SRI SUDHANSU SHEKHAR SINGH DEO versus THE STATE OF ORISSA AND ANOTHER

1 S.C.R. SUPREME COURT REPORTS

SRI SUDHANSU SHEKHAR SINGH DEO

THE STATE OF ORISSA. AND ANOTHER

(S. K. DAS, M. HIDAYATULLAH, K. c. DAS GUPTA

J.C. SHAH a.nd N. RAJAGOPALA AYYANGAR, JJ.)

Agricultural Income Tax-Ex-Ruler of Indian State-Exemp-tion from taxation-Claim based on agreement. of merger-Whether justiciable-Definition of" person "-Whether excludes "Ruler"-Orissa Agricultural Income-tax Act, I947 (Orissa z4 of r947), ss. z(i), 3-Constitution of India, Arts. z9z, 36z, 363.

On December 15, 1947, the Ruler of the erstwhile State of Sonepur, the appellant, executed merger agreement whereby the Government of India acquired full sovereign rights over the territory of the State, but ownership and full enjoyment of pri-vate properties belonging to the appellant and the personal rights, privileges, .dignities etc., enjoyed by him immediately before Au3ust 15, 1947, were guaranteed to him under Arts. 4 and 5. On July 27, 1949, the Gov-ernor-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 Ordi-nance promulgated by the Governor of Orissa on Decemoer 30, 1949, the Act became applicable to the merged Orissa States. Section 2(i) of the Act defined "person " as inclusive of Ruler of an Indian State, but by the Adaptation of Laws Order, . 1950, reference to Rulers of Indian States was deleted as from January 26, 1950. The appellant contended that he was ·not liable to be assessed to tax on agricultural income under the pro-visions of the Act because (I) as Ruler of the State of Sone-pur, he was, before merger of his State, immune from liability to taxation in respect of his private property and that his immu-nity from taxation was guaranteed by Arts. 4 and 5 o[ the agree-ment of merger; and (2) that by virtue of the amendment of s. 2, cl. (i), of the Act, he was not "person" within the meaning of the Act and therefore he was not liable to pay agri-cultural incom~-tax.

Held: (1) that the amendment in the definition of "person" · in s. 2, cl. (i), of the Act was made ncn \fith the object of exclud-ing the Rulers of former Indian States from liability to pay tax, but only to delete clause which in view of political changes' which had taken place since the Act was enacted had no practi-cal significance. The appellant could not claim exemption from taxation on the ground that he was not "person", in the absence of an. express exemption clause in the Act,

September ax.

(2) that the privileges guaranteed by Arts. 4 and 5 of the agreement of merger were only personal privileges of the appel-!ant as an ex-Ruler and as an ex-Ruler and that these privileges did not extend to

Sudh~nsu !ant as an ex-Ruler and as an ex-Ruler and )hekhar Singh Deo his private property.

Vishweshwar Rao v. The Stale of Madhya Pradesh, (19.52) S.C.R. 1020, followed.

Stale of Omsa

(3) that the claim made by the appellant of immunity from

taxation relying upon the agreement of merger was not justici-. able.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 307 to 309 of 1958.

Appeals from the judgment and order dated August l, 1956, of the Orissa High Court in 0. J. C. Nos. 16, 19, 137 a.nd 61 of 1954.

G. B. Aggarwala and P. G. Aggarwala, for the a.ppel-

la.nt (In C. As. Noe. 307 to 309 of 58). .

N. G. Chatterjee, J. H. Umrigar a.ad T. M. Sen, for the respondents (In a.II the a.ppea.Ie).

1960. September 21. The Judgment of the Court wa.e delivered by

SHAH J.-Thie is group of three appeals filed

Shah].

with certificate of fitneSB under Art. 132 of the Cons-titution issued by the High Court of J udioa.ture, Jrissa..

The Legislature of the Province of OriSBa. enacted

the Orissa. Agricultural Income-tax .Act XXIV of 1947-hereina.fter referred to a.s the Aot,-provi<ling for the levy of income-tax on agricultural income derived from la.ode situated in the Province of OriSBa. Thie Act wa.e brought into operation from July IO, 1947. Bye. 3, agricultural income-tax a.t the ra.te or ra.tee specified in the schedule wa.e ma.de pa.ya.hie for ea.oh financial yea.r on the tota.l income of the previ-ous yea.r of every person. By the proviso to tha.t section, a.gricultura.l income of the Central Govern-ment or of the Sta.te Government or of a.ny loca.l authority wa.e exempt from taxation. Section 2, cl. (i), defined "person " a.e inclusive of a. Ruler of an Indian Sta.to. The appellant in these three a.ppea.ls is the former Ruler of the Sta.te of Sonepur. After

