Col. his Highness Raja Sir Harinder
Singh Brar Bans Bahadur Vs. Commissioner of Income-Tax, Punjab & Ors 
INSC 286 (15 October 1971)
REDDY, P. JAGANMOHAN MATHEW, KUTTYIL KURIEN
CITATION: 1972 AIR 7 1972 SCR (2) 1 1972 SCC
Income-tax Act, 1922--Ruler of erstwhile
princely state--If liable to tax in respect of Personal income earned in British India.
Princely State--Ruler--Status in
The appellant who was the ruler of an erstwhile
princely state, challenged the assessments made against him for the assessment
years 1946-47 and 1947-48 in respect of his personal income earned in British
India, on the ground that he being a Ruler was immune from taxation-on every
source of income. On the question whether the appellant could claim immunity
from tax under the Indian Income-tax Act, 1922 in respect of the income earned
in British India,
HELD: The appellant was not entitled to any
immunity and, therefore was liable to tax.
(a) In International law the head of a State
representing the State as such enjoys certain extra territorial privileges in
other States. Some of these privileges and immunities are political and are
generally the subject of executive and administrative instructions. There are
others in relation to the applicability of the municipal laws, the immunity
from which are either recognised by the common law and which courts will not
enforce, as in England, or are dealt with by those laws themselves by affording
the necessary exemption; yet others are regulated by treaties and international
Whatever might be the various aspects of the
privileges and immunities enjoyed by the Heads of State, the rulers of the
erstwhile princely states did not enjoy the same or similar privileges as those
of the Heads of States recognised as members of the family of Nations in
international law. From the very nature of these princely states it was clear
that they were subject to the sovereignty and protection of the British Crown.
While their relations with the Crown were governed by treaties, though
initially on terms of equality, when the British Crown in India became
paramount, the relationship between it and the rulers became unequal with the
result that these treaties became subject to the reservation that they could be
disregarded where the interests of the British Empire or those of the subjects
of the princely states were involved. The status of these States as international
personalities was negatived by the British Government even towards the end of
the 19th century and it had been maintained that the principles of
International law had no bearing upon the relations between the Government of
India as representing the Queen Empress on the one hand and the native states under
the suzerainty of Her Majesty on the other. Again, though the status of these
rulers in England was recognised as being on par with other rulers in the
matter of personal immunity from legal proceedings in so far as British India
was concerned, these were the subject matter of legislation under which the
ruling princes in India, notwithstanding that they were not recognised as
international personalities, were accorded this immunity.
Therefore, any exemption the Rulers could
claim had to be under the relevant taxing acts. There is no such exemption
under the Income-tax Act. Besides, the fact that the income of the 17 rulers
derived from Central Government securities was specifically exempted by s. 60
implied that the rulers were not exempted from other provisions of law. The
provisions in certain statutes specifically making every Ruler of an Indian
State liable to tax only militate against the assumption of immunity from
taxation of the property of the Rulers at any rates provisions might have been
ex abundant ceutela. [21D-22B, 24G].
H. H. Maharajadhiraja'Madhav Rao Jivaji Rao
Rahadur of Gwalior etc. v. Union of India,  1 S.C.C. 85, referred to.
(b) Further it is now concluded by a decision
of this Court in Commissioner of Income-tax, Andhra Pradesh v. H. E. H.
Mir Osman Ali Bahadur,  2 S.C.R. 296
that the ruler of a princely state did not acquire international personality
and so could not rely upon International law for claiming immunity from
taxation of his personal properties. [25D]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 34 and 35 of 1969.
Appeals by special leave from the judgment
and order dated August 5, 1968 of the Punjab and Haryana High Court in
Income-tax Reference No. 40 of 1964.
K. C. Puri, K. L. Mehta, S. K. Mehta and S.
S. Hussain, for the appellant (in both the appeals).
B. Sen, P. L. Juneja, Badri Das Sharma for R.
N. Sachthey, for the respondent (in both the appeals).
The Judgment of the Court was delivered by P.
