TMI Blog1945 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,744 from Kalsia State and a sum of ₹ 8,910 from Nabha State. On the facts as they have been found by the Income-tax Tribunal it may be taken that similar payments had been made to the Rani of varying amounts in each of the years she had lived at Dehra Dun and that they represented allocations for her benefit made in the relative State budgets. In the case of the payments out of Kalsia state they were made for the purpose of meeting the Ranis household and living expenses and the education of the children at Dehra Dun; and, in the case of the allowance from Nabha State, it was made as an annual wardrobe allowance and as presents on certain specified days of festival in each year. Each payment, as I have said, was specifically budgeted for in the annual budget of each State and the evidence is that they had been made in each year consecutively for a period of almost twenty years. It is also common ground that the Rani has never been asked to give any account of her expenditure of these monies and that any surplus she may have had over at the end of the year has been tacitly assumed to be her personal property. Indeed we are told that the Rani has been able to effect consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Appellate Tribunal. The Full Bench consisted of four members-two of them judicial members, who have since been elevated to the Benches of the High Courts of Madras and the Punjab respectively. This Bench was divided in opinion, it being held by the President, first, that the Rani, notwithstanding that she was the wife of the Ruler of Kalsia State, was not exempt from assessment to income-tax in British India under the Income-tax Act, 1922, and, secondly, that the payments in question were not income of the assessee under Section 4(1) of the Act; and that, if they had been, they would not have been assessable to tax because they were casual and non-recurring within the meaning of the Section 4(3)(vii) of the Act. On the other hand, the other learned judicial member of the Full Bench of the Tribunal, while agreeing that the Rani was not entitled to exemption from taxation on the ground that her husband was the Ruler of a sovereign State, took the view that the payments made to the assessee both from Kalsia State and from Nabha State in the accounting years did form part of the total income of the Rani for the purpose of assessment in British India. The two other ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in British India, remittances received by his wife resident in British India out of any part of his income which is not included in his total income shall be deemed to be income accruing in British India to the wife. In the case before us the Ranis husband, the Raja of Kalsia, was admittedly not resident in British India. The Rani herself was at all material times resident in British India. The ₹ 14,744 received by her in the accounting year must, I think, be taken to have been paid to the Rani out of her husbands income, since it has not been and cannot be suggested that there is any distinction between the personal income of the Raja and the Revenues of his State which are allocated under the annual State budget. There is no suggestion that the payments made to the Rani from Kalsia were paid out of any income of the Raja which satisfies the definition of total income contained in the Act, nor, indeed, that the Raja had any income in British India at all. Up to this point, therefore, the conditions of sub-section (2) appear to be fulfilled exactly. But the noticeable point about sub-section (2) of Section 4 of the Act is that what it deems to be income of the wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments out of Kalsia State were casual and non-recurring. If the view taken above of the true construction of section 4(2) of the Act is the right one, then the remittances as such have to be deemed to be the income of the Rani irrespective of their actual character either as income or as casual and non-recurring payments. In other words, Section 4(3)(vii) of the Act cannot be regarded as having any reference to a remittance by a husband to a wife, which the Act itself has by Section 4(2) expressly declared to be one which is to be deemed in any case to be income of the latter. I feel it right, however, to add that; but for Section 4(2) of the Act, I should have felt the force of the conclusion reached by the learned President of the Tribunal expressed in para. 10 of his judgment that the payments in question ex Kalsia State have not in fact been shown every to have become the moneys of the Rani (except perhaps as regards any unexpended balances) as distinct from monies which she was charged to expend as the agent of her husband on the maintenance and upkeep of his wife and children. But, since the payments in question were undoubtedly remittances by the Raja to the Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from Nabha State were payments to which the Rani had an indefeasible and enforceable right. Both the learned judicial members of the Income-tax Appellate Full Bench appear to have taken the same view because the major parts of their respective judgments were devoted to discussing the very question whether the circumstances in which the payments were made justified the conclusion that they were traceable to some sort of enforceable obligation - I should desire to avoid the use of the expression vested right - which would clothe them with the character of income in the hands of the Rani in British India. That undoubtedly is the substance of the question which we are called on to decide on this reference and there is little doubt that it is a question of law and is not concluded by the finding of the Income-tax Officer to which I have referred above. The question, therefore, is whether the payment of ₹ 8,910 made ex Nabha