M.S.M.M. Meyyappa Chettiar (Died) Karaikudi and Another vs The Income Tax Officer, Karaikudi

Jagadisan, J.

(1) These are writ petitions under Art. 226 of the Constitution by one M. S. M. M. Meyyappa Chettiar of Karaikudi, in which S. 3 of the Indian

Income Tax Act, the charging section is challenged as being unconstitutional. It is said to offend the equality clause of the Constitution. Though the

petitioner is the same in all the writ petitions and though the question raised is also the same in each, several petitions have been filed calling in

question the validity of the assessment to tax in respect of each of the assessment years 1952-53, 1953-54, 1954-55, 1955-56 and 1956-57. Mr.

M.K. Nambiar, learned counsel for the petitioner, did not choose to address arguments to strike down the entire section but confined his attack

only to that portion of Section 3, which seeks to assess an association of persons or the members of such an association individually.

(2) We shall briefly refer to the facts leading up to these petitions. The petitioner was treated as the ""principal officer"" of the association of persons

described as Messrs. M. M. Ipoh, and the Income Tax officer, Karaikudi, assessed him in such capacity. There was a Hindu undivided family with

the name and Vilasam M. S. M. M. consisting of the father Meyyappa, and his two minor sons, Chockalinga and Meyyappa. The family carried

on business in money-lending, purchase and sale of rubber gardens in the Malay States, Burma and India. Besides the exclusive business carried

on by the family, it was also a partner in another business. A partition was effected among the members of the family by a deed dated 5-4-1940

with effect from 22-2-1940. The sons wee minors on that date and were represented by their mother as guardian. Two of the business owned by

the family referred to as the Karaikudi and the Rangoon business were allotted to the share of the father Mayyappa. In addition the father also

took three rubber estates and three house properties.

The other businesses were divided equally among the shares, the father and his two minor sons. Even after the alleged partition, the father

continued to be in management of all the businesses and the properties. In respect of the three rubber estates and the house properties which the

father took in the partition, separate books of account were opened under the Vilasam ''M. M.''. In 1941, another son was born to Meyyappa and

he was named Chettiappa. The father and this after-born minor son constituted a Hindu undivided family, in respect of the properties allotted to

Meyyappa at the partition. This state of affairs continued till 1949, when one of the sons of Meyyappa, Chockalinga attained age. On 30-12-

1949, there was a partnership between the father and the sons, the father and the adult son becoming partners, and the minor sons being admitted

to the benefits of the partnership. This related to the business carried on under the vilasam ''M.S.M.M.'' at Ipoh. In this partnership, Meyyappa

represented the Hindu undivided family consisting of himself and his minor son, Chettiappa.

Then followed a partition between Meyyappa and Chettiappa on 13-4-1950. Chettiappa was also admitted tot he benefits of the partnership

already referred to and became entitled to a half of the share of the father. The deed of partnership was executed in May, 1953, but it was

accepted by the Department and the partition recognised as effective from 13-4-1950. In 1951, Chockalinga raised dispute protesting against the

exclusive allotment of the rubber estates and the house properties to the father at the partition in 1940. he put forward a claim that himself and his

brother, Meyyappa, were entitled to a half share in those properties. The father yielded, and a half share in those items of properties was given to

the M.S.M.M. firm of which, as stated already, all of them were partners.

In this state of affairs, the Income Tax Officer, Karaikudi, issued notices to Meyyappa under S. 34 of the Act, in respect of the assessment ears

1951-52, 1952-53 and 1953-54 proposing to assess him in his capacity as the principal officer of an ""Association of Persons"". For the assessment

years 1954-55, 1955-56 and 11856-57, the Officer issued notices under S. 22(2), again treating Meyyappa as a principal officer. Meyyappa

denied that there was any Association of Persons, but the Officer overruled his objections and held that in 1951-52 Meyyappa and his minor son,

Chettiappa, were members of an association of persons, and that, for the remaining assessment years, these two persons and the firm of M. S. M.

