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PETITIONER: SRI SUDHANSU SHEKHAR SINGH DEO

       Vs.

RESPONDENT: THE STATE OF ORISSA AND ANOTHER

DATE OF JUDGMENT: 21/09/1960

BENCH: SHAH, J.C. BENCH: SHAH, J.C. DAS, S.K. HIDAYATULLAH, M. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA

CITATION:  1961 AIR  196            1961 SCR  (1) 779  CITATOR INFO :  RF         1964 SC 444  (12)  R          1966 SC1260  (5)  RF         1971 SC 530  (232,319,395)

ACT: Agricultural  Income Tax-Ex-Ruler of Indian  State-Exemption from  taxation-Claim based on agreement  of  merger--Whether justiciable-Definition  of   "  Person  "-Whether  excludes" Ruler  "Orissa Agricultural Income-tax Act, 1947 (Orissa  24 of 1947), SS. 2(i), 3-Constitution of India, Arts. 291, 362, 363.

HEADNOTE: On  December 15, 1947, the Ruler of the erstwhile  State  of Sonepur, the appellant, executed a merger agreement  whereby the Government of India acquired full sovereign rights  over the territory of the State, but ownership and full enjoyment of  private  properties belonging to the appellant  and  the personal rights, privileges, dignities etc., enjoyed by  him immediately  before August 15, 1947, were guaranteed to  him under Arts. 4 and 5. On July 27, 1949, the  Governor-General of  India issued an order providing that the  merged  Orissa States including the State of Sonepur shall be  administered in  all respects as if they formed part of the  Province  of Orissa.   The Orissa Agricultural Income-tax Act, 1947,  had in  the  meantime  been enacted by the  Legislature  of  the Province of Orissa and by virtue of an Ordinance promulgated by  the  Governor of Orissa on December 30,  1949,  the  Act became applicable to the merged Orissa States.  Section 2(1) of  the Act defined a " person " as inclusive of a Ruler  of an Indian State, but by the Adaptation of Laws Order,  195o, reference  to  Rulers of Indian States was deleted  as  from January  26, 195o.  The appellant contended that he was  not liable  to be assessed to tax on agricultural  income  under the  provisions  of the Act because (1) as a  Ruler  of  the State of Sonepur, he was, before merger of his State, immune from  liability  to  taxation  in  respect  of  his  private property and that his immunity from taxation was  Guaranteed by Arts. 4 and 5 of the agreement of merger; and (2) that by

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virtue of the amendment of S. 2, cl. (1), of the Act, he was not  a "person" within the meaning of the Act and  therefore he was not liable to pay agricultural income-tax. Held:  (i) that the amendment in the definition of  "person" in S. 2, Cl. (i), of the Act was made not with the object of excluding the Rulers of former Indian States from  liability to  pay  tax, but only to delete a clause which in  view  of political  changes which had taken place since the  Act  was enacted had no practical significance.  The appellant  could not claim exemption from taxation on the ground that he  was not  a  " person ", in the absence of an  express  exemption clause in the Act. 780 (2)that the privileges guaranteed by Arts. 4 and 5 of  the agreement  of  merger were only personal privileges  of  the appellant  as an ex-Ruler and that these privileges did  not extend to his private property. Vishweshwar  Rao  v.  The State of  Madhya  Pradesh,  [1952] S.C.R. 1020, followed. (3)that  the claim made by the appellant of immunity  from taxation  relying  upon  the agreement  of  merger  was  not justiciable.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 307 to  309 of 1958. Appeals from the judgment and order dated August 1, 1956, of the Orissa High Court in O. J. C. Nos. 16, 19, 137 and 61 of 1954. C.B. Aggarwala and P. C. Aggarwala, for the appellant (In C. As.  Nos. 307 to 309 of 58). N.C.  Chatterjee,  J. H. Umrigar and T. M. Sen,  for  the respondents (In all the appeals). 1960.   September  21.   The  Judgment  of  the  Court   was delivered by SHAH  J.-This  is  a  group  of  three  appeals  filed  with certificate  of fitness under Art. 132 of  the  Constitution issued by the High Court of Judicature, Orissa. The Legislature of the Province of Orissa enacted the Orissa Agricultural   Income-tax  Act  XXIV   of   1947-hereinafter referred to as the Act-providing for the levy of  income-tax on  agricultural income derived from lands situated  in  the Province  of  Orissa.  This Act was brought  into  operation from July 10, 1947.  By s. 3, agricultural income-tax at the rate or rates specified in the schedule was made payable for each financial year on the total income of the previous year of   every  person.   By  the  proviso  to   that   section, agricultural  income  of the Central Government  or  of  the State  Government or of any local authority was exempt  from ’taxation.   Section  2, cl. (1), defined a "  person  "  as inclusive  of a Ruler of an Indian State.  The appellant  in these  three  appeals is the former Ruler of  the  State  of Sonepur.  After 781 the  establishment  of the Dominion of India on  August  15, 1947,  the  appellant as the Ruler of the State  of  Sonepur executed  an  instrument  of  accession  to  the.,  Dominion restricted  to three subjects-Defence, External Affairs  and Communications.  On December 15, 1947, he executed a  merger agreement  whereby  the territory of the  State  of  Sonepur became  merged with the territory of the Dominion of  India. By  virtue of the merger agreement, the Government of  India acquired  full  sovereign rights over the territory  of  the

