# !6 COL. HIS HIGHNESS RiUA SIR HARINDER SINGH BRAR BANSBAHADUR v. COMMISSIONER OF INCOME-TAX, PUNJAB & ORS

- **Citation:** [1972] 2 S.C.R. 16
- **Court:** Supreme Court of India
- **Decided:** 1971-10-15
- **Case number:** Civil Appeals Nos. 34 and 35 of 1969
- **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy, K. K. Mathew
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-col-his-highness-riua-sir-harinder-singh-brar-bansbahadur-v-commissioner-of-5623
- **Pages:** 12

## Headnote

Income-tax Act, 1922-Ruler of erstwhile princely state-If liable to
tax itJ. resoect of versonal income earned in British India.
Princely State-Ruler-Status in International law.
The appellant, who was the ruler of an erstwhile princely state, challenged the assessments made against him for the assessment years 1946-47
and 1947-48 in respect of his personal income earned in British India,
on the ground that he being a Ruler was immune from taxation on every
source of income.
On the question whether the appellant could claim
immunity from tax under the Indian Income-tax Act, 1922 in respect of
the income earned in British India,
HELD : The appellant was not entitled to any immunity and, therefore was Hable to tax.
(a) Jn International law the head of a State representing the State as
such enjoys certain extra territorial privileges in other States.
Some of
these privileges and immunities are political and are generally the subject
of executive and administrative instructions.
There are others in rel".ltion
to the applicability of the municipal laws, the immunity from which are
either recognised by the common law and which courts wilI not enforce,
as in England, or are dealt with by those laws themselves by affording the
necessary exemption; yet others are regulated by treaties and international
conventions.
Whatever might be the various aspects of the privileges and immunities
enjoyed by the Heads of State, the rulers of the erstwhile princely states
did not enjoy the same or similar privileges as those of the Heads of States
recognised as members of the family of Nations in International law. From
the very nature of these princely states it was clear that they were subject
to the sovereignty and protection of the British Crown. While their relations with the Crown. were governed by treaties, though initially on terms
of equality, when the British Crown in India became paramount, the relationship between it and the rulers became unequal with the result that
these treaties became subject to the reservation that they could be disregarded where the interests of the British Empire or those of the subjects
of the princely states were involved.
The status of these States as inter·
national personalities was negatived by the British Government even to~
wards the end of the 19th century and it :had been maintained that the
principles of International law had no bearing upon the relations between
the Government of India as representing the Queen Empress on the one
hand and the native states under the suzerainty of Her Majesty on the
other. Again, though the status of these rulers in England was recognised
as being on par with other rulers in the matter of personal immunity from
legal proceedings in so far as British India was concerned, these were the
subject matter of legislation under which ·the ruling princes in India, notwithstanding that they were not recognised as international personalities.
were accorded this immunity. Therefore, any exemption the Rulers could
clalm had to be under the relevant taxing acts. There is no such exemption under the Income-tax Act. Besides, the fact that the income of the
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rulers derived from Central Government securities was specifically exemp!-
ed by s. 60 implied that the rulers were not exempted from other provisions of law. The provisions in certain statut~s spec1fi.cally makmg ev~ry
Ruler of an fodian State liable to tax only rmhtate agamst the assumptton
of immunity from taxation of the property of the Rulers; at any rate such
provisions might hav•' been ex abundant ceute/a. f21D-22B. 240].
H. H. Maharaiadhiraia Madhav Rao Jivaii Rao Bahadur of Gll'alior
etc. v. Union of llldia, [,1971] I S.C.C. 85, referred to.
(b) Furthe·r it is now concluded by a decision of this c;ourt in Cont:
missioner of Income-tax, Andhra Pradesh v. H. E. H. Mir Osm~n Ah
Bahadur, [19661 2 S.C.R. 296 that the ruler of a princely state did. not

## Text

!6
COL. HIS HIGHNESS RiUA SIR HARINDER SINGH BRAR
BANSBAHADUR
v.