State to the Rani in the accounting year was the Ranis income. Section 4(1) of the Indian Income-tax Act, 1922, charges in the hands of the assessee all income, profits and gains from whatever source received by the assessee in British India in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annuities and dividends. Schedule D is the schedule which charges tax on annual profits or gains arising from any trade, profession, employment or vocation. And Schedule E is the schedule which charges tax in respect of public offices or employments of profits, annuities, pensions, etc. The Indian Income-tax Act, on the other hand, by Section 4(1), charges generally to tax all income, profits and gains from whatever source derived. It is clear, therefore, that the Indian Income-tax Act in employing the expression income not only lays open to the charge of tax everything that can be properly brought within the description of income (irrespective of any technical categories of income such as are contained in the schedules to the English Act), but also treats the expression income as something which is larger and more general then profits and gains. Their Lord ships of the Privy Council pointed out in Gopal Saran Narain Singh v. Commissioner of Income-tax that the word income is not limited by the words profits and gains and that anything which can properly be described as income is taxable under the Act, unless expressly exempted. The starting point, therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y elses goodwill. It is true that the learned Law Lord there describes a mere voluntary gift as not being in the true sense of the word income; but it has to be remembered that he was speaking in reference to the English Income Tax Act and not in reference to the Indian Income-tax Act. In short, the English Income Tax Act by its charging provisions has taxed only those particular types of income which can be brought within the various schedules, whereas the Indian Income-tax Act has charged whatever is income, profits and gains on the proper construction of those expressions. It would, in my view, be going altogether too far, on the strength of those words of Viscount Dunedin in the Bradfield College case taken out of their context, to say that nothing whatever can be charged as income under the Indian Income-tax Act which has not an origin in some obligation to pay. I believe that the true test to be prescribed by Lord Russell of Killowen in Gopal Saran Narain Singh v. Commissioner of Income-tax, in which he says that anything which can properly be described as income is taxable under the Indian Income-tax Act, unless expressly exempted. I regard it as dangerous to take a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss of a valuable business agency, and, in that sense, the actual matter before the Board was clearly something which had relation to the business of the assessee. No actual question of the sort we are dealing with was involved. In my opinion, however, Sir George Lowndes never intended to-and, in fact, by the language he used, never did - limit the construction of the word income in the Indian Income-tax Act to something which must necessarily have its origin either in a business activity, an investment or an enforceable obligation. Indeed, the passage, when examined, bears no such meaning. He says that, in order to be income, it must be something which comes in (1) periodically, (2) as a return, (3) with some sort of regularity or expected regularity and (4) from a definite source. It appears to me to be beyond argument that a series of payments maybe made periodically and with regularity or with expected regularity, not- withstanding that they do not have their origin in business activity, investment or enforceable obligation. That such a payment is something which comes in and in that sense may in the proper circumstance be income in the wide sense in which that exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f each case the payments are made in such a way as to constitute what is paid the money of the recipient at all or whether the payments themselves are not merely a series of casual payments of windfalls. But there seems to me to be another class of cases altogether in which in particular circumstances payments maybe made by one person to another which can only be explained on the ground that the giver intends to give, and the recipient expects to receive, with regularity or expected regularity and from a source the nature of which is to produce such a payment, an income which is in the income-tax sense his own. I can find nothing in the Indian Income-tax Act to warrant any general conclusion that it is only in a case in which, if the payment is discontinued, the recipient will have an immediate right of action again the payer, that it will be income in his hands in the Indian income-tax sense. That is to put too limited a construction one the word income . If the payments are such as to come within the category of payments which are casual and non-recurring, then it is to be observed that the Act itself has taken them out of the category of income. The very fact that the frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been paid quarterly. The sanction for their payment has appeared in the annual budget of the State. I think, therefore, that they have become customary payments in the limited sense at least that they were habitual payments though I am inclined to agree with respect with the learned President of the Tribunal that no fact has been proved to warrant any finding that they are customary payments in the legal significance of that term denoting something that has become legally enforceable by custom. Nor do I think that there is the slightest evidence, as the Income-tax Officer has himself admitted, of any vested right in the Rani to receive the annual sum in question from Nabha State. I think