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
AV Viswanatha Sastri and K R Choudhri for the appellant
KN Rajagopal Sastri and D Gupta for the respondent
July 17
The Judgment of the Court was delivered by HIDAYATULLAH J
The appellant Rajah Hid section 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 850 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
145a 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  2Whether the provision relating to the taxation of income of 1356 F in the Hyderabad Income tax Act is intra vires  3Whether the sum of Rs 14390 and Rs 38 079 or a part thereof could be allowed as revenue deduction under section 145a or 145b 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
851 The second question mentioned above is covered by the decisions of this Court in Union of India vs Madan Gopal Kabra 1 and Rajputana Mining Agencies Ltd vs 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 sections
8 and 9 of section 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 8The relation of His Exalted e Highness with the holders of Samasthanis and Jagirdars and with such other grantees as derive grants from sanads
9The powers of His Exalted Highness over the present or future grants whether they be in the form of land or cash
1  2  852 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 vs 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 AIR 1955 C 352 853 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 vs 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 854 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 vs 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 14390 was claimed as expenses under a Act 5 a or s145b of the Hyderabad Income tax Act
A sum of Rs 38079 was similarly claimed for the assessment year 1358 Fasli
The sum of Rs 14390 has been 1   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 38079 for the following year consisted of these items a Stables and elephants Rs 16907 b Festivals and Jatras Rs 789 c Charity and subscriptions Rs 11233 d Body guards Rs 9150 _______________ Rs 38079 _______________ The Income tax Appellate Tribunal allowed these expenses as being admissible under cls
a and b of section 145
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 856 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  aAll 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
bSuch necessary expenditure as the assessee may incur under any law
cFive 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 857 and gains shall be computed after making the following allowances namely aall 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  bany compulsory expenditure incurred by such assessee under any law in force and cin 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 858 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 the administration of an estate such as jagir
Elephants drummers and bodyguards are used on occasions for administ rative 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 section 14 5 as expenditure in connection with land or its administration and they amounted to Rs 26057 in the year 1358 Fasli
For the year 1357 Fasli the amount debatable to these items from Rs 14390 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


Summary:
The appellant who was a jagirdar in the former Hyderabad State was assessed to income tax and super tax for the assessment years 1337 Fasli and 1358 Fasli corresponding to the years 1948 49 and 1949 50 under the provisions of the Hyderabad Income tax Act 1357 Fasli which was passed by the Hyderabad Legislative Assembly and came into force on Azur 1 1357 Fasli
The appellant challenged the validity of the assessment on the grounds1 that under the Hyderabad Legislative Assembly Ain the Assembly was prohibited from introducing bills which dealt with laws affecting the relations between the holders of jagirs on the one hand and the Nizam on the other that the provisions of the Act in so far as they seemed to levy a tax on jagirs amounted to an encroachment upon the relations between the jagirdars and the Nizam and that the bill introduced in contravention of the Ain was void ab initio even though it had been assented to by the Nizam 2that the Act could not affect in any case the income for the account year 1356 Fasli corresponding to the assessment year 1357 Fasli because the Act came into  force only from Aur 11357 Fasli and 3 that the Income tax Officer erred in disallowing the claim for deduction of the amount spent on account of maintenance of elephants stables drummers bodyguards etc in connection with management of the jagir Estate and in treating the amount as personal expenditure
Held 1 that the Hyderabad Income tax Act 1357 Fasli did not affect the relations between the holders of Jagirs and the Nizam and that even if it could be said to affect indirectly these relations the Act having been passed with the assent of the Nizam was valid and the question whether it could be introduced in the Legislative Assembly did not arise as it must be regarded as a law emanating from the Nizam the supreme legislator in the State whose laws promulgated in any manner binding upon the subject
849 Ameer un Nissa Begam vs Mahboob Begum A I R 1955 section C 352 Director of Endowments Government of Hyderabad vs Akram Ali A 1 R and Madhaorao vs State of Madhya Bharat   applied
2that the income for the 1356 Fasli was rightly assessed tinder the provisions of the Act for the assessment year 1357 Fasli
Union of India vs Madan Gopal Kabra  and Rajputana Mining Agencies Ltd vs The Union of India   followed
3that the maintenance of elephants stables drummers and bodyguards by the jagirdar was not entirely for his personal or private ends but must be considered part and parcel of the administration of the estate and the expenditure for such maintenance must be regarded as one incurred in connection with land and its administration within the meaning of section 145a of the Act
It was accordingly deductible for purposes of income tax