COMMISSIONER OF INCOME-TAX, PUNJAB & ORS.
October 15, 1971
(C. A. VAIDIALINGAM, P. JAGANMOHAN REDDY AND
K. K. MATHEW, JJ.J
Income-tax Act, 1922-Ruler of erstwhile princely state-If liable to
tax itJ. resoect of versonal income earned in British India.
Princely State-Ruler-Status in International law.
The appellant, who was the ruler of an erstwhile princely state, challenged the assessments made against him for the assessment years 1946-47
and 1947-48 in respect of his personal income earned in British India,
on the ground that he being a Ruler was immune from taxation on every
source of income.
On the question whether the appellant could claim
immunity from tax under the Indian Income-tax Act, 1922 in respect of
the income earned in British India,
HELD : The appellant was not entitled to any immunity and, therefore was Hable to tax.
(a) Jn International law the head of a State representing the State as
such enjoys certain extra territorial privileges in other States.
Some of
these privileges and immunities are political and are generally the subject
of executive and administrative instructions.
There are others in rel".ltion
to the applicability of the municipal laws, the immunity from which are
either recognised by the common law and which courts wilI not enforce,
as in England, or are dealt with by those laws themselves by affording the
necessary exemption; yet others are regulated by treaties and international
conventions.
Whatever might be the various aspects of the privileges and immunities
enjoyed by the Heads of State, the rulers of the erstwhile princely states
did not enjoy the same or similar privileges as those of the Heads of States
recognised as members of the family of Nations in International law. From
the very nature of these princely states it was clear that they were subject
to the sovereignty and protection of the British Crown. While their relations with the Crown. were governed by treaties, though initially on terms
of equality, when the British Crown in India became paramount, the relationship between it and the rulers became unequal with the result that
these treaties became subject to the reservation that they could be disregarded where the interests of the British Empire or those of the subjects
of the princely states were involved.
The status of these States as inter·
national personalities was negatived by the British Government even to~
wards the end of the 19th century and it :had been maintained that the
principles of International law had no bearing upon the relations between
the Government of India as representing the Queen Empress on the one
hand and the native states under the suzerainty of Her Majesty on the
other. Again, though the status of these rulers in England was recognised
as being on par with other rulers in the matter of personal immunity from
legal proceedings in so far as British India was concerned, these were the
subject matter of legislation under which ·the ruling princes in India, notwithstanding that they were not recognised as international personalities.
were accorded this immunity. Therefore, any exemption the Rulers could
clalm had to be under the relevant taxing acts. There is no such exemption under the Income-tax Act. Besides, the fact that the income of the
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rulers derived from Central Government securities was specifically exemp!-
ed by s. 60 implied that the rulers were not exempted from other provisions of law. The provisions in certain statut~s spec1fi.cally makmg ev~ry
Ruler of an fodian State liable to tax only rmhtate agamst the assumptton
of immunity from taxation of the property of the Rulers; at any rate such
provisions might hav•' been ex abundant ceute/a. f21D-22B. 240].
H. H. Maharaiadhiraia Madhav Rao Jivaii Rao Bahadur of Gll'alior
etc. v. Union of llldia, [,1971] I S.C.C. 85, referred to.
(b) Furthe·r it is now concluded by a decision of this c;ourt in Cont:
missioner of Income-tax, Andhra Pradesh v. H. E. H. Mir Osm~n Ah
Bahadur, [19661 2 S.C.R. 296 that the ruler of a princely state did. not
acquire international personality and so could. not rely upon lntcrnat1onal
law for claiming immunity from taxation of his personal properties. [250]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 34 and
35 of 1969.
Appeals by special leave from the judgment and order dated
August 5, 1968 of the Punjab and Haryana High Court in lnccmetax Reference No. 40 of 1964.