that the use of the expression vested right has been a little unfortunate and misleading. What we really have, therefore, is a series of payments made over a period long enough to entitle them to be described as habitual, originating, so far as any evidence in this case goes, in nothing more than the bounty of the Ruler of Nabha State. We must at this stage accept the facts as they are given us. It may be that, had further researches been possible, some more certain sanction for these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act in respect of her personal income accruing, arising or received in British India ? On this question all the members of the Income-tax Tribunal were agreed upon an answer in the negative. In this conclusion I concur. The learned President of the Tribunal was of the opinion, on the authority of Bishwanath Singh v. Commissioner of Income-tax, Central and United Provinces, that the Ruler of Kalsia State was not sovereign for the purposes of international law and consequently could claim immunity in British India neither from taxation under the British Indian taxing Act nor from proceedings in respect thereof in British Indian Courts. The other learned judicial member of the Tribunal came to the same conclusion on the ground that no Indian State was sovereign in the sense which that word was used in public international law and that the Ruler of an Indian State did not possess any vestige of international personality. That the Ruler of Kalsia State is a Ruling Chief and enjoys internal sovereignity over his subjects within his State, except in certain specified respects, is admitted by Dr. Asthana, who appears in this case on behalf of the Income-tax authorities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in their judicial capacity inquire into and decide whether any restrictions submitted to by any such foreign Ruler are or are not such that the Ruler has ceased to be sovereign. We could have wished that the same course had been followed in the present case before us by the Income-tax authorities. This was what was done in the case relating to Benares State referred to above : Bishwanath Singh v. Commissioner of Income-tax, Central and United Provinces. It would, I think, have been proper to obtain from the Crown Representative a certificate or statement in relation to the status in respect of the sovereignty of the Ruler of Kalsia State. But this has not been done in this case and, if by this omission the Income-tax authorities have in any way been prejudiced, they have themselves alone to blame for it. I should not myself feel disposed to direct a reference to be made to the Crown Representative at this late stage, in view of the conclusion at which I have arrived. In my opinion, the only view which on the evidence before us, we can properly taken in this case is that the Ruler of Kalsia State has, notwithstanding the protection of the British Crown, Continued to enjoy a ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng less than the retention-if, indeed, he ever had it-of an international personality in public international law in the fullest sense. No case, with one possible exception, has been brought to our notice in which there has ever been put forward successfully a claim on behalf of the Ruler of an Indian State to recognition of sovereignty in the full sense in which that word is used in public international law so as to extend the privilege of personal immunity from proceedings in Courts of British India to the Rulers wife. The only possible exception is the case relating to Kapurthala State which is reported in Movstak Rae v. Lady Randheer Singh of Kapurthala State. But, in my opinion, that case when examined is no authority for so general a proposition that the personal immunity founded on his domestic sovereignty of a Ruler of an Indian State from suits in Courts in British India extends by international usage to his wife. What the Court in British India said in that case was that it would not assume jurisdiction in British India in a suit which arose between the Maharaja and his subjects within his own State. It was held that a British Indian Court would not adjudicate in British ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections, but it appears that the objections that she ultimately raised before the Appellate Tribunal. No useful purpose would be served by making any reference to the objections raised by her earlier in the proceedings till we come to the proceedings before the Income-tax Appellate Tribunal. Before the Tribunal two objections were raised, firstly, that the sums received by the assessee from Kalsia and Nabha were not assessable income as they were purely voluntary gifts made to the assessee and were, therefore, of a casual and non-recurring nature. The second objection raised was that the assessee being the wife of the Raja of Kalsia, who was an independent sovereign, was not liable to pay any income-tax in British India. The matter was considered by a Full Bench of the Tribunal. The President of the Tribunal, Mr. M. Munir, held on both points in favour of the assessee and was of the opinion that she was not liable to pay income-tax on these sums. Mr. Yahya Ali, judicial member, was on both the points against the assessee. The two other members of the Bench agreed with Mr. Yahya Ali and it was held by the majority that the assessee was liable to pay income-tax on the sums mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident in British India. he is liable to have his income under the first two heads mentioned above included in his total income for the purpose of assessment, unless such income or any portion thereof is specially exempted. Section 4, sub-section (1), sets out what income is to be included in the total income of an assessee if he is resident and if he is not resident and if he is not ordinarily resident in British India. This