M. were the members of such an Association. Assessments were made accordingly. There were appeals to he Appellate Assistant Commissioner,

in which Meyyappa raised the same objections. The appeals failed, but the Appellate Authority, however, directed hat the rental income from

properties should be assessed in the hands of the several owners instead of an assessment of Meyyappa as the principal officer. Meyyappa went

up by way of further appeals to the Appellate Tribunal, but was again unsuccessful. proceedings under S. 66(1) of the Income Tax Act resulted in

the following question being referred to this Court:

Whether the assessments on the Association of persons'' for the assessment years 1951-52 to 1956-57 are valid?

That formed the subject-matter of the reference in M. M. Ipoh v. Commr. of Income Tax, T. C. No. 201 of 1960 (Reference No. 92 of 1960)

(Mad). It was contended on behalf of Meyyappa in this Court that the assessment in respect of the year 19511-52 was improperly made on him,

as representing an Association of persons, that there was no evidence to establish the existence of such an association, that the can be no

assessment to which a minor, though has no contracting capacity, could be a member, and that, in respect of the years subsequent to 1951-52,

there was an additional disability to assess, as the can be no association of which a firm can be a member. It was further contended that, in

assessing Meyyappa as the principal officer of the Association of Persons, the Department failed to follow the procedure contemplated under the

Act. A Division Bench of this Court, to which one of us was a party, held that the assessment of the Association of persons for the assessment

year 1951-52 was not lawfully made, but that the assessments for the subsequent years in the status of ''Association of Persons'' were valid.

(3) It is alleged in the affidavit in support of these petitions that the petitioner was assessed to tax for the assessment year 1952-53 to 1956-57 in a

sum of Rs. 19-1/2 lakhs, that during the period when these assessments were the subject-matter of appeals before the appellate authorities and

reference to this Court, the petitioner has filed writ petitions, which, however, were dismissed, that writ appeals were filed, and that, during the

pendency of these proceedings, conditional orders of stay were granted by this Court, which resulted in payment of Rs. 5 lakhs towards the

demand on he association. Apparently, the prior writ proceedings were taken with view to stay the hands of the Department, in the matter of

collection with the quantum of assessments made upon the petitioner, nor with the further question as regards the payments alleged to have been

made by him towards the demands from the Department. It is clear that, after the termination of the reference in this Court, the Department has

been making strenuous attempts to collect the tax from the petitioner, but to no useful purpose. When the petitioner found that he had practically

exhausted all remedies to escape payment of tax due, he turned his attention to he constitutional safeguards respecting fundamental rights of the

citizens. In these petitions, the prayer is for the issue of a writ of Prohibition, or such other writ or direction as this Court may think fit and

appropriate in the circumstances, to restrain the Income Tax Office, Karaikudi, from enforcing the collection of the tax in respect of the years

1952-53 to 1956-57. The original petitioner, Meyyappa is now dead and his son Chettiappan has been impleaded as his legal representative.

(4) The single question that arises is, whether S. 3 of he Indian Income Tax Act, providing for taxation of ''Association of Persons'' as an empty or

in the alternative, of the members of that Association offends Art. 14 of the Constitution.

(5) Before dealing with this questions, we should refer to an argument raised by the learned Advocate General appearing for the Department,

which is almost in the nature of a preliminary objection regarding the maintainability of these petitions. In short, the contentions that this Court had

upheld the validity of the assessments for the years 1952-53 to 1956-57 in T. C. No. 201 of 1960 (Mad) and that therefore, the petitioner cannot

reagitate the same question a different form or on different grounds. The simple question is, whether the unsuccessful challenge of the validity of the

assessments, in the earlier reference before us operates as a bar to the present writ proceedings. What was decided on a prior occasion cannot of

course be impugned now, because that decision has become final between the parties. It, however, appears that an appeal is pending from that

decision in the Supreme Court, But till it is set aside, we can take it to be a final decision between the parties. It cannot be defeated either by direct

challenge or by disguised attack. It would be vexatious to seek adjudication of the same point for a second time. This rule is strict, and any attempt

to violate it cannot succeed, however, insidious or veiled it may be.