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K. C. Puri, K. L. Mehta, S. K. Mehta and S. S. Hus;ain, for
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the appellant (in both the appeals).
B. Sen, P. L. Juneja, Badri Das Sharma for R. N .. Suc/11/Jey,
for the respondent (in both the appeals).
The Judgment of the Court was delivered by
P. Jaganmoban Reddy, J.
These
two
Appeals
are
by
Special Leave against the Judgment of the Punjab & Haryana
High Court answering the Referen:e under Section 66 (1) of the
Indian Income-tax Act 1922 (hereinafter referred to as 'the Act')
against the assessee-the Appellant.
The Appellant who
was
admittedly a Ruler of the erstwhile Faridkot State challenged the
assessments made against him for the years 1946-47 and 1947-48
with respect to which the accounting years were Vikram
year
2002 and 2003 corresponding to the period 13th April 1945 to
12th April 1946, and 13th April 1946 to 12th April 1947 respe<;tively.
The assessment in each of these years was made under
Sec. 34 read with Sec. 23 of the Act, as the assessee's income
from dividends and interest and capital gains earned
\Jy
the
assessee during the relevant accounting year in what was
then
British India had not been brought to tax.
The assessee objected to these proceedings and contended before the Income-tax
Officer that he being a Ruler of the Faridkot State was immune
from taxation on every source of income.
He could not therefore, by virtue; of his sovereignty be treated as an assessee for any
purpose under the Act.
lt was also contended that the notices
under Sec. 34 were time barred. The Income-tax Officer however, rejected these objections and held that though under the
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IS
SUPREME. G
'RT REPORTS
[1972] 2 s.c.R.
International Law the Rulers of Indian States were sovereigns
and immune from Municipal Laws of other countries, there was
no exemption as far as the personal incomes of the Rulers are
concerned from being taxed under the Act.
In that view he held
that notices under Sec. 34 were valid and accordingly made an
assessment.
The Appeal to the Appellate Assistant
Commissioner was without success, though
similar
contentions
were
raised before him with particular reference to the privileges which
the Rulers enjoyed under International Law poth in respect of
Civil and Criminal matters.
The assessee appealed against this
order to the Income-tax Appellate Tribunal where, however, there
was a divergence of view between the two Members and therefore
the matter was referred to the President of the Tribunal.
After
considerin.g the decisions in regard to the
exemption
of the
sovereign from all Civil and Criminal Laws of another State, the
Judicial Member held that no assessrnent could be made on the
assessee under the Act as he was the Ruler of a sovereign State
during the assessment years under consideration.
In this view
he did not express any opinion on the question of the legality of
the proceedings under Sec. 34 of the Act.
The Accountant
Member· however, after considering the various provisions in the.
Act whereby exemption was granted to the Rulers in regard to
certain types of income and the various decisions held that the
assessec was liable to assessment in respect of his personal income
~rising or accruing to him from British India from his private
properties.
He also held that the proceedings under Sec. 34 of
the Act were perfectly legal and valid.
In view of the difference
of opinion, the matter was referred to the President of the Tribunal under Sec. 5A (7) of the Act on the following question :
"Whether on the facts and in the circumsiances of
the case the assessee was immune from tax under the
Indian Income-tax Act on his
private income
viz.,
dividends and interest income as also the Capital Gains
earned in British India."
The President of the Tribunaf held in favour of the assessee by
relying on a decision of the Andhra Pradesh High .court in th~
case of H. E. H. Mir Osman Ali Khan Bahadur Nzzam .& Ra1permukh of Hyderabad v.
Commissioner
of IncomP.-Tax('),
where it was stated thus :
"Indisputably, a sovereign ruler enjoys.
!mmuni~y
from taxation under International Law and 11 1s only m
cases where this rule is superseded by express words
that this should be denied to him. If a
legislature
wants to depart from these principles and bring such
ii) Ci" No. 35 of 1959.
