# RAJAHS. V. JAGANNATH RAO v. COMMISSIONER OF INCOME-TAX, HYDERABAD

- **Citation:** [1962] 2 S.C.R. 848
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeals Nos. 1661-68 of 1959
- **Bench:** S. K. DA.s, M. Hidayatullah, J. C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rajahs-v-jagannath-rao-v-commissioner-of-income-tax-hyderabad-2302
- **Pages:** 11

## Headnote

Income Tax-Levy of tax onJagirs-Jagil'dar in erstu:hile
Hyderabad State-,-Validity of enactment- Retrospective effectOlaim for deduction of expenses of maintenance of elephants and
bodyguards-Hyderabad Income-tax Act, 1357 Fasli; s. 14(5)(a).
The appellant who was a Jagirdar in the former·
Hyderabad State wfs assessed, to income-tax.and super-tax for
the assessment years, 1357 Fasli and 1358 Fasli, corresponding
to the years, J 948-49 and J 949-50, under the provisions of the
Hyderabad Income-tax Act, 1357 Fasli, which \Vas passed by
the Hyderabad Legislative'Assembly and came into force on
Azur 1,1357 Fasli. The appellant challenged tire validity of
the assessment on the grounds ( J) that under the Hyderabad
.Legislative Assembly Ain the Assembly was prohibited fro!"
introducing bills which dealt with laws affecting ihe 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 enroacliment
μpon the relations between theJagirdars and the ~izam, and
that the bill introduced in 1;ontravention of the Ain was, v..oid
ab initio, even though it had' been assented 'to by the Nizam,
(2)that the Act could not aff~ct, in any case, the income for the
account year 1356 Fasli, corresponding to the-assessmtnt 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 daim for deduction of the amount spent on
acco.unt of maintenance of elephants, •stables1 drummers,
bodyguards, etc., in conitection with management of the Jagir
Estate, and in treating the amoun~ ·as personal expenditure.
Held, (I) that the Hyderaba<! 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 Aet 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 Nizam1
inc supreme legislator in the State, whose laws promulgated
in any manner were binding upon the subject.
.
.
T
849
2 S.C.R. SUPREME COURT REPOR S
Ameer-un-Nissa Begam v. Mahboob Begum, A. I. R; 1955
S. C. 352, Director of Endowments, Government of Hyderabad
v. Akram Ali, A. I. R. 1956 S. C. 60 and Madhaorao [Y·
State of Madhya Bharat, (1961) I S. C.R. 957, applied.
.
(2) that the income for the 1356 Fasli was rightly assessed
under the provisions of the Act for the assessment year 1357
Fasli.
Union of India v. Madan Gopal Kabra, (1954) S. C.R.
541 and Rajputana Mining Agencies Ltd. v. The Union of India,
(1961) I S. C. R. 453, followed.
(3) that the maintenance of elephants, stabies, drummers,
and bodyguards by the Jagirdar was not entirely for his
personal or private ends but must be con•idered part and parcel
of the administration of the estate, and the expenditure for
such maintenance must be regarded as one incurred in connec"'.
tion with land and its administration within the meaning of
s. 14(5)(a) of the Act. it was accordingly deductible for
purposes of income-tax.