Mr. M. K. Nambiar, learned counsel for the petitioner, does not demur to this proposition of law. But, what the contends is that the constitutional

validity of the charging section was not decided, wither expressly or by necessary implication, in the earlier proceedings, that a citizen can complain

of the violation of fundamental rights at nay stage, so long as there is no pronouncement against him on the point raised, and that the rule of res

judicata, actual or constructive, cannot possibly be invoked on the facts and circumstances of this case. That the judgment this Court on the former

occasion did not deal with the constitutional question is plain and manifest. We must, however, refer to the following passage in that judgment,

which shows that the petitioner very nearly attacked S. 3, but fell far short of the contention now raised. That passage reads:

It was next argued that S. 3 of the Act gives an option to the assessing authority to assess either the association of persons or its members

individually and this option should have been exercised in favour of he assess, that is to say, in a manner so far as to impose the lighter burden. It is

no doubt true that if the members of the association had to be assessed individually, the incidence of tax would have been less. Reliance was

placed on J.C. Thakkar Vs. Commissioner of Income Tax, Central, Bombay, where Chagla, C. J. observed. Whether or not the principle of the

above decision would call for implementation in the present case does not however appear to arise. This contention was not taken before any of

the officers below or even before the Tribunal, That being the case, he argument outlined seeks to pose a question which does not arise form the

order of the Tribunal. We therefore decline to deal with it.

What then is the effect of the prior decision, which upheld the validity of the assessment on the petitioner in respect of the years 1952-53 to 1956-

57 on him on his capacity as the principal officer of M.M. Ipoh? We have already pointed out that the constitutional validity did not arise for

decision at that stage. This Court then exercised its powers under S. 66 of the Indian Income Tax Act. It is needless to point out that the

jurisdiction under the provision is limited to answering the questions referred. Only the question that arises out of the order of the Tribunal can

come within the scope of S. 66. The assess cannot, of course, raise the question, before the department of the Tribunal, of the vires of any of the

provisions of the Indian Income Tax Act, either on the ground that the Legislature was not competent to enact the measure or on the ground that it

offended the fundamental rights guaranteed under the Constitution. The reason is simple, because neither the Department nor the Tribunal can give

relief to the assessee holding that the impugned provision is in any way bad in-law. If such a contention were to be raised, it has necessarily to be

ignored by the Department and the Tribunal, though sometimes the Tribunal does refer to the question, if raised, and gives the only answer which it

can, namely, that that is not a matter within its competence to decide.

Even if the Tribunal''s order makes preference to a constitutional question raised before it, it cannot be said that the question arises out of the order

of the Tribunal. It is true that a point raised but not considered by the Tribunal would be one which can be said to arise out of its order. But that

would be a case where the Tribunal would have power to decide the question, but for reasons given, it declines to decide it, either because it is

unnecessary, or in its view, it does not call for a decision. In a case where the Tribunal is plainly without jurisdiction to decide the question, we

cannot say that the refusal by the Tribunal not to decide it, which is quite legitimate and proper, would-be a question which can be said to arise out

of its decision, so as to justify a reference under S. 66 of the Act. We wish to make it very clear that it is not the province of the Department or

even the statutory Tribunal, which is really the creation of the statute, to entertain any objection to a piece of legislation as being ultra vires or

unconstitutional, and that, it would be beyond the jurisdiction of this Court, functioning under S. 66 of the Act, which, as stated already, is narrow

in is scope and reach, to consider and determine a question not properly within its sphere. The High Court, in a reference under the Indian Income

Tax Act, does not sit as an ordinary court of appeal in the matter of assessment: Newton Chikli Collieries Ltd. Vs. Commissioner of Income Tax,

Madhya Pradesh and Bhopal, . The jurisdiction of the High Court in a reference is purely advisory: PETLAD TURKEY RED DYE WORKS CO.

LTD. Vs. COMMISSIONER OF Income Tax, BOMBAY NORTH., .