Jaganmohan Reddy, J. These two Appeals are by Special Leave against the
Judgment Of the Punjab & Haryana High Court answering the Reference under
Section 66(1) of the Indian Income-tax Act 1922 (hereinafter referred to as
'the Act') against the assessee-the Appellant. The Appellant who was admittedly
a Ruler of the erstwhile Faridkot State challenged the assessments made against
him for the years 1946-47 and 1947-48 with respect to which the accounting
years were Vikram year 2002 and.2003 corresponding to the period 13th April
1945 to 12th April 1946, and 13th April 1946 to 12th April 1947 respectively.
The; assessment in each of these years was made under Sec. 34 read with Sec. 23
of the Act, as the assessee's income from dividends and interest and capital
gains earned by the assessee during the relevant accounting year in what was
then British India had not been brought to tax. The assessee objected to these
proceedings and contended before the Income-tax Officer that he 'being a Ruler
of the Faridkot State was immune from taxation on every source of income. He
could not therefore, by virtue of his sovereignty be treated as an assessee for
any purpose under the Act. It was also contended that the notices under Sec. 34
were time barred. The Income-tax Officer however, rejected these objections and
held that though under the 18 International Law the Rulers of Indian States
were sovereigns and immune from Municipal Laws of other countries, there was no
exemption at far as the personal incomes of the Rulers are concerned from being
taxed under the Act. In that view he held that notices under Sec. 34 were valid
and accordingly made an assessment. The Appeal to the Appellate Assistant
Commissioner was without success, though similar contentions were raised before
him with particular reference to the privileges which the Rulers enjoyed under
International Law both in respect of Civil and Criminal matters. The assessee
appealed against this order to the Income-tax Appellate Tribunal where,
however,, there was a divergence of view between the two Members and therefore
the matter was referred to the President of the Tribunal. After considering the
decisions in regard to the exemption of the sovereign from all Civil and
Criminal Laws of another State, the Judicial Member held that no assessment
could be made on the assessee under the Act as he was the Ruler of a sovereign
State during the assessment years under consideration. In this view he did not
express any opinion on the question of the legality of the proceedings under
Sec. 34 of the Act. The Accountant Member however, after considering the
various provisions in the Act whereby exemption was granted to the Rulers in
regard to certain types of income and the various decisions held that the
assessee was liable to assessment in respect of his personal income arising or
accruing to him from British India from his private properties. He also held
that the proceedings under Sec. 34 of the Act were perfectly legal and valid.
In view-of the difference of opinion,, the matter was referred to the President
of the Tribunal under Sec. 5A(7) of the Act on the following question
"Whether on the facts and in the circumstances of the case the assessee
was immune from tax under the Indian Income-tax Act on his private income viz.,
dividends and interest income as also the Capital Gains earned in British
India." The President of the Tribunal held in favour of the assessee by
relying on a decision of the Andhra Pradesh High Court in the case of H. E. H.
Mir Osman Ali Khan Bahadur Nizam & Rajpermukh of Hyderabad v. Commissioner
of Income-Tax(1), where it was stated thus :
"Indisputably, a sovereign ruler enjoys
immunity from taxation under International Law and it is only in cases where
this rule is superseded by express words that this should be denied to him. If
a legislature wants to depart from these principles and bring such (1) Case No.
35 of 1959.
19 ruler to tax, there must be clear
indication in the enactment itself. In the absence of such express words, the
statute must be interpreted in conformity With International Law. Simply because
the Municipal Law did' not provide for such an exemption, the principles of
International Law should not be regarded as having been superseded".
In the aforesaid view the Andhra Pradesh High
Court had held that notwithstanding the fact that His Exalted Highness the
Nizam had lost the character of a sovereign ruler after 2610-1950, he is still
immune from taxation in respect of the income derived by him prior to that
Following this decision the President held
that the assessee was immune from taxation under the Act on his private income.
In view of this decision on an application by the Revenue under Sec. 66(1) of
the Act the following question was referred to the High Court :"Whether on
the facts and circumstances of the case, the assessee was not liable to tax
under the Indian; Income-tax Act, 1922, in respect of his personal income
accruing or arising to him in British India in the two assessment years 1946-47
and 1947-48." The High Court relying upon the decision of this, court in
Commissioner of Income-tax, Andhra Pradesh v. H. E. H. Mir Osman Ali
Bahadur(1), which reversed the decision of the Andhra Pradesh High Court
referred to and relied upon by the President of the Tribunal held against the
assessee. It is contended before us that the facts and circumstances in the
Nizam's case are totally different and the decision of this Court is clearly
distinguishable. The learned Advocate contends that in that case the
assessments related to the assessment years 1950-51 and 1951-52, the corresponding
accounting year for which was the, period between 1st April 1949 and 31st March
1950, and 1st April 1950 and 31st March 1951 respectively, which years being
after the inauguration of the Constitution on 26th January 1950, clearly make
the Act which was made applicable from 1st April 1950 to all the Part B States,
applicable to the assessee. But-it is submitted that in the case before us
there could be no question of Act being made applicable to Faridkot State as
the assessment years and the accounting years are prior to the inauguration of
the Constitution and the application of the Act. The learned Advocate cited a
large number of decisions in support of his contention that the Native States
in India had International.
