Rajah S. V. Jagannath Rao Vs.
Commissioner of Income-Tax, Hyderabad  INSC 224 (17 July 1961)
CITATION: 1962 AIR 141 1962 SCR (2) 848
Income Tax-Levy of tax on Jagirs-Jagirdar in
erstwhile Hyderabad State-Validity of enactment-Retrospective effectClaim for
deduction of expenses of maintenance of elephants and body guards-Hyderabad
Income-tax Act, 1357 Fasli, s. 14(5) (a).
The appellant who was a jagirdar in the former
Hyderabad State was assessed to income-tax and super-tax for the assessment
years, 1337 Fasli and 1358 Fasli, corresponding to the years, 1948-49 and
1949-50, under the provisions of the Hyderabad Income-tax Act, 1357 Fasli,
which was passed by the Hyderabad Legislative Assembly and came into force on
Azur 1, 1357 Fasli. The appellant challenged the validity of the assessment on
the grounds(1) that under the Hyderabad Legislative Assembly Ain the Assembly
was prohibited from introducing bills which dealt with laws affecting the
relations between the holders of jagirs on the one hand and the Nizam on the
other, that the provisions of the Act in so far as they seemed to levy a tax on
jagirs amounted to an encroachment upon the relations between the jagirdars and
the Nizam, and that the bill introduced in contravention of the Ain was, void
ab initio, even though it had been assented to by the Nizam, (2)that the Act
could not affect, in any case, the income for the account year 1356 Fasli,
corresponding to the assessment year 1357 Fasli, because the Act came into'
force only from Aur 1,1357 Fasli, and (3) that the Income-tax Officer erred in
disallowing the claim for deduction of the amount spent on account of
maintenance of elephants, stables, drummers,, bodyguards, etc., in connection
with management of the jagir Estate, and in treating the amount as personal
Held, (1) that the Hyderabad Income-tax Act,
1357 Fasli, did not affect the relations between the holders of Jagirs and the
Nizam, and that even if it could be said to affect indirectly these relations,
the Act having been passed with the assent of the Nizam, was valid, and the
question whether it could be introduced in the Legislative Assembly did not
arise as it must be regarded as a law emanating from the Nizam, the supreme
legislator in the State, whose laws promulgated in any manner binding upon the
849 Ameer-un-Nissa Begam v. Mahboob Begum, A.
I. R. 1955 S. C. 352, Director of Endowments, Government of Hyderabad v. Akram
Ali, A. 1. R. 1956 S. C, 60 and Madhaorao v. State of Madhya Bharat, (1961) 1
S. C.R. 957, applied.
(2)that the income for the 1356 Fasli was
rightly assessed tinder the provisions of the Act for the assessment year 1357
Fasli. Union of India v. Madan Gopal Kabra, (1954) S. C. R. 541 and Rajputana
Mining Agencies Ltd. v. The Union of India, (1961) 1 S. C. R. 453, followed.
(3)that the maintenance of elephants,
stables, drummers, and bodyguards by the jagirdar was not entirely for his
personal or private ends but must be considered part and parcel of the
administration of the estate, and the expenditure for such maintenance must be
regarded as one incurred in connection with land and its administration within
the meaning of s. 14(5)(a) of the Act. It was accordingly deductible for
purposes of income-tax.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1661-68 of 1959.
Appeals by special leave from the judgment
and decree dated April 15, 1955, of the former Hyderabad (now Andhra Pradesh)
High Court in Reference Nos. 198 and 199 of 1953 and 19 of 1954.
A.V. Viswanatha Sastri and K. R. Choudhri,
for the appellant.
K.N. Rajagopal Sastri and D. Gupta,, for the
1961. July 17. The Judgment of the Court was
delivered by HIDAYATULLAH, J.-The appellant, Rajah Hid S. V. Jagannath Rao, was
the Jagirdar of Jatprole Samasthan in the former Hyderabad State. In the year
1357 Fasli, the Income-tax Act (1357 Fasli) was passed by the Legislature, to
come into force on Azur 1, 1357 Fasli. The present appeals, with special leave,
concern the assessment of the appellant's income to income-tax and super-tax
under the Act of 1357 Fasli for the assessment years, 1357 Fasli and 1358
Fasli, corresponding to 850 the-years, 1948-49 and 1949-50. They are directed
against a common judgment of the High Court of Hyderabad, by which certain
questions of law referred by the Income-tax Appellate Tribunal, Bombay, in the
assessment of the present appellant and some others, were answered by the High
Court of Hyderabad against the present appellant.