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State, but ownership of private properties belonging to  the appellant   and  full  enjoyment  thereof  were  under   the agreement guaranteed to him under Art. 3. In exercise of the powers conferred by the Extra Provincial Jurisdiction Act 47 of 1947, the Government of India by notification dated March 23,  1948, delegated to the Provincial Government of  Orissa full  powers  to  administer the  merged  States  of  Orissa including  the  State  of Sonepur.  The  Government  of  the Province of Orissa applied to the merged States s. 1 of  the Act  as  from January 19, 1949, and  by  notification  dated April 1, 1949, the remaining provisions of the Act.  In  the meantime,  by amendment, two new sections, s. 290(A) and  s. 290(B)  were  incorporated in the Government of  India  Act, 1935.  The Governor-General of India was thereby given power to direct by order that a merged State shall be administered in  all  respects  as if it formed part  of  the  Governor’s Province  specified in the order.  The  Governor-General  of India  exercising  authority  under ss.  290(A)  and  290(B) issued on July 27, 1949, an order providing that the  merged Orissa  States  including  the State  of  Sonepur  shall  be administered  in all respects as if they formed part of  the Province  of  Orissa with effect from August  1,  1949.   On December  30,  1949,  the  Governor  of  Orissa  promulgated Ordinance  No.  IV  of 1949 providing inter  alia  that  the Agricultural Income-tax Act, 1947, be applied to the  merged Orissa  States.   This Ordinance was later replaced  by  the Orissa Merged States (Laws) Act, XVI of 1950.  The appellant was then called upon by the Agricultural 782 Income-tax  Officer to furnish a return of his  agricultural income.   The appellant disputed his liability to   pay  the agricultural income-tax and declined to furnish the  return. The  Agricultural Income-tax Officer then proceeded to  make enquiries  about the income received from the lands held  by the  appellant  and assessed him to pay tax  for  the  years 1949-50 to 1953-54. He  also  imposed  a  penalty  upon  the appellant for  failure  to submit his returns for the  years 1949-50 and    1950-51.  Against the order assessing him  to tax and   directing  him  to  pay  penalty,  the   appellant preferred appeals to the Assistant Collector of Agricultural Income-tax,  Sambalpur.  The appeals were dismissed by  that officer.    Revision  applications  to  the   Collector   of Commercial  Taxes, Cuttack and to the Board of Revenue  were unsuccessful. The  appellant  filed four petitions in the  High  Court  of Orissa,  being  petitions Nos. 17, 16, 19 and  137  of  1954 challenging  the assessments made by the taxing  authorities for   the  years  1949-50,  1950-51,  1951-52  and   1952-53 respectively, and two more petitions being petitions Nos. 18 and  138  of 1954 against orders imposing  penalty  for  the years 1949-50 and 1950-51 respectively.  These six petitions and  certain other petitions were heard by a Division  Bench of  the Orissa High Court.  The High Court held that by  the guarantee  of  full  ownership, use  and  enjoyment  of  the private properties under the merger agreement the Properties of the appellant were not rendered immune from liability  to pay  tax  imposed by the Act and that in the absence  of  an express  provision, his income from lands was liable to  pay agricultural income-tax.  The High Court also held that even though the appellant was the Ruler of a former Orissa State, he  was a " person " within the meaning of the Act  and  was liable  to pay agricultural income-tax.  The learned  Judges therefore dismissed the petitions challenging the  liability of  the appellant for the assessment years 1950-51,  1951-52 and  1952-53  to  pay  agricultural  income-tax,  and   they

