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SUPREME COURT OF INDIA
l7th July, 1961
S.K. DAS, M. HIDAYATULLAH AND J.C. SHAH, JJ:
Rajah S. V. Jagannath Rao, Appellant
Versus
Commissioner of Income-tax, Hyderabad, Respondent.
Civil Appeals Nos. 166-168 of 1959.
Advocates appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate (Mr. K. B. Choudhuri, Advocate, with him), for Appellant; Mr. K. N. Rajagopal Sastri, Senior Advocate (Mr. D. Gupta, Advocate, with him), for Respondent.
INCOME TAX - Hyderabad Income-tax Act, 1357 Fasli - Validity - Whether the Act is ultra vires the legislature in so far as it seems to levy a tax on Jagirs and Samasthan? - Whether the provision relating to the taxation of income of 1356-F in the Hyderabad Income-tax Act is intra vires ? - Whether the sum of Rs. 14,390 and Rs. 33,079 or a part thereof could be allowed as revenue deduction under S. 14 (5) (a) or 14 (5) (b) of the Hyderabad Income-tax Act?
Fact of the Case:
The appellant, Rajah S. V. Jagannath Rao, was the Jagirdar of Jatprole Samasthan in the former Hyderabad State. He challenged the validity of the Hyderabad Income-tax Act, 1357 Fasli, claiming that it was ultra vires the legislature and that it could not affect the income of the year 1356 Fasli because it came into force only from Azur 1, 1357 Fasli. He also claimed to deduct certain expenses under S.14 (5) (a) and (b) of the Act.
Finding of the Court:
The Court held that the Hyderabad Income-tax Act, 1357 Fasli, was not ultra vires the legislature and that it could validly levy a tax on Jagirs and Samasthan. The Court also held that the provision relating to the taxation of income of 1356-F in the Act was intra vires . However, the Court allowed the appellant to deduct certain expenses under S. 14 (5) (a) and (b) of the Act, holding that these expenses were incurred in connection with land and its administration.
Issues: 1. Whether the Hyderabad Income-tax Act is ultra vires in so far as it seems to levy a tax on Jagirs and Samasthan? 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. 33,079 or a part thereof could be allowed as revenue deduction under S. 14 (5) (a) or 14 (5) (b) of the Hyderabad Income-tax Act?
Ratio Decidendi: 1. The Court held that the Hyderabad Income-tax Act, 1357 Fasli, was not ultra vires the legislature because it was passed with the assent of the Ruler, which was admittedly given. The Court also held that the Ain, which prohibited the introduction of certain kinds of bills in the Assembly, was not a supreme law such as a Constitution, the limits imposed by which could not be exceeded even by the Nizam. 2. The Court held that the provision relating to the taxation of income of 1356-F in the Act was intra vires because it was passed with the assent of the Ruler. 3. The Court held that 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 fell within cl. (a) of S. 14 5. as expenditure in connection with land or its administration.
Final Decision: The Court partly allowed the appeals, setting aside the answer of the High Court and answering the third question in the affirmative, to the extent indicated.
Judgment
HIDAYATULLAH, J. : The appellant, Rajah 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 and1333 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.
2. 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 legislature. For the account year 1356 Fasli, corresponding to the assessment year, 1357 Fasli, 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 S.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 Samasthan?
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. 33,079 or a part thereof could be allowed as revenue deduction under S. 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, 1956 and April 9, 1957, and filed the present appeals.
3. The second question mentioned above is covered by the decisions of this Court in Union of India v. Madan Gopal Kabra, 1954 S C R 541 and Rajputana Mining Agencies Ltd. v. Union of India, Civil Appeal No. 26 of 1956, D/- 31-8-1960 and was, therefore, rightly answered against the appellant. Mr. A. 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 appeal. 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.
4. 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 Aim, 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 relations of His Exalted Highness with the holders of Samasthas 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."
5. 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 i
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