(6) The learned Advocate-General cited a decision of the judicial Committee in Raleigh Investment Co., Ltd. v. Governor-General in Council, 74

Ind App 50: AIR 1947 PC 78 and drew our attention to certain observations in it to show that an assessment purporting to be under the Act is

inviolable and cannot be collaterally attacked in any independent proceeding dehors the machinery under the Act. The question that came up for

consideration in that case was as regards the scope of S. 67 of the Indian Income Tax Act. A Joint Stock company was incorporated in the Isle of

Man and had its main office in England. It held shares in nine companies carrying on business in British India. All the dividends received by the

Company from the nine companies were declared, paid and received in England; no part of the was ever remitted to British India. The company

was assessed in respect of Income Tax and super-tax for the assessment year 1939-40 as a non-resident on an income which included the

dividends received form the nine companies.

The tax was paid under protest, and a suit was instituted by the company in the High Court of Calcutta in its ordinary original civil jurisdiction,

praying for a declaration that, in so far as explanation 3 and the other provisions of S. 4 of the Indian Income Tax Act, 1922, as amended is 1939,

purported to authorise the assessment and charging to tax of a non-resident in respect of dividends declared or paid outside British India, but not

brought into British India, those provisions were ultra vires the legislative powers of the Federal legislature, and that the assessment was illegal and

wrongful. An injunction restraining the making of future assessments in respect of such dividends and relief by way of repayment of the tax paid

were also claimed. Objections was taken on behalf of the Department to the maintainability of the suit. Section 67 of the Act was relied upon. That

reads:

No suit shall be brought in any Civil Court to set aside or modify any assessment made under this Act, and no prosecution, suit or other

proceeding shall lie against any officer of the Government for anything in good faith done or intended to be done under this Act.

The Judicial Committee held that, while in form the relief claimed did not profess to modify or set aside the assessment, in substance the suit was

directed exclusively to a modification of the assessment, and that therefore the suit was barred under that provision. The main if not the only ground

on which the Board held the suit was barred was that the Act provided a special machinery for the assesses to object to improper and illegal

assessments, that even a question relating to he vires of the provisions of the Act can properly be agitated in the proceedings under such special

machinery, and necessarily therefore the assessment once made and completed cannot be called in question, and hat S. 67 was only enacted ex

abundant cautela, as even but for such a provision, the suit would be barred. The following observations make this position clear:

In construing the section (section 67) it is pertinent, in their Lordships'' opinion, to ascertain whether the Act contains machinery which enables as

assess effectively to raise in the courts the question whether a particular provision of the Income Tax Act bearing on the assessment mad is or is

not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an

alternative to inquire into the same subject-matter.............

Effective an appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is in that setting

that S. 67 has to be construed....... The circumstance that the assessing officer has taken into account an ultra vires provision of the Act is in this

view immaterial in determining whether the assessment is ""made under this Act."" The phrase describes the provenance of the assessment; it does

not relate to its accuracy in point of law. The use of the machinery provided by the Act, nor the result of that use, is the test.

(7) It is now a well-accepted rule of law that where rights are created under a statute, and the statute itself prescribes or erects a special machinery

to adjudicate upon such rights, the jurisdiction of the normal forum of the land is taken away by necessary implication. Their Lordships of the

Judicial Committee had apparently this principle in mind, when they laid emphasis on the fact that questions relating to assessment, whatever be

their nature and character, could be solved with the help and assistance of the hierarchy of tribunals constituted under the Act. We must confess,

with great respect to the judicial Committee, our difficulty in appreciating this point of view, as regards cases where the assessee impugns, as ultra

vires and unconstitutional, the very Act, which the assessing authorities are compelled to administer.

(8) The authority of the Raleigh Investment Co''s case, 74 Ind App 50: AIR 1947 PC 78 however, seems to be shaken and whittled down by the

decision of the Supreme Court in The State of Tripura Vs. The Province of East Bengal, That case had to construe not S. 67 of the Indian Income

Tax Act, but an analogous provision, S. 65 of the Bengal Agricultural Income Tax Act, 1944. That section bared suits in civil courts to set aside or

modify any assessment made under that Act. Actually, the reliefs claimed in the suit, the competency of which was in question in that case, were as

follows. (1) For a declaration that the Bengal Agricultural Income Tax Act, 1944, so far as it imposes a liability to pay agricultural Income Tax on

the plaintiff, is ultra vires and void and that the plaintiff is not bound by the same. (2) For a declaration that in any case the notice served by the

Agricultural Income Tax Officer, Dacca Range, above referred to, is void and of no effect and that no assessment can be made on the basis on

that notice; and (3) For a perpetual injunction to restrain the defendants form taking any steps to assess the plaintiff to agricultural Income Tax.