## Text

1961
July, 17
84.8
SUPREME COlJRT REPORTS
(1962)
RAJAHS. V. JAGANNATH RAO
v.
COMMISSIONER OF INCOME-TAX, HYDERABAD
(S. K. DA.s, M. HIDAYATULLAH- and J. C. SHAH, JJ.)
Income Tax-Levy of tax onJagirs-Jagil'dar in erstu:hile
Hyderabad State-,-Validity of enactment- Retrospective effectOlaim for deduction of expenses of maintenance of elephants and
bodyguards-Hyderabad Income-tax Act, 1357 Fasli; s. 14(5)(a).
The appellant who was a Jagirdar in the former·
Hyderabad State wfs assessed, to income-tax.and super-tax for
the assessment years, 1357 Fasli and 1358 Fasli, corresponding
to the years, J 948-49 and J 949-50, under the provisions of the
Hyderabad Income-tax Act, 1357 Fasli, which \Vas passed by
the Hyderabad Legislative'Assembly and came into force on
Azur 1,1357 Fasli. The appellant challenged tire validity of
the assessment on the grounds ( J) that under the Hyderabad
.Legislative Assembly Ain the Assembly was prohibited fro!"
introducing bills which dealt with laws affecting ihe 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 enroacliment
μpon the relations between theJagirdars and the ~izam, and
that the bill introduced in 1;ontravention of the Ain was, v..oid
ab initio, even though it had' been assented 'to by the Nizam,
(2)that the Act could not aff~ct, in any case, the income for the
account year 1356 Fasli, corresponding to the-assessmtnt 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 daim for deduction of the amount spent on
acco.unt of maintenance of elephants, •stables1 drummers,
bodyguards, etc., in conitection with management of the Jagir
Estate, and in treating the amoun~ ·as personal expenditure.
Held, (I) that the Hyderaba<! 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 Aet 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 Nizam1
inc supreme legislator in the State, whose laws promulgated
in any manner were binding upon the subject.
.
.
T
849
2 S.C.R. SUPREME COURT REPOR S
Ameer-un-Nissa Begam v. Mahboob Begum, A. I. R; 1955
S. C. 352, Director of Endowments, Government of Hyderabad
v. Akram Ali, A. I. R. 1956 S. C. 60 and Madhaorao [Y·
State of Madhya Bharat, (1961) I S. C.R. 957, applied.
.
(2) that the income for the 1356 Fasli was rightly assessed
under the provisions of the Act for the assessment year 1357
Fasli.
Union of India v. Madan Gopal Kabra, (1954) S. C.R.
541 and Rajputana Mining Agencies Ltd. v. The Union of India,
(1961) I S. C. R. 453, followed.
(3) that the maintenance of elephants, stabies, drummers,
and bodyguards by the Jagirdar was not entirely for his
personal or private ends but must be con•idered part and parcel
of the administration of the estate, and the expenditure for
such maintenance must be regarded as one incurred in connec"'.
tion with land and its administration within the meaning of
s. 14(5)(a) of the Act. it was accordingly deductible for
purposes of income-tax.
CIVIL APPELLATE JURISDICTION: Civil 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 aljd 19 of 1954.
A. V. Viswanatha Sastri and K. R. Choudhri,
for the appellant.
·
K. 'iv. Rajagopal Sastri and D. Gupta, for the
respondent.
1961. July 17. The Judgment of. the Court
was delivered by
1961. -
Rajah S.V.
JtJgannaih RM
v
(!,ymmissibiiir oj
I namie-tax,
Hyderabad
HIDAYATULLAH, J.-The appellant,
Rajah
JJidayaiulla~ J;
S. 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 l, 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, corresponditig to
1961
Rajah S. V.
J49annath Rao
v.
Commissiomr of
IncorM-tax
Hyderabad
Hitla11.atul/tJh J.
850
SUPREME COURT REPORTS
(1962)
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 lcgislat1tre. For the account
year 1356 Fasli, corresponding to the assessment
year, 1357 Fasli, the appellan_t had urged that the
Act could not affect the income of that year, because
it came into force only from Azur l, 1357 Fasli.
The appellant .<tlso claimed to deduct certain
expenses (details of which will be given later)
under ss. 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 :
"l. 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
a.ppeahi.
2 S.C.R.
SUPREME COURT REPORTS
851
The second question mentioned above is
covered by the decisions of this Court in Union of
India v. Madan
Gopr1l Kabra (') and Rajputana
Mining Agenc,ies Ltd. v. The Union of India and
another (') p,nd 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 q\iestion 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 Assern bly. The appellant relies upon
sub-ss. (8) and (9) of s. 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 Highness
with the holders of Samasthans 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."
en c
1954) s.c.R. 541.
(2) (1961) I S.C.R. 458.
1961
Rajahs. V.
J agan'fUllh Rao
v
Commission<T ~I
l ncome-tax,
HytlArabad
Hidayatul/ahJ,
1961
Rajah S. I'.
J agannath Rao
v
Commissioner of
Income-tax,
Hyrkro-bad
HidayatullahJ.
852
SUPREME COURT REPORTS
[1962]
These two s11 b-sections df'al with laws affecting the relations hPtWC'<'n th" holdcrn of Samasthans
and J agirs on the one hand, and His Exalted
Highness the Nizam, un the oth0r.
The Act in
qm·stion imposes a tax and dn0s nut SP.Pk to affect
the relations afon·saitl. It is
a
little difficult
to read into the Ineome-tax Act any encroachment
upon the
relations bctwf'Pn tiw holders
of
Samasthans and Jagirs and the Nizam. Even if
the Income-tax Act can be said to affect indirectly
those relations, it is manifrst that it was passed
with the assent of the Ruler, which admittedly
was given.
There have been a number of rnlings of this
Court on the powers of RulNs 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 he Id 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-N issa Begum v .
.Mahboob Begum (') dealt with a F-irman issued by