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cancelled  the  order of assessment in respect of  the  year 1949-50 and the orders imposing penalty in respect of  years 1949-50 and                             783 1950-51.  Against the orders dismissing the applications for setting  aside the assessments in respect of years  1950-51, 1951-52 and 1952-53, these appeals have been preferred  with certificate granted by the High Court under Art. 132 of  the Constitution. The  appellant was undoubtedly the Ruler of an Indian  State before  August  15.  1947,  but  by  reason  of  the  merger agreement  executed  by  him  on  December  15,  1947,   his sovereignty  was extinguished.  By Art.  1 of the  terms  of the merger agreement, the appellant ceded to the Dominion of India  full and exclusive authority, jurisdiction and  power for  and  in  relation to the governance of  the  State  and agreed  to transfer the administration of the State  on  the appointed  day  and  as  from the  said  day,  the  Dominion Government became competent to exercise the power, authority and jurisdiction in relation to the governance of the  State in  such matters and through such agency as  the  Government thought fit.  By Art. 3, the appellant remained entitled  to full ownership, use and enjoyment of all private  properties (but  not of the State properties) belonging to him  on  the date of the merger.  By Art. 5, the Dominion Government gua- ranteed the succession according to law and customs, to  the gadi  of the State and to the personal  rights,  privileges, dignities  and titles of the appellant.  It was provided  by Art.  4 that " the Raja, the Rani, the Rajmata, the  Yuvraja and the Yuvrani shall be entitled to all personal privileges enjoyed by them whether within or outside the territories of the  State, immediately before the 15th day of August,  1947 ". The  appellant  contends  that as a Ruler of  the  State  of Sonepur,  he  was, before merger of his State,  immune  from liability  to  taxation in respect of his  private  property both  within his territory and outside.  He claims  that  he was so immune in respect of his property within his State as a Ruler and in respect of his property outside the State  by the  rules of International Law which, he  submits,  protect from taxation the properties of a Ruler of a State,  situate in a foreign State.  The appellant says that by Arts. 4  and 5, the Dominion Government guaranteed to him all 784 his  personal  rights,  privileges,  dignities  and   titles enjoyed within or without the territory immediately   before the  15th  August,  1947, and that any attempt  to  tax  his private  property  by the State of Orissa or  by  the  Union Government  violates that guarantee.  The appellant  submits that to give effect to this guarantee, all legislation  must be interpreted in the light of the merger agreement which he claims  is incorporated in Art. 362 of the Constitution  and he must be held exempt from liability to pay tax even though no  express  provision in that behalf has been made  by  the Legislature.   In  our  view,  there  is  no  force  in  the contentions   raised  by  the  appellant.   The   privileges guaranteed  by Arts. 4 and 5 are personal privileges of  the appellant as an ex-Ruler and those privileges do not  extend to  his  personal  property.   In  dealing  with  a  similar contention  raised  on the interpretation of Art. 4  of  the merger  agreement  entered into by the Ruler  of  Khairagarh (which  was  in material terms identical with the  terms  of Art.  4 of the agreement executed by the appellant),  S.  R. Das, J., (as he then was), observed in Visweshwar Rao v. The State of Madhya Pradesh(1):

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"  The guarantee or assurance to which due regard is  to  be had is limited to personal rights, privileges and  dignities of  the Ruler qua a Ruler.  It does not extend  to  personal property which is different from personal rights ". The Act imposes on the agricultural income of "every  person " liability to pay agricultural income-tax.  By the  proviso to  s.  3, agricultural income of  the  Central  Government, State  Government  and of local authorities is  exempt  from tax, but this exemption is not extended to any other body or person.  It is true that in the definition of the expression "  person " as originally enacted in s. 2, cl. (1),  a Ruler of  an  Indian  State  was expressly  included  and  by  the Adaptation  of  Laws  Order, 1950, reference  to  Rulers  of Indian States was deleted as from January 26, 1950.  But  by that amendment, an intention to exclude the Rulers of Indian States from liability to pay (1)  [1952] S.C.R. 1020, 1054.                             785 agricultural  income-tax was, in our judgment, not  evinced. Between  the  dates  on which the Act wag  enacted  and  the Adaptation of Laws Order, 1950. several political events  of far reaching effect had taken place, in consequence of which the  appellant bad ceased to be a Ruler of an Indian  State. On  January  26, 1950, the date on which the  Adaptation  of Laws Order, 1950, became operative, there were in, existence no  Indian  States.  The sovereign rights of  the  erstwhile Rulers  of  the Indian States were extinguished,  and  their territories were merged in the, Indian Union.  The amendment in the definition of "person  " in s. 2, cl. (i), of the Act was made  not  with) the  object of excluding the Rulers of former Indian  States from  liability  to pay tax: it was only made to;  delete  a clause which, in view of political changes, had no practical significance.   Liability to pay tax is imposed by  the  Act and  there is in the Act no express exemption in  favour  of the  appellant.  The claim of the appellant to exemption  on the  ground that he is not a " person " cannot therefore  be sustained. Article 362 of the Constitution provides: "In  the  exercise  of the power of  Parliament  or  of  the Legislature  of a State to make laws or in the  exercise  of the  executive power of the Union or of a State, due  regard shall be bad to the guarantee or assurance given tinder  any such  covenant  or agreement as is referred to in  Art.  291 with   respect  to  the  personal  rights,  privileges   and dignities of the Ruler of an Indian State ". Article  291 of the Constitution deals with the privy  purse of  the Rulers under any covenant or agreement entered  into by the Ruler of any Indian State before the commencement  of the  Constitution  payment whereof is free from tax  as  has been granted or assured by the Government of the Dominion of India.   Article  362 recommends to the Parliament  and  the State  Legislatures in making laws after the Constitution  " to have due regard to the guarantee or assurance given under any  covenant  or agreement ". Even though Art. 362  is  not restricted  in its recommendation to agreements relating  to the privy purse and 786 covers  all  agreements and covenants entered  into  by  the Rulers  of  Indian  States before the  commencement  of  the Constitution  whereby  the personal rights,  privileges  and dignities  of the Ruler of an Indian State were  guaranteed, it  does not import any legal obligation enforceable at  the instance  of the erstwhile Ruler of a former  Indian  State. If, despite the recommendation that due regard shall be  had

