Case ID: 1293

Judgment:
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. A.V. Viswanatha Sastri and K. R. Choudhri	 for the appellant. K.N. 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. 14(5)(a) 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 ? 2.Whether the provision relating to the taxation of income of 1356 F in the Hyderabad Income tax Act is intra vires ? 3.Whether the sum of Rs. 14	390 and Rs. 38	 079 or a part thereof	 could be allowed as revenue deduction under section 14(5)(a) or 14(5)(b) 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: (8)The relation of His Exalted e Highness with the holders of Samasthanis and Jagirdars and with such other grantees as derive grants from sanads. (9)The 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) A.I.R. 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. 14	390 was claimed as expenses under a. Act (5) (a) or s.14(5)(b) of the Hyderabad Income tax Act. A sum of Rs. 38	079 was similarly claimed for the assessment year 1358 Fasli. The sum of Rs. 14	390 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. 38	079 for the following year consisted of these items (a) Stables and elephants Rs. 16	907 (b) Festivals and Jatras Rs. 789 (c) Charity and subscriptions Rs. 11	233 (d) Body guards Rs. 9	150 _______________ Rs. 38	079 _______________ The Income tax Appellate Tribunal allowed these expenses as being admissible under cls. (a) and (b) of section 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 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 : (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 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: (a)all 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 ; (b)any compulsory expenditure incurred by such assessee under any law in force and (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. 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. 26	057 in the year 1358 Fasli. For the year 1357 Fasli	 the amount debatable to these items from Rs. 14	390 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 grounds(1) 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	 (2)that 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 1	1357 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. (2)that 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. (3)that 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 14(5)(a) of the Act. It was accordingly deductible for purposes of income tax.