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1948 Supreme(Cal) 204
CALCUTTA HIGH COURT
Harries, C.J, Mukherjea, J.
MAHARAJA BIKRAM KISHORE OF TRIPURA - Appellant
Versus
PROVINCE OF ASSAM. - Respondent
Income-tax Reference No. 7 of 1943
Decided On : 30-03-1948
Headnote:
Taxation - Indian State - Agricultural Income Tax - Assam Agricultural Income Tax Act, 1939 - Section 28(5), 7, 19(1), 24(5), 30 - Whether an Indian ruler is liable to pay agricultural income tax in respect of income derived from property situated in British India - Whether the property in question is State property or personal property of the ruler - Whether the income tax authorities can re-open the assessment under Section 30 of the Act - Whether salami is agricultural income - Whether a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act - Held, that an Indian ruler is not liable to pay agricultural income tax in respect of income derived from State property situated in British India - Held, that the property in question is State property and not personal property of the ruler - Held, that the income tax authorities cannot re-open the assessment under Section 30 of the Act - Held, that salami is not income as a matter of law - Held, that a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act
Fact of the Case:
The assessee, the Maharaja of Tripura, was assessed to agricultural income tax in Assam for the years 1939-40, 1940-41 and 1941-42. The property in question was a large zemindary known as the Chakla Roshanabad, which was situated within the Province of Assam. The income tax authorities held that the income was that of the Tripura State, which was assessed as an association of individuals. The Appellate Assistant Commissioner held that the zemindary belonged to the Maharaja of Tripura personally and that he was liable to pay taxation in the Province of Assam. The Maharaja appealed to the Assam Board of Agricultural Income Tax, which referred the matter to the High Court.
Finding of the Court:
The Court held that the Maharaja of Tripura was not liable to pay agricultural income tax in respect of income derived from State property situated in British India. The Court held that the property in question, Chakla Roshanabad, was State property and not personal property of the ruler. The Court also held that the income tax authorities could not re-open the assessment under Section 30 of the Act. The Court held that salami is not income as a matter of law. The Court held that a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act.
Issues: The main issue before the Court was whether the Maharaja of Tripura was liable to pay agricultural income tax in respect of income derived from the zemindary of Chakla Roshanabad, which was situated in British India. The Court also had to consider whether the property was State property or personal property of the ruler, whether the income tax authorities could re-open the assessment under Section 30 of the Act, whether salami was agricultural income, and whether a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act.
Ratio Decidendi: The Court held that an Indian ruler is not liable to pay agricultural income tax in respect of income derived from State property situated in British India. The Court reasoned that Indian rulers are not fully independent, but they are treated as independent sovereigns under international law. The Court also held that the property in question, Chakla Roshanabad, was State property and not personal property of the ruler. The Court reasoned that the zemindary was settled with the then ruler in his capacity as ruler, and that the British authorities had not returned the property to the State. The Court also held that the income tax authorities could not re-open the assessment under Section 30 of the Act. The Court reasoned that the income tax authorities had already considered the income and had held that it was not assessable. The Court also held that salami is not income as a matter of law. The Court reasoned that salami is a single payment made to purchase the general right to enjoy the benefits granted by a lease. The Court also held that a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act. The Court reasoned that the deduction is 15 per cent of the total amount of rent which accrued due, and not 15 per cent of the total amount of rent collected.
Final Decision: The Court held that the Maharaja of Tripura was not liable to pay agricultural income tax in respect of income derived from the zemindary of Chakla Roshanabad. The Court also held that the income tax authorities could not re-open the assessment under Section 30 of the Act. The Court held that salami is not income as a matter of law. The Court held that a deduction of 15 per cent of the arrears of rent due but not realized during the accounting period should be made under Section 7(c) of the Act.
JUDGMENT
HARRIES, C.J. - This is a reference made by the Assam Agricultural income tax Board u/s 28(5) of the Assam Agricultural income tax Act, 1939. The reference is made in respect of the assessment to agricultural income tax of the assessee, His Highness the Maharaja of Tripura, for the years 1939-40, 1940-41 and 1941-42.
The facts giving rise to this reference can be shortly stated follows : The Assam Agricultural income tax Act (Act IX of 1939) was passed in the month of August, 1939, and was to have effect from the month of April of that year. A notice u/s 19(1) of the Act was served upon a pleader who described himself as Am-Muktear of His Highness the Maharaja of Tripura calling upon him to make a return of the agricultural income of His Highness for the year 1939-40. The Am-Muktear filed an objection alleging that there was no necessity for a return to be made as the property of the Maharaja or of the Tripura State in Assam was part of the State property and, therefore, not assessable to the Assam agricultural income tax. The property in question was a large zemindary known as the Chakla Roshanbad which was situate within the Province of Assam. It appears that the income tax Officer accepted the contention of the Am-Muktear and no assessment was made.
By an order dated May 27, 1941, the Agricultural income tax Officer, however, re-opened the matter u/s 30 of the Act and issued a notice on the Assistant Manager of the Tripura Raj estate calling upon him to make a return of the income for the year 1939-40. The Am-Muktear of the Tripura State filed a return of the agricultural income under protest and eventually the Agricultural income tax Officer found the agricultural income to be Rs. 66,830 and assessed the tax at Rs. 4,639-1-0. The income was held to be that of the Tripura State which was assessed as an association of individuals.
No steps were taken for some time to make an assessment for the year 1940-41. However, on May 27, 1941, notice u/s 30 of the Assam Act was served on the Assistant Manager of the Tripura State alleging that the income for that year had escaped assessment and calling upon him to file a return. A return was filed under protest and eventually the agricultural income was assessed at Rs. 66,541 and the tax at Rs. 9,233. Again the assessee was stated to be an association of individuals.
Proceedings for the assessment year 1942-42 were started on July 7, 1941. A return of income was filed under protest and eventually the total agricultural income was assessed at Rs. 65,411 and the tax payable for the year 1941-42 was assessed at Rs. 9,056-7-0, the assessee again being described as an association of individuals.
Being dissatisfied with the assessments for the years 1939-40, 1940-41 and 1941-42 His Highness the Maharaja of Tripura on April 20, 1942, filed an appealed the matter came in due course before the Appellate Assistant Commissioner of Agricultural income tax who disposed of the three appeals by an order dated July 26, 1943. He held that the zemindary known Chakla Roshanabad belonged not to the Tripura State s suggested but to the Maharaja of Tripura personally and that with respect to this zemindary the latter was a zemindary and British subject and, therefore, liable to pay taxation in the Province of Assam. He did not accept the view of the Agricultural income tax Officer that the assessee was an association of individuals and he amended the assessment making the Maharaja personally the assessee.
Being dissatisfied, His Highness the Maharaja on September 18, 1943, filed three petitions requiring the Assam Board of Agricultural income tax to make a reference u/s 28(2) of the Act to the High Court for determination of certain questions of law.
The Assam Agricultural income tax Board on November 13, 1943, stated a case by which it referred seven questions for the determination of the High Court. The matter came before this Court and by a judgment dated April 25, 1945, Derbyshire, C.J., and Gentle, J.