The Supreme Court held that the suit was not barred. Patanjali Sastri, J., after referring to the passage cited above in the Raleigh Investment Co.''s

case, 74 Ind App 50: AIR 1947 PC 78 observed that the suit was not one to set aside or modify the assessment, as no assessment had been

made, that the gist of the wrongful and complained of was the alleged harassment and trouble caused to the assessee by commencing against him

on illegal and unauthorised assessment, and that therefore the suit was outside the mischief of the barring provision. It is true that no dissent is

expressed by the Supreme Court form the principle laid down in Raleigh Investment Co.''s case, 74 Ind App 50: AIR 1947 PC 78 But the

distinction pointed out by the Supreme Court between an intended illegal assessment and such an illegal assessment having become a fait accompli

is sufficiently destructive of the view point adopted by the Board.

(9) A recent decision of the Supreme Court in Firm and Illuri Subbayya Chetty and Sons Vs. The State of Andhra Pradesh, , Firm of Illuri

Subbayya Chetty v. State of Andhra Pradesh, would seem to indicate that their Lordships are not inclined to accept as sound the Raleigh

Investment Co.''s case, 74 Ind App 50: AIR 1947 PC 78. That was a case which considered the scope of Section 18-A of the Madras General

Sales Tax Act, 1939, and incidentally the Raleigh''s case 74 Ind App 50: AIR 1947 PC 78 was referred to and dealt with by His Lordship

Gajendragadkar, J. The following observation of His Lordship really gives an inkling of his view as regards Raleigh''s case, 74 Ind App 50: AIR

1947 PC 78:

It is true that the judgment shows that the Privy Council took the view that even the constitutional validity of the taxing provision can be challenged

by adopting the procedure prescribed by the Income Tax Act; and this assumption presumably proceeded on the basis that if an assessee wants to

challenge the vires of the taxing provision on which an assessment is purported to be made against him, it would be open to him to raise that point

before the High Court u/s 66(1) of the Act. It is not necessary for us to consider whether this assumption is well founded or not.

(10) In the present case, we can steer clear of the principle laid down in Raleigh''s case, 74 Ind App 50: AIR 1947 PC 78 even if it were to be

taken to have laid down the law correctly on the subject as we are not now dealing with the maintainability of a suit as contemplated u/s 67 of the

Act. These are proceedings under Art. 226 of the Constitution, and it cannot be contended that Section 67 of the Act would deprive this Court of

is powers to issue writs. Such a power has been vested with the High Courts under the provision in the Constitution which certainly overrides all

legislations, whether by the Parliament or by the State. It cannot be doubted that what would be hit by the provisions of Section 67 can yet be

agitated in a properly constituted writ proceeding either under Art. 226 in the High Court or under Art. 32 before the Supreme Court, if a

fundamental right is involved. The bar imposed u/s 226 of the Government of India Act, 1935, has now been completely removed. The operations

of Section 67 of the Indian Income Tax Act has to be strictly and literally confined to original suits in any civil Court to set aside or modify any

assessment. Section 67 of the Act cannot prevent the exercise of jurisdiction under Art. 32 or Art. 226 of the Constitution in appropriate cases

either by the Supreme Court or by the State High Court. The maintainability of these writ petitions is, therefore, beyond question.