is followed by a number of provisos and explanations which deal mostly with income that has accrued outside British India and are not necessary for our purposes. If an assessee (that is, a person liable to pay income-tax in British India) makes a voluntary allowance to any person out of the assets which remain his property, he is not entitled to deduct such sums from his total income. Section 16(1)(c) provides that all income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income-tax (Amendment) Act, 1939, from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with approval from Ingram on Income-tax that source means not a legal concept but something which a practical man would regard as a real source of income : see Rhodesia Metals Ltd. (Liquidators) v. Commissioner of Taxes. If, however, the husband is bound to pay a certain sum periodically under an order of a Court or under an agreement, the order or the agreement may be deemed to be the source of the income. Their Lordships of the Judicial Committee in Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa held that the agreement to pay the royalty by the lessee of a coal mine was the source of the income. Ordinarily, therefore, if a person makes a voluntary allowance to his wife or his children, he is not entitled to get a deduction for such payment and the money in the hands of his wife or children would not be deemed to be their income. It has been held in England that the word income must be construed in the popular sense of the word : see Simpson v. Teignmouth and Shaldon Bridge Co. and Aikin v. Macdonalds Trustees. In Smelting Co. of Australia Ltd. v. Commissioners of Inland Revenue, (sic) it was held that the popular sense of the word income connotes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a wife resident in British India who receives remittances from her husband who is not resident in British India out of any part of his income which is not included in his total income the remittance so received shall be deemed to be income accruing in British India to the wife. There can be no doubt, therefore, that the sums received by the assessee from Kalsia are to be deemed to be income of the assessee which has accrued to her in British India. For the purposes of that sub-section three conditions are necessary, firstly, that the husband was not resident in British India, secondly, that he should have made remittances which were received by his wife resident in British India, and lastly, that such remittance should have been made out of any part of his income which is not included in his total income. If these three conditions are fulfilled, then the remittance received must be deemed to be income accruing in British India to the wife. It will be noticed that the word here used is remittances and there can be no doubt that the moneys received by the assessee were remittances. It was admitted by learned counsel for the assessee that in Kalsia the whole income of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble as receipts deemed to be income accruing to her in British India. Learned counsel has argued that a gift of money is never taxable as income in the hands of the donee. He has in support of this proposition cited before us Halsburys Laws of England, Hailsham Edition, volume 17, page 14, paragraph 16, and again page 265, paragraph 531. Apart from the question that little can be gained by trying to construe an Income-tax Act of one country in the light of a decision upon the meaning of the income-tax legislation of another, as was remarked by their Lordships of the Judicial Committee in Gopal Saran Narain Singh v. Commissioner of Income-tax, the proposition, to my mind, as stated by learned counsel, is far too general. I shall deal with this matter in greater detail when I come to deal with the question of allowances paid to the assessee from the Nabha State. In Section 4, sub-section (2), the legislature has laid down that the remittances received by the wife in British India are taxable as income which has accrued to the wife in British India. The word remittances means sending of money. There can be no doubt that the moneys received by the assessee were remittances to he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untary allowances are part of the emoluments of an office, employment or vocation, they are not income... and at page 265, paragraph 531, of the same volume :- Gifts or voluntary allowances are not income in the hands of the recipient unless they are attached to and form part of the emoluments of an office, employment, or vocation. This matter is further discussed in the same volume from paragraphs 435 to 438 at pages 213-217. Before accepting the proposition enunciated above, we must bear in mind that the scheme of the Indian Income-tax Act is entirely different from the scheme of the English Act. Under the latter Act the profits and gains that are taxable are set out in the various schedules to the Act and before a tax can be levied the profits and gains which are sought to be taxed must fall under one or other of the heads specified in the schedules. On the other hand, under the Indian Income-tax Act all income, profits and gains are made taxable unless they fall within the exceptions mentioned in the Act. After having enumerated the four heads of salaries, interest on securities, income from property, and profits and gains of business, profession or vocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be no doubt it will be treated as his income and, as such, be taxable. The leading case on the subject which attempted to define this most difficult word income is the decision of their Lordships of the Judicial Committee in Commissioner of Income-tax, Bengal v. Shaw Wallace Co. There the assesses were given a certain solatium for the compulsory cessation of their business as agents, and the question was whether the payment thus