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to  the guarantee or assurance given under the  covenant  or agreement,  the  Parliament or the Legislature  of  a  State makes laws inconsistent with the personal rights, privileges and dignities of the Ruler of an Indian State, the  exercise of  the  legislative  authority  cannot,  relying  upon  the agreement or covenant, be questioned in any court, and  that is so expressly provided by Art. 363 of the Constitution. The plea of the appellant that he was not seeking to enforce the  terms  of the merger agreement and that be  was  merely resisting  the claim made by the authority appointed by  the State of Orissa to levy a tax inconsistently with the  terms of  the merger agreement, has no substance.  In  truth,  the appellant  sought  by his petitions under Art.  226  of  the Constitution  to enforce the terms of Art. 4 of  the  merger agreement.   By his petitions, the appellant contended  that in  enacting the Agricultural Income-tax Act and in  seeking to  enforce  it  against  him, the  State  of  Orissa  acted contrary  to the terms of the merger agreement and he  asked the High Court to enforce the terms of the merger agreement. On the grounds therefore that liability to pay  agricultural income-tax  in  respect of his private property  is  imposed upon  the  appellant by s. 3 of the Act,  and  the  immunity claimed  by the appellant is not one of the personal  rights or privileges within the meaning of the merger agreement and that the claim made by the appellant is not justiciable, the objection  raised  by  the appellant  to  liability  to  pay agricultural  income-tax  assessed under the Act  cannot  be sustained. Two  subsidiary contentions which were sought to  be  raised before us may be briefly referred to.  It was urged that  of the forty-two villages of which the                             787 appellant  is  held  by the assessing authority  to  be  the holder, two were in the year 1945 transferred by him to  the Yuvrani (the appellant’s son’s wife) and on that,,  account, the  income of those villages was not liable to be taxed  in his  hands.  It appears from the assessment order that  this contention  was  raised before the  Agricultural  Income-tax Officer  and  that officer rejected the  contention  relying upon s. 14, cl. (1), of the Act.  It is unnecessary for  the purpose  of  these appeals to decide whether  the  assessing officer  was  right  in  the view which  he  took.   In  the petitions  filed  by the appellant in the High  Court,  this plea  was  not raised and no relief was claimed  by  him  in respect of the income of the two villages.  The question was never  mooted before the High Court and the State of  Orissa had  no  opportunity of meeting the claim now sought  to  be made by the appellant.  On the ground that the question  was never raised in the High Court, we reject this contention. It  was  also urged that whereas the assessing  officer  has found that the appellant had lands in forty-two villages, in the  inventory of properties submitted by the  appellant  to the Government, only eighteen villages were set out and this inventory was accepted by the Government of India.   Relying upon this premise, the appellant contends that he is  liable to  pay  tax in respect of his income  from  these  eighteen villages  and no more.  But even this plea was never  raised in  the  High  Court and we cannot, in  dealing  with  these appeals,  enter  upon an enquiry into a question  which  was never  raised on which no evidence was led, and on which  no finding was given by the High Court. On  the view taken by us, appeals Nos. 307, 308 and  309  of 1958  fail and are dismissed with costs.  There will be  one hearing fee. Appeals dismissed.

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