(1) 59 I.T.R. 666.
20 personality and their Rulers had 'immunity
similar to those that were accorded to any other Head of a State under
International Law. It was also argued that though these princely States in
India may have been 'protected States; it was not necessary for the recognition
of the privileges and immunities of the Rulers of such States to possess all
the attributes of sovereignty and complete independence in support of which the
decisions of Mighall ,v. Sultan of Jahore(1), Duff Development Co. Ltd. v.
Govt. of Kelantan & Anr.(2), Stathem v. Stathem & H. H. the Gaekwad of
Baroda(3), were referred to. It was therefore contended that in this country
also the position was the same as that recognised by the Common Law of England
for which proposition, decisions were referred to from Punjab Recorder onwards.
A reference was also made to several cases pertaining more specifically to the
immunity enjoyed by the Rulers from payment of Income-tax on the basis of their
status under International Law. These are : The Patiala State Bank v.
Commissioner of Income-tax, Bombay(4), Rani Amrit Kunwar v. Commissioner of
Income-tax, C.P. & U.P.(5), The Accountant General, Baroda State v.
Commissioner of Income-tax, Bombay City(6), A. H. Wadia, as Agent of the
Gwalior Durbar v. Commissioner of Income-Tax, Bombay (7), and Maharaja Bikram
Kishore of Tripura v. Province of Assam (8).
On behalf of the Revenue reliance is placed
on Commissioner of Income-tax Andhra Pradesh v. H. E. H. Mir Osman Ali
Bahadur(9), to sustain the Judgment under appeal and it is conceded that if
this decision was not applicable to the facts and circumstances of this case,
the position as contended by the assessee would be that the Indian Rulers prior
to the Constitution were granted immunity from taxation, and in any case this was
so in respect of the income from the property of the State as, distinct from
the private or personal property of the Ruler though there were observations in
someof the cases that it was difficult 'to distinguish public or private
property owned by a ruler.
At this stage we think it necessary to advert
to one argument .adduced on behalf of the assessee namely that the Income-tax
authorities-particularly the Income-tax Officer, had accepted the International
status of the assessee and the immunity from .taxation of income from public
property, but only rejected the claim for such immunity in respect of income
from private or Personal property. It is therefore contended that the status of
(1)  I. Q. B. 149.
(3) (1912) Probate 92.
(5) XIV ITR 561.
(7) XVII ITR 63.
(9) 59 I.T.R.
(2)  A. C. 797.
(4) XI ITR 617.
(6) XVI ITR 78.
(8) XVII ITR 220.
(9) 59 I.T.R.666 21 the assessee as an
international personality is not in issue before.us s, what is in issue is
whether his income from private property is exempt from taxation. We do not
think this contention has, validity, because the High Court has specifically
While rejecting, the second contention addressed on behalf of the assessee
ruled;, that the status of the assessee as a ruler of the Indian State could.'
not be equated with that of a sovereign in international law.
Even the reference to the High Court does not
limit or circumscribe the matter for consideration as contended for but on the,
other hand enables us to deal with the question whether as an, erstwhile ruling
prince the assessee can at all be entitled to the.. immunity from taxation.
