Case: Rajah S. V. Jagannath Rao Vs. Commissioner Of Income-Tax, Hyderabad

consider the third question. In the assessment year 1957 Fasli, a, sum of Rs. 14,390 was claimed as --expenses under S. 14 (5) (a) or S. 14 (5) (b) of the Hyderabad Income-tax Act. A sum of Rs. 33,079 was similarly claimed for the assessment year 1358 Fasli. The sum of Rs.14,390 has been 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. 38,079 for the following year consisted of these items :(a) Stables and elephants Rs. 16,907(b) Festivals JatrasRs. 789(c) Charity and subscriptions Rs. 11,233(d) Body Guards Rs. 9,150Rs. 38,07910. The Income-tax Appellate Tribunal allowed these expenses as being admissible under cls. (a) and (b) of S. 14 (5). 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 tennure was created and continued. 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 on the statement of the case. In the result, the answer to the question is in the negative."11. 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 Baithak which under proviso 2 and Explanation respectively of cl. (4) of S. 2, is deemed to be non-agricultural income, such income, profits and gains shall be computed after making the following allowances ;(a) All 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.(b) Such necessary expenditure as the assessee may incur under any law.(c) Five 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 rentals and the income which under the provisions of S. 2 (4) is deemed to be non-agricultural income, all such incomes, profits and gains shall be computed after making the following allowances, namely :(a) all such expenditure, not being in the nature of 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 ;( b) any compulsory expenditure incurred by such assessee under any law in force ;(c) in 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.12. 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 of elephants, stables, bodyguards, etc., is not entirely for the Jagirdars 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 a jagir. Elephants, drummers and bodyguards are used on occasions for administrative 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 cl. (a) of S. 14 5. as expenditure in connection with land or its administration, and they amounted to Rs. 26,057 in the year 1358 Fasli.For the year 1357 Fasli, the amount debitable to these items from Rs. 14,390 will have to be determined. The evidence before us is not sufficient to state the exact amount.13. We set aside the answer of the High Court, and answer the third question in the affirmative, to the extent indicated here.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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: (AIR 1954 SC 158  ) and Rajputana Mining Agencies Ltd. v. Union of India, Civil Appeal No. 26 of 1956, D/- 31-8-1960 : (AIR 1961 S C 56), and was, therefore, rightly answered against theshall, 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.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.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 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.The first question was thus answered correctly by the HighHigh 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 of elephants, stables, bodyguards, etc., is not entirely for the Jagirdars 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 a jagir. Elephants, drummers and bodyguards are used on occasions for administrative 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 cl. (a) of S. 14 5. as expenditure in connection with land or its administration, and they amounted to Rs. 26,057 in the year 1358 Fasli.For the year 1357 Fasli, the amount debitable to these items from Rs. 14,390 will have to be determined. The evidence before us is not sufficient to state the exact amount.13. We set aside the answer of the High Court, and answer the third question in the affirmative, to the extent indicated here.