The appellant had submitted returns of his
income for the two accounting years under protest. According to him, the
Income-tax Act, 1357 Fasli was ultra vires the by legislature. For the account
year 1356 Fasli, corresponding to the assessment year, 1357 Fash, the appellant
had urged that the Act could not affect the income of that year, because it
came into force only from Azur 1, 1357 Fasli.
The appellant also claimed to deduct certain
expenses (details of which will be given later) under as. 14(5)(a) and (b) of
the Act. These were the three matters on which the Income-tax Appellate
Tribunal framed the following three questions for the decision of the High
"1. Whether the Hyderabad Income-tax Act
is ultra vires in so far as it seems to levy a tax on Jagirs and Samasthans ?
2.Whether the provision relating to the taxation of income of 1356-F in the
Hyderabad Income-tax Act is intra vires ? 3.Whether the sum of Rs. 14,390 and
Rs. 38, 079 or a part thereof, could be allowed as revenue deduction under
section 14(5)(a) or 14(5)(b) of the Hyderabad Income-tax Act ?" As stated
already, all the three questions were answered by the High Court against the
appellant. He obtained special leave from this Court on three separate petitions
for special leave, on December 17, 1966, and April 9, 1957, and filed the
851 The second question mentioned above is
covered by the decisions of this Court in Union of India v. Madan Gopal Kabra
(1) and Rajputana Mining Agencies Ltd. v. The Union of India and another (2)
and was, therefore, rightly answered against the appellant. Mr. A. V.
Viswanatha Sastri, counsel for the appellant, conceded frankly that he had
nothing to urge against the decision of the High Court on that question. We shall,
therefore, confine ourselves to the two remaining questions in these appeals.
It may be mentioned that the ,first question also arises in Civil Appeal No. 17
of 1961, and what we say here will govern the disposal pro tanto of that appeal
The contention of the appellant on the
validity of the Act is this : The Act was passed by the Hyderabad Legislative
Assembly and was assented to by His Exalted Highness, the Nizam. Under the
Hyderabad Legislative Assembly Ain, there was a prohibition on the introduction
of certain kinds of bills in the Assembly. The appellant relies upon sub-ss. (8)
and (9) of s. 18 of the Ain, which in their English translation read as follows
"18. There shall not be introduced into, or moved in the Assembly,, any
bill, or motion, or resolution, or question, or other proceedings relating, to
or affecting the following matter:(8)The relation of His Exalted e Highness
with the holders of Samasthanis and Jagirdars and with such other grantees as
derive grants from sanads.
(9)The powers of His Exalted Highness over
the present or future grants, whether they be in the form of land
(1) (1954) S.C.R.,541.
(2) (1961) 1 S.C.R. 453 852 These two
sub-sections deal with laws affecting the relations between the holders of Samasthans
and JaGirs on the one hand, and His Exalted Highness the Nizam, on the other.
The Act in question imposes a tax and does not seek to affect the relations
aforesaid. It is a little difficult to read into the Income-tax Act any
encroachment upon the relations between the holders of Samasthans and Jagirs
and the Nizam. Even if the Income-tax Act can be said to affect indirectly
those relations, it is manifest that it was passed with the assent of the
Ruler, which admittedly was given.
There have been a number of rulings of this
Court on the powers of Rulers of Indian States to promulgate laws in their
States in the exercise of their sovereigntyand on the nature of their
sovereignty. Two such cases of this Court 'Considered the legislative powers of
His Exalted Highness the Nizam, and in those cases, it was held that the
legislative power of the Nizam was not subject to any limitations or control of
any kind whatever. The first of these cases, Ameer-un-Nissa Begum v. Mahboob
Begum (1) dealt with a Firman issued by His Exalted Highness the Nizam, and.
in dealing with his powers, in general and
his legislative powers, in particular, it was observed by this Court as follow:
"It cannot be disputed that prior to the
integration of Hyderabad State with the Indian Union and the coming into force
of the Indian Constitution, the Nizam of Hyderabad enjoyed uncontrolled
sovereign powers. He was the supreme legislature, the supreme judiciary and the
supreme head of the executive, and there were no constitutional limitations
upon his authority to act in any of these capacities.