made was in the nature of a capital receipt or was it a receipt from business or other sources which were taxable. Their Lordships held that income should be (1) in the nature of a periodical monetary return (2) coming in with some sort of regularity and (3) from definite sources, the source being not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. It must be remembered that this definition was given be their Lordships when dealing with the question whether the amount paid to the assessee was in the nature of a capital receipt or was an income from business. Their Lordships held that it was not as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Lord Russell, adopting generally the definition already quoted, added the following important amplification : The word income is not limited by the words profits and gains. Anything which can properly be described as income, is taxable under the Act unless expressly exempted. Their Lordships then observed :- It is not in their Lordships opinion correct to regard as an essential element in any of these or like definitions a reference to the analogy of fruit, or increase or sowing or reaping or periodical harvests. Lord Cairns (loc. cit.) used these expressions because he was distinguishing mineral leases from agricultural leases. Sir George Lowndes (loc. cit.) speaks of income being likened pictorially to the fruit of a tree or the crop of a field. But it is clear that such picturesque similies cannot be used to limit the true character of income in general, and particularly when it is constituted by mining rent or royalties. Then their Lordships go on to hold :- Income is not necessarily the recurrent return from a definite source, thought it is generally of that character. Income again may consist of a series of separate receipts, as it generally does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the remittances made by the Maharaja of Nabha to the assessee are her income or are taxable income. I am inclined to hold that in any case the remittances are not taxable income. The remittances made by the Maharaja of Nabha to the assessee may be income but to my mind they are expressly exempted under Section 4, clause (3)(vii). That sub- clause provides that any receipts not being receipts arising from business or the exercise of a profession, vocation or occupation, which are of a casual and non-recurring nature, or are not by way of addition to the remuneration of an employee are not taxable There can be no doubt that the allowances made by the Maharaja of Nabha to the assessee were of a casual nature. The case in Stedeford v. Beloe dealt with the question whether the allowances and pensions, given to the headmaster of a school on his retirement when his services was not a pensionable service and the pension depended entirely upon the goodwill of the governing body, who might at any time, if they wished, rescind the minute under which they granted the pension, fell under Schedule E, Income Tax Act of 1918, as amended by Section 18, Finance Act, 1922. Viscount Dunedin observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurrence. I think a mere voluntary payment, not being receipt arising from business or the exercise of a profession, vocation or occupation and not being by way of addition to the remuneration of an employee or not having been made expressly liable, is not liable to be taxed; and as I understand the exception, a voluntary payment must be deemed to be of a casual and non-recurring nature unless there is a liability on the donor to pay, which liability may arise out of a contract, a custom or some order which is binding on him. On the grounds given by me above I would hold that the allowances made to the assessee from Nabha do not constitute her personal income assessable under the Indian Income-tax Act and that they are of a casual and non-recurring nature and are, as such, exempt under Section 4(3)(vii) of the Act. To my mind, there was no justification in splitting up questions Nos. (1) and (2) into parts (a) and (b) as they appear to me to be contradictory to each other. If the case fell Section 4(3)(vii) of the Act, it would necessarily not be personal income assessable under the Indian Income-tax Act, and I, therefore, do not see any reason why the questions were split up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abrogated by statute, the Courts would interpret the Act, as far as its language admits, so as not to be inconsistent with the established rules of International law or with the principles of comity of nations : see Maxwell on interpretation of Statutes, 7th edition, page 127. There can be no doubt that these are sound principles of law and in interpreting the Income-tax Act it must be conceded that there is nothing in the language of the Act which entitle us to hold that the legislature intended to override any settled principles of international law. The distinction between British territory in India or British India and the territory of the Indian States is well recognised, and it is admitted on all hands that the Indian States do not form a part of the British territory, though the Crown exercises certain rights through His Majestys representative known as the Crown Representative including the right of conducting international relations, the right of exercising jurisdiction over Europeans and Americans, interference to settle disputes as to succession to the State, the suppression of grave misrule in the State, and the regulation of armaments and the strength of military f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own. As against that the it is argued that the relations between the Kalsia State and the British Government are governed by the treaty rights and the Kalsia State retains sovereign powers limited only by the clauses of the treaty. Moghul Emperors, in the days when they were in power, claimed to be the Emperors of