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Supreme Court Of India
COMMISSIONER OF INCOME TAX,andhra PRADESH
Versus
H. E. H. Mir Osman All Bahadur
Decided On : October 25, 1965
INCOME TAX - Assessment year 1950-51 and 1951-52 - Whether the assessee, H. E. H. the Nizam of Hyderabad, was liable to tax under the Indian Income-tax Act, 1922, in respect of any part of his income - Whether the assessee enjoyed immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950 - Whether the assessee was entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India - Held, assessee was liable to tax under the Indian Income-tax Act, 1922, in respect of any part of his income - assessee did not enjoy immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950 - assessee was not entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India.
Fact of the Case:
The assessee, H. E. H. the Nizam of Hyderabad, was assessed to income-tax for the assessment years 1950-51 and 1951-52. The assessee contended that he was not liable to tax under the Indian Income-tax Act, 1922, as he was a sovereign ruler and enjoyed immunity from taxation. The assessee also contended that he was entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India.
Finding of the Court:
The Court held that the assessee was liable to tax under the Indian Income-tax Act, 1922, in respect of any part of his income. The Court also held that the assessee did not enjoy immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950. The Court further held that the assessee was not entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India.
Issues: 1. Whether the assessee was liable to tax under the Indian Income-tax Act, 1922, in respect of any part of his income. 2. Whether the assessee enjoyed immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950. 3. Whether the assessee was entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India.
Ratio Decidendi: 1. The assessee was liable to tax under the Indian Income-tax Act, 1922, in respect of any part of his income because he was not a sovereign ruler and did not enjoy immunity from taxation. 2. The assessee did not enjoy immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950 because he was not a sovereign ruler on that date. 3. The assessee was not entitled to exemption from payment of income-tax and super-tax under item 8 of the Notification dated 21-3-1922, issued by the Finance Department of the Government of India because the securities in question were not held by the trustees on behalf of the assessee as his private property.
Final Decision: The Court answered the questions REFERRED TO to it by the High Court as follows: 1. Question 1: in the affirmative. 2. Question 2: in the negative. 3. Question 3: in the negative. 4. Question 4 (i): in the affirmative. 5. Question 4 (ii): the assessee was exempt from payment of income-tax, but he was not exempt from payment of super-tax. 6. Question 4 (iii): the assessee was exempt from payment of income-tax, but he was not exempt from payment of super-tax. 7. Question 4 (iv): in the negative.
Judgment
K. SUBBA RAO
( 1 ) THESE four appeals by special leave granted by this Court are preferred TO against the judgment of a Division Bench of the Andhra Pradesh High Court at Hyderabad in a case REFERRED TO to it by the Income-tax Appellate Tribunal, Hyderabad Bench, under S. 66 (1) of the Indian Income-tax Act, 1922, hereinafter called the Act, in respect of assessments made on H. E. H. the Nizam of Hyderabad for the assessment years 1950-51 and 1951-52.
( 2 ) THE Income-tax Officer, B Ward, Hyderabad-Deccan, by his orders, dated 15/02/1955, and 31/03/1956, rejected the objections raised by the assessee and assessed him to income-tax for the said two years. Against the said orders the assessee filed two appeals before the Appellate Assistant Commissioner, Hyderabad, who by his orders gave some relief in respect of the said assessments. On further appeals by the assessee, the Income-tax Appellate Tribunal, Hyderabad Branch, allowed the appeals of the assessee in part and ordered the assessments to be revised accordingly. At the instance of the assessee, the Income-tax Appellate Tribunal drew up a statement of case and REFERRED TO four questions to the High Court of Andhra Pradesh for its decision. On 4/07/1961, the High Court answered some of the questions in favour of the assesse and others against him. The Commissioner of Income-tax filed two appeals to this Court, being Civil Appeals Nos. 46 and 47 of 1964, in so far as the High Courts judgment went against the Revenue; and the assessee filed two appeals, being Civil Appeals Nos. 48 and 49 of 1964 against that part of the High Courts judgment which rejected his contentions.
( 3 ) TO avoid prolixity and repetition we shall state the relevant facts in considering each of the questions REFERRED TO to the High Court.
( 4 ) QUESTIONS 1 and 3 may be considered together. The said questions read:
QUESTION 1.-"whether in the circumstances of the case and having regard to International Law and construction of Municipal Laws and/or the covenant dated 25-1-1950 between the Assessee and the Government of India, the Assessee was liable to tax under the Indian Income-tax Act, 1922, in respect of any party of his income.
QUESTION 3.-"whether, in any event, the Assessee enjoyed immunity from taxation under the Indian Income-tax Act, 1922, in respect of income which accrued or arose to him or was received by him upto 26-1-1950.
THESE two questions raise the following points: (1) Whether under International Law the assessee is immune from taxation in respect of the assessment year 1950-51 : and (2) whether, having regard to the said Covenant dated 25-1-1950, he was not liable to tax under the Indian Income-tax Act, 1922. The High Court held that under the International Law, the assessee being a sovereign upto 25-1-1950 his income upto that date was immune from taxation and that, the Indian Income-tax Act not having expressly amended the International Law in its application to India, his income till that date was not liable to tax under the Income-tax Act. As a corrollary from the said conclusion, the High Court held that as the assessee ceased to be a sovereign from 26-1-1950 the income accrued to him thereafter was liable to tax. The High Court rejected the contention of the assessee that he was exempted from the liability to pay income-tax under the Covenant entered into by him with the Government of India at the time of merger.
( 5 ) THE argument based upon the Covenant may easily be disposed of. The relevant articles of the Covenant read as follows:
ARTICLE 3.-His Exalted Highness the Nizam of Hyderabad and the members of his family shall be entitled to all the personal privileges and titles enjoyed by them whether within or outside the territories of the Dominion before 15-8-1947.
ARTICLE 4.- The Government of India guarantees the succession according to the laws and customs of the Gaddi of the State and the personal rights, privileges, dignities and titles of His Exalted Highness the N
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