the establishment of the Dominion of India on August '9[60 ]15, 1947, the appellant as the Ruler of the State of Sudhansu Sonepur executed an inst~ument of accession to the Shekhar Singh D'° Dominion restricted to three subjects-Defence, Ex-v. ternal Affairs and Communications. On December State of Orissa 15, 1947, he executed merger agreement whereby the territory of the State of Sonepur became merged Shah ]. 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 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 ~vincia.l Government of Orissa full powers to ad.minister the merged States of Orissa including the State of Sonepur. The Govern-l)lent of the Province of Orissa. applied to the merged States s. 1 of the Act as from J a.nua.ry 19, 1949, and by notification dated April 1, 1949, the remaining provisions of the Act. In the meantime, by amend-ment, two new sections, s. 290(A) and s. 290(B) were in-corporated in the Government of India Act, 1935. The GovernoF-Qeneral of India. was thereby given power to direct by order that merged State shall be · a.dminis~e~ed in a.II respects as if it formed pa.rt 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 a.II respects as if they formed pa.rt of the Province of Orissa. with effect from August l, 1949. On December 30, 1949, the Governor of Orissa. promulgated Ordinance No. IV of 1949 providing inter a.lia 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 ca.lied upon by the Agricultural

r96o Income-tax Officer to furnish return of hie a.gricul-s dk tura.I income. The appellant disputed hie liability to S.Wk~r ;;:;~ Deo p&y the agricultural income.tax and declined to fur-.,., nish the return. The Agriculture.I Income-tax Officer St•t• of Orim then proceeded to make enquiries a.bout the income received from the lands held by the appellant and Skok f. . a.eseesed him' to pay tax for the years 1949-50 to 1953-54. He also impo8'ld penalty upon the appellant for failure to submit hie returns for the years 1949-50 and 1950-51. Against the order aeseBBing him to tax and directing him to pay penalty, the appellant pre-ferred appeals to the Assistant Collector of Agricul-tural Income-tax, Sa.mbalpur. The appeals were dis-missed by that officer. Revision applications to the Collector of Commercial Taxes, Cuttack and to the Board of Revenue were unsucc68Bful.

The appellant filed four petitions in the High Court ofOrisea, being petitions Nos. 17, 16, 19 and 137of 1954 challenging the aseeesmente ma.de by the taxing anthorities for the yea.re 1949-50, 1950-51, 1951-52 and 1952-53 respectively, and two more petitions be-ing petitions Noe. 18 and 138 of 1954 against orders imposing penalty for the yea.re 1949-50 and 1950-ol respectively. These six petitions and certain other petitions were heard by • Division Bench of the Ori1111& High Court. The High Court held that by the gua-rantee 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 ta.x imposed by the Act and that in the absence of a.n expreBS provision, his income from lands was liable to pay agricultural income-tax. The High Court also held that even though the appel-lant wa.e the Ruler of former Ori1111& State, he was "person" within -the meaning ·of the Act and was liable to pay agricultural income-ta.x. The learned Judges therefore dismissed the petitions challenging the liability of the appellant for the &88e&sment yea.re 1950-tll, 1961-1>2 anq 1952-1>3 to pay agricultural income-tax, and they oanoelled the order of a.s86811 ment in reapeot of the year 1949-60 and the orders imposing penalty in respect of years 1949-50 and

1950-51. Against the orders. dismissing the applica-196• tions for setting aside the assessments in respect of s.tdhansu years 1950-51, 1951-52 and 1900-53, these appeals Sltehh• s;,.1i D••. have been. preferred with certificate granted by the · v. High Court under Art. 132 of thfl Constitution. . Sl•I• •f o,;,.. The appellant was undoubtedly the Ruler of e.n Indian State before August 15, 1947, but by reason of the merger agreement executed by him ·on December 15, UU7, his eovereignty was extinguished. By Art. I of tohe t.erml 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 bees.me 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 enjoy-ment of all private properties (but not of the State pro~tf,ie~) belonging to . him on the da.te of the mer~~1.By Art. 5, the Dominion Government gua. ranteed the succession according to law and custom-. to the gadi of the State and to the personal rights, privileges, dignities and titles of the appellant. It wu provided by Art. 4 that "the Raja, the Rani, the· Rajmata, the Yuvraj& 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 Ruler of the State of Sonepur, he. was, before merger of his State, immune from liability to taxation in respect of hie private property both within hie territory and out.aide. He claims that he was so immune in respect of hie p~operty within ~is State as Ruler and'in respect of bJB property outside the State by the. rules of Inter. national Law which, he submits, protect from taxation the properties of Ruler 6f State, situate in foreign State. The appellant says that by Arts. 4 and 5, the Dominion Government guaranteed to him all

r96o his personal rights, privileges, dignities anq titles 5 [dh ]enjoyed within or without the territory immediately 5[;,,]0[:, ][;;~;,. ]0 [,]0 [before the 15th August, 1947, and ][that ][any ][atfempt ]v. to tax his private property hy the St&te of Orissa or Sl•I• of Orissa by the Union Government violates that guarantee. The appellant submits that to give effect to this Shah ]. 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 he held exempt from liability to pay tax even thouga 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 a.re personal privileges of the appellant as an ex.Ruler and those privileges do not extend to his personal property. In dealing with similar contention raised on the inter-pret&tion of Art. 4 of the merger agreement entered into by the Ruler of Khaire.garh (which was in mate-rial terms identical with the terms of Art. 4 of the agreement executed by the appellant), S. R. Da.s, J., (as he then was), observed in Visweshwar Rao v. The State of Madhya Pradesh('):

"The guarantee or assure.nee to which due regard is to be had is limited to persona.I rights, privileges and dignities of the Ruler qua Ruler. It does not extend to persona.I property which is different from personal rights".