In considering the question referred to by
the Tribunal it,, may be useful to examine briefly the basis and extent of the
privilege and immunity enjoyed by Head of State in International Law,
particularly having regard to the lengthy arguments. addressed before us. In
International Law the Head of a State,. represent* the State as such and not as
an individual representing his own rights. In that capacity he enjoys certain
extra, territorial privileges in other States which are friendly and in peace,
known as the receiving States, with the State he represents. These are,
ceremonial honours for himself, the Members of his, family and his retinue;
special protection to his person, and' exemption from Criminal jurisdiction;
the grant of extra territoriality, on the basis that one sovereign does not
have any power over the other, such as immunity from filing of suits against
him except where he is himself a plaintiff and from.
other civil processes; exemption from
taxation rating and other fiscal enactments and the invilobility of immovable
property in which he of, the representatives of the State accorded diplomatic
immunity. reside etc. Some of these privileges and immunities are political and
are generally the subject of executive and administrative instructions such as
ceremonial honours, Police protection. exemption from customs in accessability
of their residences to officers of Justice, Police or Revenue officials unless
consented to by them. There are yet others in relation to the applicability of
the Municipal Laws, the immunity from which are either recognised by the Common
Law and which Courts will not enforce as. in England or are dealt with by those
laws themselves by affording the necessary exemption.
There are yet others which may be regulated
by Treaties or international covenants. Whatever may be the various aspects of
the immunity and privileges enjoyed by the Heads of the State under the Laws of
the Country where questions relating to them arise, what we are concerned with
at the very thresh-hold of this argument dealing with the immunity is whether
the rulers of the erstwhile native States as.
22 they were called enjoyed the same or
similar privileges as those ,of the Heads of States recognised as Members of
the family of nations in International Law. It is clear from the very nature of
the native States in 'India that they were subject to the sovereignty and
protection of British Crown. While their relations with the Crown were governed
by treaties, though initially on terms of equality, as time went by and the
British Crown in India ,became paramount, the relationship between it and the
Rulers ,became unequal with the result that these treaties became subject to
the reservation that they could be disregarded where the interests of the
British Empire or those of the subjects of the native States were involved.
When the Nizam claimed equality with the
British Crown, the then Viceroy Lord Reading informed him on 27th March 1926
that "The sovereignty of the British Crown is supreme in India and
therefore no Ruler of an Indian State can justifiably claim to negotiate with
the British Government on an equal. footing". After giving a few illustrations
to negative the claim of the Nizam, the Viceroy proceeded to observe
"other illustrations could be added no less inconsistent than the
foregoing with the suggestion that the Government of your Exhalted Highness and
the British Government stand on a plane of equality ... (1). This paramountcy
was described by Shah, J, as he then was, as "brazen faced autocracy"
in H. H. Maharajadhiraj Madhav Rao Jivaji Rao Bahadur of Gwalior etc. v. Union
of India (2).
What then becomes of the claim of these
States or their rulers to recognition. as International personality. The answer
to this specific question is furnished even towards the end of the 19th
Century. The status of these native States as International personalities was
negatived. in the Notification of the Government published in Gazette of India
Part 1, dated 21st August, 1891 at page 485, which was a resolution containing
a proclamation regarding the trial of accused persons in Manipur and the
regrant ,of the Manipur State. In this regard the following passage at page 488
is of interest :
"The principles of the International law
have no bearing upon the relations between the Government of India as
representing the Queen Empress on the one hand, and the Native States under the
suzerainty of Her Majesty on the other. The paramount supremacy of the former
presupposes and implies the subordination of the latter. In the exercise of
their high prerogative, the Government of India have, in Manipur as in other
protected States, the unquestioned right to remove by (1) Vide Appendix I of
the White Paper on Indian States.
(2)  (1) S. C. C. 85-p. 161.
23 .lm15 administrative order any person
whose presence in the State, may seem objectionable. They also have the right
to summon a Darbar through their political representative for the purpose of
declaring their decision upon matters connected with the expulsion of the
ex-Maharaja.... through their Officers." After stating that any one
resisting the decision and not complying with orders will be liable to arrest,
the declaration went on to say "In the opinion of the Governor-General in
Council any armed and violent resistance to such arrest was an act of
rebellion, and can no more be justified by a plea of self-defence than could
resistance to a police officer armed with a Magistrate's warrant in British
India." In the recent case of this Court in H. H. Maharajadhiraja Madhav
Rao Jivaji Rao Scindia Bahadur of Gwalior(1), referred to above the majority
expressed the view that "the States had no International personality".