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ruler to tax, there must be clear indication in the enactment itself. In the absence of such express words, the
statute must be interpreted in conformity with International Law.
Simply because the Municipal Law did
not provide for such an exemption, the principles . of
International Law should not be regarded as
havmg
been superseded".
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In the aforesaid view the Andhra Pradesh High Court had held'
that notwithstanding the fact that His Exalted Highness
the
Nizam had Jost
the
character of a sovereign ruler after
26-10-1950, he is still immune from taxation in respect of the
income derived by him prior to that date.
Following this decision the President held that the assessee
was immune from taxation under the Act on his private income.
In view of this decision on an application by the Revenue under
Sec. 66 (1 ) of the Act the following question was referred to the·
High Court :-
"Whether on the facts and circumstances of
the·
case, the assessee was not liable to tax under the Indian
Income-tax Act,
1922, in respect of his
personal
income accruing or arising to him in British India in
the two assessment years 1946-47 and 1947-48."
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The High Court relying upon the decision of this Court in
Commissioner of Income-tax, Andhra Pradesh v. H. E. H. Mir
Osman Ali Bahadur(1), which reversed
the decision of the
Andhra Pradesh High Court referred to and relied upon by the
President of the Tribunal held against the assessee. It is contended before us that the facts and circumstances in the Nizam's
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case are totally different and the decision of this Court is clearly
distinguishable.
The learned Advocate contends that in
that
case the assessments related to the assessment years 1950-51 and
1951-52, the corresponding accounting year for which was
the
period between 1st April 1949 and 31st March 1950, and
1st
April 1950 and 31st March 1951 respectively. which years being
G after the inauguration of the Constitution on 26th January 1950.
clearly make the Act which was made applicable from 1st April
1950 to all the Part B States, applicable to the assessee.
But it
is submitted that in the case before us th.ere could be no question of Act being made applicable to Faridkot State as the assessment years and the accounting years are prior to the inauguration of the Constitution and the application of the Act.
The
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learned Advocate cited a large number of decisions in support
of his contention that the Native States in India had International
{l) 59 l.T.R. 666.
:20
SUPREME COURT REPORTS
(1972] 2 S.C.R.
;personality and their Rulers had immunity similar to those that
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were accorded to any other Head of a State under International
Law.
It was also argued that though these princely States in
India may have been 'protected States'; it was not necessary for
the recognition of the privileges and immunities of the Rulers of
such States to possess all the attributes of sovereignty and complete independence in support of which the decisions of Mighal/
v. Sultan of Jahore('), Duff Development Co. Ltd. v.
Govt. of
Ke/antan & Anr.("), Stathem v. Stathem & H. H. the Gaekwad
of Baroda( 3 ), were referred to.
It was therefore contended that
in this country also the position was the same as that recognised
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.by the Common Law of England for which proposition, decisions
were referred to from Punjab Recorder onwards.
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was also made to several cases pertaining more specifically to the
immunity enjoyed by the Rulers from payment of Income-tax on
the basis of their status under Internaiional Law.
These are :
The Patiala State Bank v. Commissioner of Income-tax,
Bombay('), Rani Amrit Kunwar v.
Commissioner of Income-tax,
C.P. & U.P.('), The Accountant General, Baroda State\". Commissioner of Income-tax, Bombay City (6 ), A. H. Wadia, as Agent
of the Gwalior Durbar v. Commissioner of Income-Tax,
Bombay('), and Maharaja Bikram Kishore of Ttipura v. Province
of Assam(').
On behalf of the Revenue reliance is placed on Commissioner
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of Income-tax Andhra Pradesh v. H. E. H. 'Mir Osman Ali E
Bahadur("), to sustain the Judgment under appeal and it is conceded that if this decision was not applicable to the facts and
circumstances of this case, the position as
contended by the
assessee would be that the Indian Rulers prior to the Constitution were granted immunity from taxation, and in any case this was
so in respect of the income from the property of the State as distinct from the private or perso.nal property of the Ruler though
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there were observations in some of the cases that it was difficult
to distinguish public or private property owned by a ruler.