The 'Firmans' were expressions of the
sovereign will of the Nizam and they were binding in the same way as (1) A.I.R.
1955 &C. 352.
853 any other law;-nay, they would override
all other laws which were in conflict with them.
So long as a particular 'Firman' held the
field, that alone would govern or regulate the rights of the parties concerned
though it could be annulled or modified by a later 'Firman' at any time that
the Nizam willed." The same view was reaffirmed in the second case
reported in Director of Endowments, Government of Hyderabad v. A kram Ali (1).
It is contended that a limitation on the
powers of the Legislative Assembly in Hyderabad State was created by the Ain,
which was, in essence the supreme law, and any bill introduced in contravention
of the Ain was void ab initio.
According to the learned counsel for the
appellant, a law which was void at its inception remained so, even if
subsequently assented to by the Nizam. If one were to think in terms of a
legislature of limited jurisdiction, this might be true. Laws are really
commands embodying rules of conduct emanating from one whose will is sovereign,
or, in other words, supreme. Legislative Sovereignty must be found to uphold
the laws. It depends upon the' Constitution of a particular State, where it
resides. It may not reside in a Ruler but in a legislature where the Ruler has
surrendered or been made" to surrender his powers, as, for example, the
King in Parliament in England, or it may reside in' an absolute and sovereign
Ruler, who has not parted with it, the legislature being merely his amanuensis.
In the latter case, the will of the Ruler expressed as a rule of conduct is the
law, whether made by him directly or through his legislature. The Ain itself
derived its authority from the Nizam only, and the Nizam, as the supreme
legislator, could frame a law in derogation of the Ain, which was his own
creation. The Ain was (1) A. I. R. 1956 S. C. 60.
854 not a supreme law such as a Constitution,
the limits imposed by which could not be exceeded even by the Nizam. The Ain
prohibited the, introduction of laws of a particular kind in the Assembly, and
the Nizam could reject them as being in contravention of the Ain even if passed
by the Assembly.
The position, however, was not the same when
a law which the Nizam could refuse to accept was accepted by him. As a supreme
legislator, the Nizam could have written out the entire Income-tax Act in his
own hand-writing and signed it;
and it would have been as valid and binding
as the Ain itself. It made no difference if the law was passed by a body of men
and was sent to the Nizam for his assent, because on his assent, the law was as
effective as if made by the Nizam himself. The Nizam could withhold his assent
to a law contrary to the Ain if he chose; but once he assented to it., the law
derived its vitality, not from the act of the Legislative Assembly but from the
act of the Nizam. It could not be questioned any more than a Firman issued by
the Nizam. The Income-tax Act must, therefore, be regarded as binding upon
those affected by its terms, and the question whether it could be introduced in
the Legislative Assembly hardly arises. It must be regarded as a law emanating
from His Exalted Highness the Nizam, the supreme legislator in the State, whose
laws promulgated in any manner were binding upon the subject. See Madhaorao v.
State of Madhya Bharat (1).
The first question was thus answered
correctly by the High Court.
It remains to consider the third question. in
the assessment year 1357 Fasli, a sum of Rs. 14,390 was claimed as expenses
under a. Act (5) (a) or s.14(5)(b) of the Hyderabad Incometax Act. A sum of Rs.
38,079 was similarly claimed for the assessment year 1358 Fasli. The sum of Rs.
14,390 has been (1) (1961) 1 S.C.R. 957, 855, ,shown in the assessment year as
spent on account of "domestic servants, drummers and other
paraphernalia", which the Income-tax, Officer treated as personal
The sum 'of Rs. 38,079 for the following year
consisted of these items (a) Stables and elephants Rs. 16,907 (b) Festivals and
Jatras Rs. 789 (c) Charity and subscriptions Rs. 11,233 (d) Body guards Rs.
9,150 _______________ Rs. 38,079 _______________ The Income-tax Appellate Tribunal
allowed these expenses as being admissible under cls. (a) and (b) of s. 14(5).
No reasons were given by the Tribunal for coming to this conclusion. The High
Court answered the question against the assessee without advertence to the two
clauses. The reason given by the High Court was as follows :
"The jagirdar, however anxious he be to
maintain his dignity, cannot claim deductions of money so spent professedly
unless there be orders in exercise of prerogative powers of the grantor
authorising such expenditures.
