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

Citation: [1997] SUPP. 4 S.C.R. 626 · Decided: 21-10-1997 · Supreme Court of India · Bench: S.C. SEN · Disposal: Case Partly allowed

Judgment (excerpt)

A 
COMMISSIONER OF WEALTH TAX, GUJARAT-III, AHMEDABAD 
B 
c 
v. 
ELLIS BRIDGE GYMKHANA ETC. ETC. 
OCTOBER 21, 1997 
[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. 
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 
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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. 
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. 
E 
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 a

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