TMI Blog1971 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ively. The assessment in each of these years was made under section 34 read with section 23 of the Act, as the assessee's income from dividends and interest and capital gains earned by the assessee during the relevant accounting year in what was then British India had not been brought to tax. The assessee objected to these proceedings and contended before the Income-tax Officer that he being a Ruler of the Faridkot State was immune from taxation on every source of income. He could not, therefore, by virtue of his sovereignty, be treated as an assessee for any purpose under the Act. It was also contended that the notices under section 34 were time-barred. The Income-tax Officer, however, rejected these objections and held that, though under the international law the Rulers of Indian States were sovereigns and immune from municipal law of other countries, there was no exemption as far as the personal incomes of the Rulers are concerned from being taxed under the Act. In that view he held that notices under section 34 were valid and accordingly made an assessment. The appeal to the Appellate Assistant Commissioner was without success, though similar contentions were raised before him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international law should not be regarded as having been superseded. " In the aforesaid view the Andhra Pradesh High Court had held that notwithstanding the fact that His Exalted Highness the Nizam had lost the character of a sovereign Ruler after October 26, 1950, he is still immune from taxation in respect of the income derived by him prior to that date. Following this decision the President held that the assessee was immune from taxation under the Act on his private income. In view of this decision, on an application by the revenue under section 66(1) of the Act, the following question was referred to the High Court : " Whether, on the facts and circumstances of the case, the assessee was not liable to tax under the Indian Income-tax Act, 1922, in respect of his personal income accruing or arising to him in British India in the two assessment years 1946-47 and 1947-48 ? " The High Court relying upon the decision of this court in Commissioner of Income-tax v. H. E. H. Mir Osman Ali Bahadur, which reversed the decision of the Andhra Pradesh High Court referred to and relied upon by the President of the Tribunal, held against the assessee. It is contended before us that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bahadur, to sustain the judgment under appeal and it is conceded that if this decision was not applicable to the facts and circumstances of this case, the position as contended by the assessee would be that the Indian Rulers prior to the Constitution were granted immunity from taxation, and in any case this was so in respect of the income from the property of the State as distinct from the private or personal property of the Ruler though there were observations in some of the cases that it was difficult to distinguish public or private property owned by a Ruler. At this stage we think it necessary to advert to one argument adduced on behalf of the assessee, namely, that the income-tax authorities--particularly the Income-tax Officer--had accepted the international status of the assessee and the immunity from taxation of income from public property, but only rejected the claim for such immunity in respect of income from private or personal property. It is therefore contended that the status of the assessee as an international personality is not in issue before us ; what is in issue is whether his income from private property is exempt from taxation. We do not think this contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspects of the immunity and privileges enjoyed by the heads of the State under the laws of the country where questions relating to them arise, what we are concerned with at the very threshold of this argument dealing with the immunity is whether the Rulers of the erstwhile Native States as they were called enjoyed the same or similar privileges as those of the heads of States recognised as members of the family of nations in international law. It is clear from the very nature of the Native States in India that they were subject to the sovereignty and protection of the British Crown. While their relations with the Crown were governed by treaties, though initially on terms of equality, as time went by and the British Crown in India became paramount, the relationship between it and the Rulers became unequal with the result that these treaties became subject to the reservation that they could be disregarded where the interests of the British Empire or those of the subjects of the native States were involved. When the Nizam claimed equality with the British Crown, the then Viceroy Lord Reading informed him on 27th March, 1926, that " the sovereignty of the British Crown is supreme i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in British India. " In the recent case of this court in H. H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior, referred to above, the majority expressed the view that " the States had no international personality. " Nonetheless the status of these Rulers in England was recognised as being on par with other Rulers in the matter of personal immunity from being sued in their courts. In so far as British India was concerned, these were governed partly by Acts of the legislatures, particularly the provisions contained in the Civil Procedure Code and by notifications of the executive under taxation laws as well as by executive or administrative instructions relating to their privileges. It is, therefore, apparent that in so far as this country is concerned the immunity from legal proceedings which is recognised in the common law has been the subject-matter of legislation under which the ruling princes of India, notwithstanding that they were not recognised as international personalities were however accorded this immunity. Section 433 of the Code of Civil Procedure of 1882 and subsequently sections 84 to 87 of the Civil Procedure Code of 1908 deal with these matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity the Rulers of an Indian State could only avail of it, if they are recognised as international personalities which, as we have seen, they are not. Any exemptions which they may be given must, in our view, be under the relevant taxing Acts. The learned advocate for the assessee, however, points out that if the Rulers of Indian States were not exempted from tax apart from the statute there was no need to make a provision in section 3 of the Bengal Agricultural Income-tax Act, IV of 1944, specifically making every Ruler of an Indian State liable to agricultural income-tax. On the other hand, it would appear to us that this provision would itself militate against the assumption of immunity from taxation of the property of the Rulers and at any rate the legislature may have been acting ex abundanti cautela. It may, however, be noticed that in so far as the Income-tax Act is concerned exemption of the income of the Rulers derived from Central Government securities was specifically given under section 60 of the Act which implies that the Rulers were not exempt from other provisions of law. This position also finds support from a case cited by the learned author on the " Immunity from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued to have force, thereafter, by reason of article 372. We have noticed these contentions to show that there is no validity in the submission of the learned advocate for the assessee that that question did not directly arise in that case because the Nizam was being assessed in respect of assessment years 1950-51 and 1951-52, when he was not a ruling prince. This court specifically dealt with this matter as can be seen from the observations of Subba Rao J., as he then was, at page 671 : " International law vis-a-vis the liability of a sovereign to taxation in respect of his private property is in a process of evolution. It has not yet become crystallized. " After referring to Halsbury's Laws of England, 3rd edition, volume 20, page 589, and Oppenheim's International Law, 8th edition, volume I, page 759, and the article on immunity from taxation of foreign State-owned property in the Americal Journal of International Law, to which we have already adverted, he observed " that the question is not free from difficulty and that it requires serious consideration when it directly arises for decision ". Assuming for the purposes of these appeals that a foreign sovereign who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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