For example, he may be authorised by the
Sanad creating his tenure to maintain elephants or bodyguards. These
expenditures would then though personal, be necessary and legal, because of the
constitutional position of the grantor when the tenure was created and continued.
But the statement of the case should show the legal basis upon which deductions
are allowed. If the assessee was entitled to maintain elephants, stables,
paraphernalia etc., under the grants, he should have filed them before the Income-tax
Evidently this has not been done; at any rate
there is no mention of the fact in the statement of the case. In the result,
the answer to the question is in the negative," 856 The relevant
provisions of the law may now be read. Section 14 (5) as translated by Messrs
Ramchandra Rao Kurtadikar and B. V. Subbarayudu reads as follows :
"In respect of income from land-revenue
paid to the Jagirdar by the holder of any nonKhalsa land in lieu of the use or
possession thereof and in respect of any income derived by giving over Abkari
trees for extracting sendhi or toddy and from "Baitbak'which under proviso
2 and Explanation respectively of clause (4) of section 2, is deemed to be nonagricultural
income, such income, profits and gains shall be computed after making the
following allowances :
(a)All such expenses not being his private or
personal expenses which the assessee may incur in relation to such land or the
inhabitants thereof towards management or superintendence or on works of public
(b)Such necessary expenditure as the assessee
may incur under any law.
(c)Five per cent of the income chargeable to
tax towards necessary expenses." The Tribunal, however, pointed out that
the English text published by Government Press, Hyderabad, was slightly
different. It reads as follows :
"14 (5) The income from land revenue
paid to jagirdar by the occupier of non-Khalsa land for its use or possession,
the income that arises from renting of trees for extraction of sendhi or toddy,
the income from Abkari rental$ and the income which under the provisions of
Section 2 (4) is deemed to be ,nonagricultural' income, all such incomes,
profits 857 and gains shall be computed after making the following allowances
(a)all such expenditure,, not being, in the
nature of capital, private or personal expenditure, incurred by the assessee in
connection with land or its inhabitants for administration or on works of
general improvement and benefit ;
(b)any compulsory expenditure incurred by such
assessee under any law in force and (c)in respect of compulsory expenditure
five per cent of the income subjected to tax." A literal translation of
cl. (a) made by us reads as follows "'All such expenditure which the
assessee makes in connection with such land or its inhabitants on
administration or works of public welfare, which expenses. do not include, his
private or personal expenses." This shows that the official translation is
accurate., and we shall refer to it only.
The question thus is whether the expenditure
in respect of which deduction is, claimed can be described to be private or
personal expenditure of the assessee, or in connection with land and its
administration. The High Court apparently thought that unless it' was incumbent
upon the jagirdar by reason of his Sanad to maintain bodyguards., elephants,
etc., the expenses could not but be regarded as private or personal. In our
opinion the High Court put the burden of proof somewhat strictly upon the
assessee. The Tribunal, though it gave no reasons., held that the expenses were
incurred in relation to the management. The conclusion is based on some
evidence. The maintenance 858 of elephants, $tables, bodyguards, etc., is not
entirely for the Jagirdar's personal or private ends, and cannot be said to be
wholly unrelated to the management ofthe Estate.
Such equipage is considered part and parcel
of the administration of an estate, such as jagir. Elephants, drummers and
bodyguards are used on occasions for administrative purposes, and even if these
might be few and far between, the expenditure must be regarded as one incurred
in connection with land and its administration. The expenses over drummers (but
not over domestic servants) in the first year, and over stables, elephants and
bodyguards (but not over festivals and jatras or on charities and
subscriptions) in the second year, were deductible. These expenses fall within
c 1. (a) of s. 14 (5) as expenditure in connection with land or its
administration, and they amounted to Rs.
26,057 in the year 1358 Fasli. For the year
1357 Fasli, the amount debatable to these items from Rs. 14,390 will have to be
determined.' The evidence before us is not sufficient to state the exact
We set aside the answer of the High Court,
and answer the third question in the affirmative, to the extent indicated here.
In view of the partial success in these
appeals, the parties shall bear their own costs in this Court.
A appeals allowed in part.