Nonetheless the status of these rulers in England was recognised as being on
par with other Rulers in the matter of personal immunity from being sued in
their Courts. In so far as British India was concerned these were governed
partly by Acts of the Legislatures particularly the provisions contained in
Civil Procedure Codes and by Notifications of the executive under taxation laws
as well as by executive or administrative instructions relating to their
It is therefore apparent that in so far as
this country is concerned the immunity from legal-proceedings which is
recognised in the common law has been the subject matter of legislation under
which the ruling princes of India, notwithstanding that they were not
recognised as International personalities, were however accorded this immunity.
Sec. 433 of the Code of Civil Procedure of 1882 and subsequently Sections 84 to
87 of the Civil Procedure Code of 1908 deal with these matters. Gajendragadkar,
C.J., in Mirza Ali Akbar Kashani v. United Arab Republic & Anr.(2), cited
with approval the observations of Strachey, J, in Chandulal Khushalji v. Awed
Bim Umar Sultan Nawaz Jung Bahadur(3), as correctly representing the result of
the provisions of Sec. 433 as much as of those contained in Sec.
86(1). It may be mentioned that Strachey, J,
after pointing out that in India before the enactment of Sec. 433 of the Code,
the privilege of independent sovereign princes stood on exactly the same
footing as in England, observed (1)  1 S.C.C. 85-p. 161. (2)  1 S.C.R.
(3) 21 I. L. R. Bom. 351 at 371-372.
24 .lm15 "No doubt the question of
privilege now depends on the construction of Sec. 433, and I am alive to the
danger of pressing too far an analogy between a rule of international law and a
specific enactment of the Legislature." It is apparent from a perusal of
Sec. 86 of the Civil Procedure Code that there is no absolute prohibition
against a Ruler of a foreign State being sued in India. A Ruler can be sued
with the consent of the Central Government certified in writing by a Secretary
to that Government. It is also provided that such consent should not be given
unless it appears to the Central Government that the Ruler has instituted a
suit in the Court against the person desiring to sue him or by himself or another,
trades within the local limits of the jurisdiction of the Court, or, is in
possession of immovable property situate within those limits and is to be sued
with reference, to such property or for money charged thereon, or has expressly
or impliedly waived the privilege accorded to him by this Section.
In view of these provisions the several cases
cited by the learned Advocate for the assessee which deal with immunity from
suits against ruling princes under the English law have no application.
In so far as the question whether there
exists a rule of international law exempting a State, or the property which it
owns, from taxation by a foreign State, is concerned, there seems to be no
uniform practice followed by the various States. It is however suggested that
immunity from taxation "appears as a logical accompaniment of the
principle of immunity of foreign State owned property from judicial
process" and on this basis it is sought to be contended that even
personal, private property of the Head of a State is exempt. It is unnecessary
for us to examine this position because even if there was such an immunity the
Rulers of an Indian State could only avail of it, if they are recognised as
international personalities which, as we have seen, they are not. Any
exemptions which they may be given, must, in our view be under the relevant
The learned Advocate for the Assessee however
points out that if the Rulers of Indian State were not exempted from tax apart
from the statute, there was no need to make a provision in Sec. 3 of the Bengal
Agricultural Income-tax Act IV of 1944, specifically making every Ruler of an
Indian State liable to Agricultural Income-tax. On the other hand it would
appear to us that this provision would itself militate against the assumption
of immunity from taxation of the property of the Rulers and at any rate the
legislature may have been acting ex abundanti cautale. It may however be
noticed that in so far as the Income-tax Act is 25 concerned exemption of the
Income of the Ruters derived from Central Government securities was
specifically given under Sec. 60 of the Act which implies that the Rulers were
not exempt from other provisions of law. This position also finds support from
a case cited by the learned Author on the "Immunity from taxation on
foreign owned Property" in the Americal Journal of International Law XLI
at page 239, where the Suppreme Court of Ceylon in the Suprintendent of the
Government Soap Factory, Bangalore v. Commissioner of Income-tax, held that the
profits ade in Ceylon by the Mysore Government Soap Factory could be taxed by
Ceylon without violation of international law. The Ceylon Court held that the
State of Mysore had no position in international law and could not,invoke any
immunity arising by virtue of international law' In any case so far as,
immunity from taxation of the income from personal property of the Rulers of
the Native States is concerned this is now concluded by a decision of this