The Act imposes on the agricultural income of

"every person " liability to p&y agriculture.I income-

tax. By the proviso to s. 3, agriculture.I income of the Central Government, State Govf\rnment and of .local authorities is exempt from tax, but this exemp• tion 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, ol. (i), e. Ruler of an Indian State was expressly included and by the Adapt&tion of Laws Order, 1950, reference to Rulers of Indian Sta.tee was deleted a.Ii from January 26, 1950. But by that amendment, an intention to ex-clude the Rulers of Indian States from liability to pay (1) [1952) S.C.R. 1020, 1054.

agricultural income-tax was, in our judgment, not '9[60 ]evinced. Between the da~es on which the Act was Sudhansu enacted and the Adaptat10n of Laws Order, 1950, Shekha. Singh Dn several political events of far reaching effect had v. taken place, in consequence of which· the appellant State of O>issa had ceased to he Ruler of an Indian State. On January 26, 1950, the date on which the Adaptation Shah ]. 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 extin-guished, 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 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 "person" cannot therefore be sustained.

Article 362 of the Constitution provides :

"In the exercise of the power of Parliament or of the Legislature· of State to make laws or in the exercise of the executive power of the Union or of State, due regard shall be had to the guarantee or assurance given under any such covenant or agree-ment as is referred to in Art. 291 w;th 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 assur-ed by the Government of the Dominion of India. Article 362 recommends to the Parliament an<l the State Legislatures in making laws after the Constitu-tion "to have due regard to the guarantee or assur-ance given under any covenant or agreement". Ev<m though Art. 362 is not restricted in itA recommenda-tion to agreements relating to the privy purse an<l

19° 0 co,·crR a.II agreements a.nd C'ovenants PntRred into by Sudh•"-"' the H.ul,er~ <>_£ ln.dian State~ before the co~meneom.rr~t Shtkha' Srngh Dco of the Const1tut10n whereby t hA uer<mnal r1ght~, priv1-v. leges and dignitifls c;f the Ruler of an Indian State s1a1e of o,issa were guaranteed, it doeR not import any legal obliga. tion enforceablfl a~ the inJtanco 0f the erstwhile Ruler Sh•h J. of a. former lndiar.Htate. If, despite the recommenda-tion that due regard shall be had to the guarantee or assure.nee given under the covenant or a.greoment, the Parliament or the Legi8la.ture of State makes laws inconsistent with the personal righLs, privileges a.nd dignities of the Ruler of an Indian State, the exercise of the legislative &uthority cannot, relying upon the agreement or covenant, be questioned in any court, and that is so expressly provided by rt. 363 of the Constitution.

The plea. of the appellant that he wa.s not seeking

to enforce the termH of the merger agreement and that he wa.s merely resisting the claim made by the autho-rity appointed by the State of Orissa. to levy ta.x inconsistently with th" terms of the merger agree-ment, bas no suhst.a.nce. 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 a.nd in seeking to enforce it against him, tho State of Orissa. acted contrary to the terms of the merger agreement and he asked the High Court to C'nforce the terms of the merger agreement. On the grounds therefore that Jia.bility to pay agricultural income. ta.x in respect of his private property is imposed upon the appellant by s. 3 of the Act, and the immunity claimed by the a.ppella.nt is not one of the persona.I rights or privileges within the meaning of the merger agreement a.nd tha.t the claim ma.de by the appellant is not justiciable, the objection raised by the appellant to liability to pa.y a.gricultura.l income-tax assessed under the Act cannot be sustained.

Two subsidiary contentions which were sought to be

raised before us ma.y be briefly referred to. It wa.s urged tha.t of the forty-two villages of which the

appellant is held by the assessing authority to be the 1960 holder, two were in the year 1945 transferred by him 5 dh•••~ to the Yuvrani (the appellant's son's wife) and on that Shekh:, Sin&A Deo account, the income of those villages was not liable to v. be taxed in his hands. It appears from the assessment State of Orissa order that this contention was raised before the Shah J. A·gricultural Income-tax Officer and that officer reject-ed the contention relying upon s. 14, cl. (I), 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 appeHant 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 prem_ise, the appellan~ c~ntends that he is liable to pay tax m respect of his mcome from these eighteen villages and no more. But even this nlea was never raised in the High Court and we cannot, in dealing with these appeals, enter unon an enquiry into ques-tion which was never raisea on which no evidence was led, and on which no finding was given by the High · Court.

led, and on which no finding was given by the High ·

On the view taken by us, appeals Nos. 307 308 and 309 of 1958 fail and are dismissed with cost~. There will be one hearing fee.

Appeala dismissed.