Lord Justice Luxmoore:-

The appellant was at the date of his assessment; for income tax for the year ending 31st March, 1932, the proprietor of an estate known as the Kanika Raj or Killah Kanika situate in and forming part of the tract of land formerly known as the Rajwara Orissa. This estate is hereinafter referred to as Kanika. The assessment was made by an order dated 11th March 1932, by the appropriate Income-tax officer. In making it the officer took into account certain sums accruing to the appellant by virtue of his ownership of Kanika from sources admitted to be non-agricultural. The appellant in due course appealed to the Assistant Commissioner of Income-tax against this assessment upon the ground (among others) that all income which accrued to him by virtue of the ownership of Kanika was exempted from liability to income tax by virtue of a Treaty engagement, Kaoolnama, made on 22nd November 1803, by a predeceasor in title to Kanika with the Commissioners of the East India Company for the Soobah of Cuttack. On 13th October 1932 the Assistant Commissioner rejected the appellant's contention with regard to the Treaty. By petition dated 23rd November 1932, the appellant requested the respondent, who is the Commissioner of Income-tax for Bihar and Orissa, to refer to the High Court under the provisions of S. 66 (2), Income-tax Act, 1922, the question whether on the terms of the Kaoolnama dated 22nd November, 1803, the petitioner's (i. e. the appellant's incomes from his Kanika Raj are exempt from taxation under the Indian Taxation Act, 1922 ?

The reference to the Indian Taxation Act, 1922, is admittedly a clerical error for the Indian Income-tax Act, 1922 (hereinafter referred to as “The Act”). The respondent on 17th July 1934, refused the appellant's request, and on 6th February, 1935, the appellant presented a petition to the High Court of Patna under S. 66 (3), of the Act for an order requiring the respondent to refer the question set out above to that Court. On 21st February 1935, the High Court ordered the respondent to state a case raising the said question for the decision of the Court.

The respondent accordingly drew up a statement of the case (hereinafter called the statement) which was on 20th August 1935, referred to the High Court. The respondent included in the statement an expression of his opinion that the said question should be answered in the negative. On 14th September 1936, the High Court expressed an opinion in agreement with that of the respondent, and dismissed the appellant's application with costs. The appellant obtained special leave to appeal from this order, and has in accordance therewith appealed to His Majesty in Council. The appellant claims that the said question ought to be answered in the affirmative, and that it should be declared that he is exempt from liability to income-tax in respect of the non-agricultural income derived by him from Kanika.

The statement sets out the history of the relationship of the East India Company after its occupation of Orissa with 23 feudal chieftains who owned land then forming part of the Rajwaras of Orissa. One of these feudal chieftains was the then owner of Kanika, through whom the appellant's title is derived. In or about 1803 the East India Company, by the Commissioners of the Soobah of Orissa, entered into treaties with these feudal chieftains. The kaoolnama of 22nd November 1803, is one of such treaties. It is stated in para. 9 of the statement that after the execution of the treaties changes took place in the condition and status of many of the 23 feudal chieftains, and that Kanika was one of those who did not retain its status as a feudatory State of Orissa, while in para. 12 of the statement it is stated that the appellant's present status is the same as that of a proprietor of a permanently settled estate in Orissa created by S. 35 of Regulation 12 of 1805 which is in the following terms :

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