His Exalted Highness the Nizam, and in dealing
with his powers, in general and his legislative
power~, in particular, it was observed by this Court
as follows :
"It cannot be diRputed 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 theee capacities. The 'Firmans' were
flXpressions of the sovereign will of the Nizam
and they were binding in the same way ae
(I) A.1.:9.. 19M> S,C. 352.
,.
> •
2 S.GJ.R. SUPREME COURT REPORTS
859
any other law;-nay, they would override all
other laws which were in conflict with them.
S~ long a~ a particular 'Firman' held the
field, t,hat 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 veiw was reaffirmed in the second case
reported in Director of Endowments, Government of
Hyderabad v. Akram Ali(').
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 eupreme 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
cqmmands 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 b.ut 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 A.in itself derived its authority from
the Nizam only, and the Nizam, as the supreme
legislator, could frame a law in derogation of the
A.in, which was his own cre.ation. The Ain w11,~
(I) A. I. R. 1956 ~. C. llQ,
1961
RajaAS. Y.
J agannath Rao
v.
Oommi88ioner of
Jntiome-tax,
Hyderabad
Hidayatullah · I.
l961
Rajah S. V.
.]<UJannath Rao
v.
Oommiia.Wner of
I ncome-laa,
Hyderabad
H idayatullah J.
854
SUPREME COURT REPORTS
(1962]
not a supreme law such as a Constitution, the
limits imposed by which could not be exceeded
even hy 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 him~clf. 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 Legisfo tive 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 v. State of Madhya Bharat (1).
The first question was thus answered correctly
by the High Court.
It remains to con!ider the third question. In
the assessment year 1357 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. 38,079 was similarly claimed for the assessment year 1358 Fasli. The sum ofR1t.14,390 has been
(l} (1961) I s.c.R. 9ii7.
2 S.C.R. SUPREME COURT REPORTS
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
(bl 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 els. (a)
and (b) of s. 14(5). No reasons were given by
the Tribunal for coming to tnis conclusion. The
High Court answered the question against the asses11ee with3ut 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
gr:mtor authorising such expenditures. For
e:immple, 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•
tinned. But the statement of the case should
show the legal basis upon which deductions
are allowed. If the assessee was entitled to
maintain elephants, stabies, 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 a.nawer to the questi.on is in the negative."
1961
Rajah S. V.
J agannath Rao
v.
Commissioner of
Income-tax,
Hyderabad
H idayatu llah .J.
1961
Rajah S. V.
J agannath Rao
v.
Commissioner of
Income-tax,
Hyderabad
H idayatullah 1.
856
SUPREME COURT REPORTS
[1962]
The rele~ant provisions of the law may now
bti r .. ad. Sectwn 14 (Ii) as translated by Messrs
Ramchandra Rao Kurtadikar and B. V. Subbarayudu reads as follows :
"In respect of inrome from land-revenue
paid to the Jagi;-da;- by the holder of any
non-Khalsa land m hen of the use or possession
thereof and in respect of any. income derived
by gi~ing over Abkari trees for extracting
SPndh1 or t0<ldy and from 'Baitbak' which
under proviso 2 and Explanation respectively
of clause (4) of section 2, is deemed to be nonagricultural 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 managemPnt or
superintendence or on works of public welfare.
(b) Sm:h 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
follow•:
"14 (5) The income from land revenue
paid to jagirdar by the occupier of non-Khalsa
!1tnd for its use or possession, the incom~ that
arises from renting of trees for extractwn of
sendhi or toddy, the income from Abka'.i
rent.ala and the income which under the provisions of Section 2 ( 4) is deem~d to be 'no!1agricultur&l' income, all such moomes, pr0f1ti
2 S.C.R. SUPREME COURT REPORTS
857
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 ex·
penditure, incurred by the assessee iu 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 litera 1 translation of cl. (a) made by us reads a~
follows :
"All such expenditure which the assessee
makns in connection with such land or its
inhabitants on administration or works of
public welfare, which Axpenses 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 cfaimed can be
described to be private or personal expenditure
of the assessee, or in connection with land and
its
administration. The High Court app'>rently
thoucrht that unless it was incumbent nnrm the
M
'
jagirdar by reason of his Sanad to maintain bodyguards, elephants, etc., the expensPs rould not but
be regarded as private or personal. In our opinion
the High Court put the burdPn of proof somewhat
strictly upon the assPssee. The Tribunal, though
it gave no rrasons, held that the expernPs were
incurred in relation to th<' managPment. The conclusion i" based on some ev1U.ence. The maintenance
.1961
Rajah 8. V.
Jagannath Rao
v.
Oommissioner <f
Income-tax,
Hyderahad
Hidayatullah J.
1.961
Rajah S. V.
Ja.gannath Rao
v,
Commissioner of
1 ncome-tax,
Hyderabad
Hidayatul/.ah J.
858
SUPREME COURT REPORTS
[1962]
of elephants, stables, 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 equipa.ge is
considered part and parcel of the administration
of an estate, such as 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 cine 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 wfth 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,
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.
Appeals allow~d in part.