Court in the Commissioner of Income-Tax, Andhra Pradesh ',v. H.E.H. Mir Osman
Ali Bahadur(1). In that case the question directly arose as to whether the
Ruler of the Hyderabad State prior to 26th January '50 could claim immunity
from taxation under international law, namely whether the assessee enjoyed
immunity from taxation under the Act in respect of income which accrued or
arose to him, and which was received by him upto 26th January 1950. The learned
Advocate for, the revenue had contended that under the International law, a
foreign sovereing was not immune from taxation in respect of his private
properties situated in the Taxing State; even if there was such an immunity
under the international law, the assessee being under the suzerainty or ,he
paramountcy of the British Crown, had never enjoyed the status of a sovereign
as understood in the international law and, therefore, was not governed by that
law; and that in any event, as on January 26, 1950, the date when he became
liable to tax, he was no longer a sovereign and therefore he could not claim
exemption under the international law. Respondent's Advocate claimed that the
assessee was not liable to Income-tax on the ground that under the Act,
income-tax was charged on the assessee's income received during the accounting
year and that as during the accounting year the assessee was a ruling chief, he
was exempt from taxation under the international law. He argued that under the
international law, as understood by English Courts, a foreign sovereign was
exempt from taxation, that the said interpretation of the law had become the
common law of England and that the said common law was the law of India before
the Constitution and it continued to have force thereafter reason of Article
(1)  I.T.R. 666 256SupCI/72 26 We have
noticed these contentions to show that there is no validity in the submission
of the learned Advocate for the assessee, that that question did not directly
arise in that case because the Nizam was being assessed in respect of
assessment year 1950-1951 and 1951-52, when he was not a ruling prince. This
Court specifically dealt with-this matter as can be seen from the observations
of Subba Rao J, as he then was at page 670 "International' law vis-a-vis
the liability of a sovereign to taxation in respect of his private property is
in a process of evolution'. It has not yet become crystallized." After
referring to Halsbury's Laws of England, 3rd Edition, Volume 20, page, 589 and
Oppenheim's International Law, 8th Edition, Volume 1, page 759 and the Article
on immunity from taxation of foreign State owned property in the American
Journal of International Law, to which we have already adverted,. observed
"that the question is not free from difficulty and that it requires
serious consideration when it directly arises for decision. Assuming for the
purposes of these, appeals that a foreign sovereign who has acquired an
international personality has such an immunity from taxation, he proceeded to
examine the question whether His Exalted Highness the Nizam had ever acquired
international personality. After examining the position he concluded at page
675 : ". . . that Hyderabad State did not acquire international
personality under the international law and So its Ruler could not rely upon
international. law for claiming immunity front taxation of his personal
We are not here concerned with the
alternative argument in that case, that the Act having applied to the State of
Hyderabad-, after the inauguration of the Constitution on `6h January '50, the
charge as well as the manner of computation of income did not depend on the
pre-existing law but only upon the provisions of the Act because in these
appeals that question does not arise.
in view of this legal position we do not
propose to burden this Judgment with any detailed examination. of the several
decisions of the High Courts which were prior to the decision of this Court
cited by the learned Advocate in support of the proposition that the ruling
chief of an Indian State has the same immunity from taxation as enjoyed by
other foreign sovereigns. Two of 'those cases arose under the Government
Trading Taxation Act 1926 where different considerations were applicable (The
Patiala State Bank v. C.I.T., Bombay(1), A. H. Wadia, as Agent of the Gwalior
Durbar v. C.I.T., Bombay (2). At any rate in one other case i.e. in Maharaja
Bikram Kishore of Tripura v.
Province of Assam(3), a distinction was
sought to be drawn (1) XI I.T.R. 617. (2) XVII I.T.R.63. (3) XVIT I.T.R. 220.
27 between the property of the State and the
private property of the ruler. In that case the question whether the income
derived from Chakla Roshanabad Estate was liable to tax under Assam
Agricultural Income-tax Act, by assessment upon the State of Tripura or by
assessment on the ruler of Tripura. It was held that the Chakla Roshanabad was
the State property and not personal property of the then ruling Raja who held
it in his capacity as a Ruler. No doubt in the other two cases refunds were not
given for tax deducted at source on the assumption that, the Rulers were not
In the view we have taken the answer of the
High Court to the reference was clearly right and the appeals are accordingly
dismissed with costs-one set.
S.N. Appeals dismissed.