At this stage we think it necessary to advert to one argument
adduced on behalf of the assessee namely that the Income-tax
authorities-particularly the Income-tax Officer,
had accepted
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the International status of the assessee and the immunity from
taxation of income from public property, but only rejected the
<:!aim for such immunity in respect of income from private or
.personal property.
It is therefore contended that the status of
(!) [18~4] l. Q. B. 149.
(3) (1912) Probate 92.
(5) XIV !TR 561.
(7) XVII !TR 63.
(9) 59 l.T.R. 666.
(2) [1924] A. C. 797.
(4) XI IT.R 617.
(6) XVI !TR 78.
(8) XVH !TR 220.
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the assessee as an international personality',is not in issue before:
us, what is in issue is whether his income from private property
is exempt from taxation.
We do not think this contention has
validity, because the High Court has specifically while rejecting
the second contention addressed on behalf of the assessee ruled
that the status of the assessee as a ruler of the Indian State could
not be equated with that of a sovereign in international
law.
Even the reference to the High Court does not limit or circumscribe the matter for consideration as contended for but on the
other hand enables us to deal with the question whether as an
erstwhile ruling prince the assessee can at all be entitled to the
immunity (rom taxation.
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In considering the question referred to by the Tribunal it
may be useful to examine briefly the basis and extent of the privilege and immunity enjoyed by Head of State in International
Law, particular! y having regard to the lengthy arguments
addressed before us.
In International Law the Head of a State
represent~ the State as such and not as an individual representing his own rights.
In that capacity he enjoys certain extra
territorial pfr •ileges in other States which are friendly
and in
peace, known as the receiving States, with the State he represents.
These are, ceremonial honours for himself, the Members of his
family and his retinue; special protection to
his person,
and
exemption from Criminal jurisdiction; the grant of extra territoriality, on the basis that one sovereign does not have any power
over the other, such as immunity from filing of suits against him
except where he is himself a plaintiff and from other civil processes; exemption from taxation rating and other fiscal
enactments and the invilobility of immovable property in which he 01
the representatives of the State accorded diplomatic immunity
reside etc.
Some of these privileges and immunities are political and are generally the subject of executive and administrative
instructions such as
ceremonial
honours,
Police
protection.
exemption from customs in accessabi!ity of their residences to
officers of Justice, Police or Revenue officials unless cor~ented to
by them.
There are yet others in relation to the applicability of
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the Municipal Laws, the immunity from which are either recog·
nised by the Common Law and which Courts will not enforce as
in England or are dealt with by those laws themselves by afford·
ing the necessary exemption.
There are yet others which may
be regulated by Treaties or international covenants.
Whatever
may be the various aspects of the immunity and privileges enjoy·
ed by the Heads of the State under the Laws of the Country
where questions relating to them ~rise, what WP. ar.e
co!1cerned
with at the very thresh-hold of this argument dealmg with
the
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imm11riity is whether the rulers of the erstwhile native States
a~
22
SUPREME COURT REPORTS
(1972] 2 S.C.R.
;they were called enjoyed the same or similar privilege.s as those
of the Heads of. States recognised as Members of the family of
nations in International Law.
It is clear from the very nature
of the native. States in India that they were subject to the sove·
reignty and protection of British Crown.
While their relations
with the Crown were governed by treaties, though initially on
terms of equality, as time went by and the British Crown in India
became paramount, the relationship between it and the Rulers
became unequal with the result that these treaties became subject
to the reservation that they could be disregarded where the
interests of the British Empire or those of the subjects of the
native States were involved.
When the Nizam claimed equality with the British Crown,
the then Viceroy Lord Reading informed him on 27th March
1926 that "The sovereignty of the British Crown is supreme in
India and therefore no Ruler of an Indian State can justifiably
claim to negotiate with the British Government on an equal
footing".