(11) It is, however, contended that the petitioner might and ought to have raised these objection as regards the validity of the assessment even in

the former occasion, and that the bar of constructive res judicata should prevail. The Supreme Court had recently to consider the applicability of

the general doctrine of res judicata in matters arising in writ proceedings. The reference to that case is Civil Appeals Nos. 469 etc. of 1962 and

The Amalgamated Coalfields Ltd. and Another Vs. The Janapada Sabha, Chhindwara, . The Amalgamated Coal fields Ltd. v. The Janapada

Sabha Chhindwara. His Lordship Gajendragadkar, J., dealing with the general doctrine of res judicata observed thus:

The question about the applicability of the doctrine of res judicata to the petitions filed under Art. 32 came before this Court in another form in

Daryao and Others Vs. The State of U.P. and Others, and in that case it has been held that where the petition under Art. 226 is considered on the

merits as a contested mater and dismissed by the High Court, the decision pronounced is binding on the parties and so, if the said decision was not

challenged by an appropriate remedy provided by the Constitution, a writ petition filed in respect of the same matter would be deemed to be

barred by the res judicata. Therefore, there can be no doubt that the general principle of res judicata applies to writ petitions filed under Art. 32 or

Art. 226. It is necessary to emphasise that the application of the doctrine of res judicata to the petitions filed under Art. 32 does not in nay way

impair or affect the content of the fundamental rights guaranteed to the citizens of India.

Referring to the doctrine of constructive res judicata His Lordship stated thus:

The grounds now urged are entirely distinct, and so, the decision of the High Court can be upheld only if the principle or constructive res judicata

can be said to apply to writ petitions filed under Art. 32 or Art. 226. In our opinion, constructive res judicata which is a special and artificial form

of res judicata enacted by section 11 of the CPC should not generally be applied to writ petitions filed under Art. 32 or Art. 226. We would be

reluctant to apply this principle to the present appeals all the more because we are dealing with cases where the impugned tax liability is for with

cases where the impugned tax liability is for different years....... Therefore, we are inclined to hold that the appellants cannot be precluded from

raising the new contentions on which their challenge against the validity of the notices is based.

(12) The principle enunciated by their Lordships of the Supreme Court may thus be summed up. A decision between the parties, which stands, not

having been appealed form, binds them, and it would not be open o either of the parties to challenge its correctness by initiating fresh proceedings.

This rule is firmly rooted and it applies irrespective of the nature of the proceeding in which the decision is rendered. A writ proceeding whether

under Art. 32 or Art. 226 is just as much a proceeding in a civil Court and there is no virtue adverse decision against him by permitting him to seek

the refuge of writs. But all the same, the entire body of the doctrine of res judicata as embodied in the provisions of Section 11 of the CPC or

under what may be called the general principles of res judicata which are founded on grounds of public policy to avoid multiplicity of proceedings

need not be pressed into service to delimit the scope of writ proceedings, particularly in cases where the is a complaint of infringement of

fundamental rights. It is, of course, true that, if a fundamental right is put in issue once and decided upon, the same subject manner call in question

that decision, as if he has a fundamental right to complain till a decision is rendered in his favour. In our opinion therefore, in the present case, there

is no substance in the contention raised on behalf of the Department that these proceedings would not lie and would be incompetent because of the

decision of this Court in T.C. No. 201 of 1960 (Mad).

(13) The provision impugned as offending Art. 14 of the Constitution Section 3, which is the charging section under the Act. It reads as follows:

Where any Central 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 accordant with and subject to the provisions of, this Act in respect of the total income of the previous year 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 the members of the

association individually.

The contention urged is that that part of the section enabling the imposition of tax on the ''association of persons or the members of the association

individually'' violates the equality clause, because the taxing authorities are vested with the power to tax an association of persons or the members

of he association individually according to their whim and caprice. It is said that the authorities are put in a position to pick and choose as amongst

the associations of persons, and subject one association to tax as an association, and subject the members of another association individually

without treating them together as an entity. In other words, the vice of this part of Section 3, is according to the learned counsel for the petitioner,

that the Department is clothed with unguided and uncontrolled powers, which they can successfully use to discriminate between associations

similarly situated.