Hindusthan and insisted on being recognised by the minor kings and chieftains as their overlord or sovereign, though these minor kings enjoyed a considerable amount of internal sovereignty. As the powers of Moghul kings declined their hold on these chiefs or chieftains gradually grew weaker and new chief or chieftains arose, but in name the kings of Delhi remained their overlord or sovereign. As the Mahratta power in the country increased, the power of the Moghul Emperors declined and ultimately about the year 1760 the Moghul Emperors became practically puppets in the hands of the Mahrattas. Therefore they remained the virtual prisoners in the hands of the British till Bahadur Shah II was tried and formally deposed and deported after the Mutiny of 1857 and the claim for paramountcy of the Moghul Emperors was transferred to the British Crown, see State, 21 and 22 Vic., Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable to the jurisdiction of the British Courts has arisen in several cases. It is true that under Section 57 of the Evidence Act, a Court may, on all matters of public history or the existence of title and national flag of every State or sovereign recognised by the British Crown, resort for its aid to appropriate books or documents of reference, and most of the text-writers are of opinion that for the purposes of international law the Indian States cannot be treated as international units. The Crown has, however, always drawn a distinction between the territories in its possession and the territories of Ruling Chiefs over which it exercises rights of paramountcy. Before we come to the statutes where the sovereign status of the Indian princes has been recognised, I may mention some of the cases where the question arose. In Statham v. Statham, the question arose whether His Highness the Gaekwar of Baroda could be cited as a co-respondent before the British Court. Bargrave Deane, J., at page 96 observed :- Grotius (De Jure Belli ac Pacis) says unequal leagues are made not only between the conquerors and the conquered, but also between peoples of unequal power, even such as neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at principle. Under the international law a foreign sovereign, an ambassador and an envoy of a foreign Government enjoy immuntity from taxation. Any immovable property, even thought it may be owned by a foreign sovereign, is under the jurisdiction of the Court of that country. It is only to be deemed as foreign territory when it is the official residence of the sovereign or his ambassador. The income of the house property owned by the Maharaja of Benares over which income-tax was held to be payable in Bishwanath Singh v. Commissioner of Income-tax, Central and United Provinces, was not income from such property which could be said to be outside the jurisdiction of the Indian Courts. The Indian States have been recognised as sovereign States by various statutes in India and in England. Under the Civil Procedure Code beginning from 1859 the restriction of the British Courts over Indian Princes has been well recognised. The present Sections 85 and 86 of the Act V of 1908 make Indian princes liable to be sued on three grounds which are exactly the same as under the well recognised, principles of international law, that is, if they have immovable property in British India and the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Munir, was of the opinion that he was bound to hold that the Kalsia state is not a subject of international law and its Ruler not an independent sovereign. Mr.Yahya Ali, with whom the other two members of the Tribunal, Mr. A.L. Sahgal and Mr. N.N. Chakravarty, agreed, held as follows :- It is from the authorities abundantly clear therefore that the appellants husband as Ruler of Kalsia is not entitled to the rights of extraterritoriality (including the right of exemption from taxation) which a sovereign is entitled to under the code of the international law. All the members of the Tribunal were, therefore, agreed that the Ruler of Kalsia was not entitled to immunity from taxation under the international law. So far as I can see, the question has not been referred to us for our opinion. The question reads as follows :- Whether, by reason of her being the wife of the Ruling Chief of Kalsia, the assessee, who is a resident in British India, is exempt under the canons of international law from taxation under the Indian Income-tax Act, in respect of her personal income accruing, arising or received in British India. If I had to consider the question whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted to the wife of a sovereign. A reference to Sections 85 and 86 of the Civil Procedure Code (V of 1908) would, however, show that there is no such protection given to the wives of Indian princes against their liability to be sued in British India. The only case in which the question of the wife of an Indian Chief being sued arose was the case in Movstak Rae v. Lady Randheer Singh of Kapurthala State. A reference to that case, however, would show that the suit had been filed with reference to moneys lent to Lady Randheer Singh, Rani of Kapurthala, while she was living inside the State with the Maharaja. the suit was brought in British India where she happened to be present and the Court held that the cause of action had arisen in the State and the Court would not entertain a suit between a State subject and the ruler or his wife on a cause of action which had accrued inside the State and outside British India merely on the ground that the defendant happened to be British India. A reference to section 155 of the Government of India Act, 1935, would also show that the exemption from Federal taxation with respect to lands, or buildings situate in British India or income accruing, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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