After giving a few illustrations to negative the claim
of the Nizam, the Viceroy proceeded to observe "other illustra·
tions could be added no less inconsistent than the foregoing with
the suggestion that the Government of your Exhalted Highness
and the British Government stand on a plane of equality ... (1).
This paramountcy was described by Shah, J, as he then was,
as
"brazen faced autocracy" in H. H. Maharajadhiraj Madhav Rao
Jivaji Rao Bahadur of Gwalior etc. v. U11ion of India(').
What
then becomes of the claim of these States or their rulers to
recognition as International personality.
The answer
to
this
specific question is furnished even towards th.e end of the 19th
Century.
The status of these native States as International per·
sonalities was negatived in the Notification of the
Government
published in Gazette of India Part I, dated 21st August, 1891 at
page 485, which was a resolution containing a proclamation
regarding the trial of accused persons in Manipur and the regrant
of the Manipur State.
In this regard the following passage at
page 488 is of interest:
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"The principles of the International law have no
bearing upon the relations between the Government of
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India as representing the Queen-Empress on the one
hand, and the Native States under the suzerainty of Her
Majesty on the other.
The paramount supremacy of
the former presupposes and implies the. subordination
of tl).e latter. In the exercise of their high prerogative,
the Government of India have, in Manipur as in other
11
protected States, the unquestioned right to remove by
(1) Vide Appendix 1 of the White Paper on Indian States.
(2) [1971] (l)S. C. C. 85-p. 161.
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administrative order any person whose presence in the
State. may seem objectionable.
They also have the
right to summon a Darbar through their political representative for the purpose of declaring their decision
upon matters connected with the expulsion of the exMaharaja .... through their Officers."
23
After stating that any one resisting the decision and not complying with orders will be liable to arres't, the declaration went on to
say:
"ln the opinion of the Governor-Ge11eral in Council any armed and violent resistance to such arrest was
an act of rebellion, and can no more be justified by a
plea of self-defence than could resistance to a police
officer armed with a Magistrate's warrant in
British
India."
In the recent case of this Court in H. H. Maharajadhiraja Madhav
Rao Jivaji Rao Sci1~dia Bahadur
of Gwalior('),
referred
to
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above the majority expressed the view that "the States had no
International personality".
Nonetheless the statns of these rulers
in England was recognised as being on par with other Rulers in
the matter of personal immunity from being sued in their Courts.
ln so far as British India was concerned these were governed
partly by Acts of the Legislatures particularly the provisions conE
tained in Civil Procedure Codes and by Notifications of the
executive under taxation laws as well as. by executive or administrative instructions relating to their privileges.
It is therefore apparent that in so far as this country is concerned the immunity from legal proceedings which is recognised
in the common law has been the subject matter of legislation
under which the ruling princes of India, notwithstanding that they
were not recognised as International personalities, were however
accorded this immunity.
Sec. 433 of the Code of Civil Proce'
<lure of 1882 and subsequently Sections 84 to 87 of the Civil
Procedure Code of 1908 deal with these
matters.
Gajendragadkar, CJ., in
Mirza AU Akbar Kashani
v.
United Arab
G Republic & Anr. (2), cited with approval the observations of
Strachey, J, in Chandu/al Khusha/ji v. Awed Bim Umar Sultan
Nawaz Jung Bahadur( 8 ), as correctly representing the result of
the. provisions of Sec. 433 as much as of those contained in Sec.
86(1).
It may 'be mentioned that Strachey, J, after
pointint,
out that in India before the enactment of Sec. 433 of the Code,
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the privilege of independent sovereign princes stood on exactly
the same footing as in England, observed :
(I) [1971] I S.C.C. 85--p. 161.
(2) [1%611 S.C.R. 319.
(3) 21 I. L, R. Born. 351 at 371-372.
24
SUPREME COURT REPORTS
[l 972] 2 S.C.R.