The argument is developed thus. Though the rate of tax on the income of the individual and association of persons is the same, inequality might

result, if the assessing authorities wee to choose to tax the association rather than the individual. The following illustration is given in paragraph 5 of

the affidavit in support of the petitions:

For example when an Association of Persons consisting of 10 members is assessed as such on income of Rs. 1,00,000/-the tax liability would

approximately be about Rs. 50,000/-each; and the share of tax on the individual would be about Rs. 5,000/-each, but if on the same income of the

Association an individual member is taxed on his share of the income of Rs. 10,000/-the tax he is liable to pay would be only about Rs. 800/-. It is

also pointed out in the affidavit that the amount of tax levied on an association is not divided and collected from the members forming the

association, but is capable of being demanded form the ''principal offer'' defined under the Act.

(14) The words, ''or the members of the association individually'' were not originally in the Act, but appear to have come in by way of a

subsequent amendment. Some comment is made upon this circumstance to show that discrimination was intended and designed. But, we do not

see any substance in this contention, as the question now is whether the Act, as it stands to-day, violates the equality clause, by reason of the

authorities being vested with uncontrolled powers to tax an association or the individual members without any standard principle or policy laid

down by the Act. Prior to 11939, the Act contained the expression, ''association of individuals'' but subsequently it was changed to ''association of

persons''. ''Association of persons'' is a term of wider connotation and of more comprehensive import that the term ''association of individuals.'' An

association, which is a taxing entity under the Act, is a combination of persons in a joint enterprise to earn income. There is community of interest

and endeavor to earn the income, and the Act has constituted the enterprises as an association for the purpose of levying tax.

It is not suggested that the creation of such an entity is repugnant to Art. 14 of the Constitution. The Act has a scheme of creating entities of groups

of persons like a Hindu undivided family, firm of partnership, a company, each with different characteristics and different legal attributes.

''Association of persons'' is a residuary group which cannot fit in with the other groups referred to. That is why separate mention is made of an ad

hoc body like an ''association of persons'' who join together to earn income, and whose jointness is incapable of being assigned any legal label. It

is, however, unnecessary to pursue this point further, as the problem now before us is not whether the constitution of such a group is

unconstitutional, but whether the liberty given to the Department to assess an association or its members is so large and so bereft of any principle,

as to attract the mischief of Art. 14.

(15) We do not think that the mere fact that the Department can that the ''principal officer'' as the representative of the association would amount

to any discrimination, as suggested by the learned counsel for the petitioner. ''Principal officer'' is defined in Section 2(12) of the Act and it reads:

Principal officer"", used with reference to a local authority or a company or any other public body or any association means:

(a) the secretary, treasurer, manager or agent of the authority, company, body or association, or

(b) any person connected with the authority, company, body or association upon whom the Income Tax Officer has served a notice of his intention

of treating him as the principal officer thereof:

An Association of persons may consist of members who hail from different parts of the country. It would be very difficult for the Department to get

at these members individually, and complications might arise, as some of them may reside and carry on business beyond the territorial jurisdiction

of the Officer concerned. It is purely a matter of administrative convenience. It cannot be said that a member f the association is made vicariously

liable for he tax liability of his co-members. The tax is paid out of the common income, and what would be available for division amongst the

members is only the net income after deducting the tax payable or paid. Section 63 of the Act provides for service of notices and sub-section (2)

reads:

Any such notice or requisition may,... in the case of another association of persons be addressed to the principal officer thereof.

It is thus clear that the principal officer is treated as an agent of the members of the association collectively, for the limited purpose of putting the

machinery of the Act in force and in operation. Section 14, sub-section (2), clause (b) of the Act enacts that if a member of an association of

persons receives any portion of the amount which he is entitled to receive from the association on which tax has already been paid by the

association, he shall not be subjected to tax again. The provisions of the Act relating to assessment of association of persons are practically of the

same design and pattern as the assessment of a firm or its partners.

