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 respondent. 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 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 Court :
"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 present appeals. 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 also. 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 or-cash.". (1) (1954) S.C.R.,541. (2) (1961) 1 S.C.R. 453 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 sovereignty- and 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.
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. 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 expenditure. 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 con-
tinued. 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 authorities.
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," 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 non-
Khalsa 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 non-
agricultural 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 welfare.
(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 provi-
sions of Section 2 (4) is deemed to be ,non-
agricultural’ income, all such incomes,
profits
and gains shall be computed after making the
following allowances namely:
(a)all such expenditure,, not being, in the
natureof 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 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 of- the Estate. Such equipage is considered part and parcel of theadministration 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 amount. 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.