"No doubt the question of privilege now depends
on the construction of Sec. 433, and I am alive to the
danger of pressing too far an analogy between a rule
of international law and a specific enactment of the
Legislature."
It is apparent from a perusal of Sec. 86 of the Civil Procedure
Code that there is no absolute prohibition against a Ruler of a
foreign State being sued in India.
A Ruler can be sued with the
consent of the Central Government certified in writing by a Secretary to that Government.
It is also provided that such consent
should not be given unless it appears to the Central Government
that the Ruler has instituted a suit in the Court against the person desiring to sue him or by himself or another, trades within
the local limits of the jurisdiction of the Court, or is in possession of immovable property situate within those limits and is to
be sued with reference to such property or for money charged
thereon, or has expressly or impliedly waived the privilege accorded to him by this Section.
In view of these provisions the several cases cited by the
learned Advocate for the assessee which deal with immunity from
suits against ruling princes under the English law have no application.
In so far as the question whether there exists a rule of international law exempting a State or the property which it owns, from
taxation by a foreign State, is concerned, there seems to be no
uniform practice followed by the various States.
It is however
suggested that immunity from taxation "appears as
a logical
accompaniment of the principle of immunity of foreign
State
owned property from judicial process" and on this basis it is
sought to be contended that even personal, private property of
the Head of a State is exempt. It is unnecessary for
us
to
examine. this position because even if there was such an immunity the Rulers of an Indian State could only avail of it, if they
are recognised as internation·a1 personalities which, as we have
seen, they are not.
Any exemptions which they may be given,
must, in our view be under the relevant taxing Acts.
The learned Advocate for the Assessee however points out that if the Rulers
of Indian State were not exempted from tax apart from
the
statute, there was no need to make a provision in Sec. 3 of the
Bengal Agricultural Income-tax Act IV of
1944, specifically
making every Ruler of an Indian State liable to
Agricultural
Income-tax. On the other hand it would appear to us that this
provision would itself militate against the assumption of immunity from taxation of the property of the Rulers and at any rate
the legislature may have been acting ex abzmdanti cautale. lt
may however be noticed that in so far as the Income-tax Act is
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II. s. BARAR v. C,I.T. (Jaganmohan Reddy, J.).
25
concerned exemption of 1the Income of the Rulers derived from
Central Government securities was specifically given under Sec.
oO of the Act which implies that the Rulers were not exempt from
other provisions of law.
This position also finds support from
a case cited by the learned Author on the "Immunity from taxation on foreimn owned Property" in the America! Journal of
International Law XLI at page 239, where the Suprr~me Court
of Ceylon in the Suprintendent of the Government Soap Factory,
Bangalore v. CommissiOner of Income-tax, held that the profits
made in Ceylon by the Mysore Government Soap Factory could
be taxed by Ceylon without viola<tion of international law. Tlie
Ceylon Court held that the State of Mysore had no position in
international law and cauld not mvoke any immunity arising by
virtue of international law.
In any case so far as immunity from taxation of the income
from personal property of the Rulers of the Native States is con-
~erned this is now concluded by a decision of this Court in
the
Commissioner of Income-Tax, Andhra Pradesh v.
H.E.H. Mir
D Osman Ali Bahadur('). In that case the question directly arose
as to whether the Ruler of the Hyderabad State prior to 26th
January '50 could claim immunity from taxation under international Jaw, namely whether the assessee enjoyed immunity from
taxation under the Act in respect of income .which accrued or
arose to him, and which was received by him upto 26th January
1950. The learned .Advocate for the revenue had contended
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that under the International law, a foreign sovereign was not
immune from taxation in respect of his private properties situated
in the Taxing State; .even if there was such an immunity under
the international Jaw, the assessee being under the suzerainty or
the paramountcy of the British Crown, had never enjoyed the
status of a sovereign as understood in the international law and,
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therefore, was not governed by that law; and that in any event,
as on January 26, 19 50, the date when he became liable to tax,
he was no longer a sovereign and therefore he could not claim
exemption under the international law.