(16) Does the Act really enable the Department to act arbitrarily with unguided powers to tax an association or its members just to suit is own

convenience or desirability of imposing a greater burden of tax upon the assessee to augment the Exchequer? In the counter affidavit on behalf of

the Department, it is averred as follows:

..........the Act confers no choice as alleged and that where an association of persons earns income and is assessable it is bound to be assessed as

such. The last part of Section 3 is intended to enable an assessment on the individuals earlier than or independent of the association. Even assuming

that the Act permits an assessment either on the association or the members individually, the choice of the Income Tax Officer, is not unguided or

arbitrary. He will have to make an assessment, in the submission of this respondent on the principle that the object of the enactment is to levy the

tax at its point of accrual to the association itself and he can assess the individuals only in cases as for example, where the association is not

assessable but the individuals are.

The constitutionality of the provision is of course to be judged not by the averments in the counter affidavit but on a proper construction of the

Statute itself. In Jyoti Pershad Vs. The Administrator for The Union Territory of Delhi, , the following principles governing the applicability of Art.

14 of the Constitution to any piece of legislation are laid down:

(1) ""The enactment or the rule might not in terms enact a discriminatory rule of law but might enable an unequal or discriminatory treatment to be

accorded to persons or things similarly situated. This would happen when the legislature vests a discretion in an authority by a legislation which

does not lay down any policy or disclose any tangible or intelligible purpose, thus clothing the authority with unguided and arbitrary powers

enabling it to discriminate.

(2) In such circumstances the very provision of the law which enables or permits the authority to discriminate, offends the guarantee of equal

protection afforded by Art. 14.

(3) It is manifest that the above rule would not apply to cases where the Legislatures lays down the policy and indicates the rule on the line of

action which should serve as a guidance to the authority. Where such guidance is expressed in the statutory provision conferring the power, no

question of violation of Art. 14 could arise........

(4) It is not, however essential that the rules for the guidance of the designated authority which is to exercise the owner to which is vested with the

discretion should be laid down in express terms in the statutory provision itself. Such guidance may thus be obtained form or afforded by (a) the

preamble read in the light of the surrounding circumstances which necessitated the legislation taken conjunction with well known faces of which the

Court might take judicial notice or of which it is appraised by evidence before it to the form of affidavits. (b) or even from the policy and purpose

of the enactment which may is gathered from other operative situations or generally form the object sought to be achieved by the enactment.

(17) Now reading the relevant provisions of the Act, it seems to us that the Act does not vest any uncontrolled power or discretion on the part of

the authorities to tax an association or its members without any standard or criterion whatsoever. If the authorities find an association of persons

and a return is made of its income by the principal officer or any member, it is bond to assess the entity as such. The alternative of assessing the

individual member would common only in a case where the association itself cannot be taxed as such for reasons which cannot be exhaustively

listed. The fact that there is some discretion left in the assessing officer would not be a ground to condemn the provision. it is well-known that

Statutes do vest the authorities with discretion in the matter of administering the law, and it is equally well-known that discretion means judicial

discretion.

For example, under the Indian Penal Code, the is always a discretion on the part of the publishing authority to sentence a person to a term of

imprisonment or to levy a fine. The Penal Code has nowhere defined the circumstances under which a fine should be imposed rather than a term of

imprisonment. That would depend upon the gravity of the offence, the mitigating circumstances pleaded before the trying Magistrate and several

other factors. We have not so far heard it contended that the provisions of the Indian Penal Code offend Art. 14 of the Constitution. The standard

to be followed by an authority in the matter of exercise of discretion may either be expressly found within the four corners of the statute, or may be

gleaned from the underlying policy of the Act. If we are satisfied that, in the scheme of Indian Income Tax Act, the Department had not been

clothed with the powers of taxing an association or the individual members in a naked arbitrary fashion we must uphold it as being constitutional. It

seems to us that, properly understood the charging section does not confer any despotic power on the Department to treat associations differently

and tax with governed only by its will. There is sufficient indication in the scheme, design and policy of the Act to fetter free and unbridled taxing

power. We are therefore, of opinion that the challenge on the Act is unsustainable.

(18) In the result, these writ petitions fail and are dismissed. The rule nisi is discharged. The petitioner will pay the costs of the department in W. P.

No. 1374 of 1961. Counsel''s fee Rs. 250.

Petitions dismissed.