or in the areas covered by Notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 [as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (18 of 1971)] any income which accrues or arises to him-

(a) from any source in the areas, States or Union Territories aforesaid, or,

(b) by way of dividend or interest on securities;

From a bare reading of this section, it is clear that the following conditions must exist in order to entitle a person to the exemption:

(i) He should be a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution;

(ii) He should be residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution; or the State or Union Territories mentioned in this provision;

(iii) The income in respect of which exemption is claimed must be an income which accrues or arises to him -

(a) from any source in the area, State or Union Territories mentioned in the provision, or

(b) by way of dividend or interest on securities." - Income Tax Officer, Shillong and Others Vs. R. Takin Roy Rymbai and Others, .

In the instant case, there is no controversy about the existence of the last two conditions. There is also no controversy that Khasis are members of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution. It is also not in dispute that had the income in question in the instant case accrued to a single member of the Khasi Tribe, it would have been exempt u/s 10(26). The only controversy is whether the income in the instant case having accrued not to an individual Khasi but to a Khasi family, whether this exemption will be available. In other words, whether the benefit of exemption available to a member of Khasi Tribe will be available even if the income is earned by him not as an individual but as a group of individuals comprising the members of his family. There is no dispute that all the members of the family are Khasis.

We have carefully applied our mind to the controversy. The word ''family'' is a popular expression. It should be given a normal meaning and should not be construed technically unless, it is so intended by the statute. Most commonly, the word ''family'' refers to a group of persons consisting of parents and children; father, mother and their children; immediate kindred. It also means a collective body of persons who live in one house and under one head or management; a group of blood relatives; all the relations who descend from a common ancestor, or who spring from a common root; a group of kindred persons, husband and wife and their children - see Black''s Law Dictionary. So construed, a Khasi family would mean a group of Khasis who are blood relatives or who spring from a common root. Viewed thus, it is difficult to say that the benefit of exemption from income tax given u/s 10(26) to a member of a Khasi Tribe will cease to be available if such income accrues not to an individual member, but collectively to a number of such members known as family. It must be remembered that section 10(26) is a beneficial provision intended to provide protection to the members of the Scheduled Tribes from the burden of income tax. The benefit is confined to tribal people residing in specified areas and that too is available only in respect of income accruing or arising to them from any source in such areas. Thus, whatever limitation the Legislature wanted to put, it has specifically incorporated in the clause itself. No more condition or restriction can be added, nor can such beneficial provision be given too narrow a meaning which may result in disentitling the members of the Khasi Tribe from the benefit conferred by this clause.

In the light of the foregoing discussion, we are of the clear opinion that the benefit of exemption u/s 10(26) will be available even in cases where the income accrues not to an individual member of Khasi Tribe, but to a family comprising such members. Accordingly, we answer the question referred to us in the affirmative and in favour of the assessee. In view of the facts and circumstances of the case, we make no order as to costs.

D.N. Baruah, J.

I agree.