Respondent's Advocate
claimed that the assessee was not liable to Income-tax on the
ground that under the Act, income-tax was charged on. the
c,
assessee's income received during the accounting year and that
as during the accounting year the assessee was a ruling chief, he
was exempt from taxation under the international law.
He
argued that under the international law, as understood by English
Courts, a foreign sovereign was exempt from taxation, that the
said interpretation of the law had become the common law
c;>f
England and that the said common law was the law of India
H before the Constitution and it continued to have force thereafter
by reason of Article 372.
°(I). [1959] I.T.R. 666
3-L256S•.1pCl,72
26
SUPREME COURT REPORTS
[1972] 2 S.C.R.
We have noticed th.ese contentions to show that there is no
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validity in the submission of the learned Advocate for
the
assesse~ that that question did not directly arise in that case
because the Nizam was being assessed in respect of assessment
year 1950-1951 and 1951-52, when he was not a ruling prince.
This Court specifically dealt with this matter as can be seen .from
the observations of Subba Rao J, as he then was at page 670 :-
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"International law vis-a-vis the liability of a sovereign to taxation in respect of his private property is in
a process of "evolution.
It has not yet become cry-
. stallized."
After referring to Halsbury's Laws of England,
3rd Eaition,
Volume 20, page 589 and Oppenheim's International Law,
8th
Edition, Volume I, page 759 and the Article on immunity from
taxation of foreign State owned property in the American Journal
of International Law, to which we have already adverted, observc
ed "that the question is not free from difficulty and that it requires
serious consideration when it directly arises for decision". Assuming for the purposes of thes~ appeals that a foreign sovereign
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who has acquired an international personality has
such
an
immunity from taxation, he proceede4 to examine the question
whether His Exalted Highness the Nizam had ever
acquired
internatiOQill personality.
After examining the position he concluded at page 675 : " .... that Hyderabad State did not acquire
international personality under the international law and so its
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Ruler could not rely upon international law for claiming immunity from taxation of his personal properties".
We are not here concerned with the alternative argument in
that case that the Act having applied to the State of Hyderabad
after the inauguration of the Constitution on 26h January '50,
the charge as well as the manner of computation of income did
not depend on the pre-existing law but only upon the provisions
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of the Act because in these appeals that question does not arise.
In view of this legal position we do not propose to burden
this Judgment with any detailed examination of the several decisions of the High Courts which were prior to the decision of this
Court cited by the learned Advocate in support of the proposition that the ruling chief of an Indian State has the same immuG
nity from taxation as enjoyed by other foreign sovereigns.
Two
of those cases arose under the Government Trading Taxation
Act 1926 where different considerations were
applicable (The
Patla/a State Bank v. C.l.T., Bombay('), A.H. Wadia, a.' Agent
of the Gwalior Durbar v. C.l.T., Bombay(")].
At any rate in
one other case i.e. in Maharaja Bikram Kishore of Tripura v.
Province of Assam('), a distinction was sought to be drawn
(!) XI I.T.R. 617. (2) XVI! I.T.R.63. (3) XVII l.T.R. no.
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between the property of the State and the private property of the
ruler.
In that case the question whether the
income derived
from Chakla Roshanabad Estate was liable to tax under Assam
Agricultural Income-tax Act, by assessment upon the State of
Tripura or by assessment on the ruler of Tripura.
It was held
that the Chakla Roshanabad was the State property and not personal property of the then ruling Raja who held it in his capacity
as a Ruler.
No doubt in the other two cases refunds were not
given for tax deducted at source on the assumption that the
Rulers were not assessees.
In the view we have taken the answer of the High Court to
the reference was clearly right and the appeals are accordingly
dismissed with costs-one set.
S.N .
Appeals dismissed.
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