TMI Blog1948 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... not assessable to the Assam agricultural income-tax. The property in question was a large zemindary known as the Chakla Roshanbad which was situate within the Province of Assam. It appears that the Income-tax Officer accepted the contention of the Am-Muktear and no assessment was made. By an order dated May 27, 1941, the Agricultural Income-tax Officer, however, re-opened the matter under Section 30 of the Act and issued a notice on the Assistant Manager of the Tripura Raj estate calling upon him to make a return of the income for the year 1939-40. The Am-Muktear of the Tripura State filed a return of the agricultural income under protest and eventually the Agricultural Income-tax Officer found the agricultural income to be ₹ 66,830 and assessed the tax at ₹ 4,639-1-0. The income was held to be that of the Tripura State which was assessed as an association of individuals. No steps were taken for some time to make an assessment for the year 1940-41. However, on May 27, 1941, notice under Section 30 of the Assam Act was served on the Assistant Manager of the Tripura State alleging that the income for that year had escaped assessment and calling upon him to file a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the Crown ? 2. Is His Highness of Maharaja of Tripura the sovereign ruler of the State of Tripura ? The Court directed the Board of Agricultural Income-tax to re-state the case after answers had been obtained from the Crown Representative to the questions propounded by the Court. The reply was received from the Secretary to His Excellency the Crown Representative on June 8, 1945, and it is in these terms :- Lieutenant Colonel His Highness Maharaja Manikya Sir Bir Bikram Kishore Deb Barman Bahadur, a K.C.S.I., Maharaja of Tripura, has been recognised by His Majesty as the Ruler of the Indian State of Tripura since the August 13, 1923. His Majestys Government do not regard or treat His Highness or his subjects as subjects of His Majesty and they do not regard or treat Tripura as being part of British India or of His Majestys Dominions. Tripura is an Indian State and the Maharaja is a Ruler as defined in sub-section (1) of Section 311 of the Government of India Act, 1935. But, though His Highness is thus not independent, His Majestys Government accord to him the status of a Sovereign Ruler under the suzerainty of His Majesty exercised through His Maje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Assam Act IX of 1939). 6. Whether the income of the accounting year 1345 B.S. (assessment year 1939-40) can be deemed to have escaped assessment within the meaning of section 30 of the Assam Agricultural Income-tax Act, 1939 (Assam Act IX of 1939). 7. Whether the salami realised in respect of settlement of lands is agricultural income within the meaning of the Assam Agricultural Income-tax Act, 1939 (Assam Act IX of 1939). 8. Whether in determining the agricultural income a deduction of 15 per cent. of the arrears of rent due but not realised during the accounting period should be made under clause (c) of Section 7 of the Assam Agricultural Income-tax Act, 1939 (Assam Act IX of 1939). 9. Is the income derived from the Chakla Roshanabad Estate liable to tax under the Assam Agricultural Income-tax Act - (a) by assessment upon the State of Tripura or (b) by assessment upon His Highness the Maharaja of Tripura. The most important question in this reference is whether the Maharaja is liable to be taxes and this to some extent must depend upon the nature of the property, namely, Chakla Roshanabad which lies within the Province of Assam. The questions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the property could be regarded as the property of the Maharaja. The Board of Agricultural Income-tax was of opinion that Chakla Roshanabad formed part of the personal property of the then assessee, the Maharaja of Tripura. But in my view the early history of this zemindary shows that it is the property of the Maharaja in his capacity as ruler. When the British drive out the Moghuls they left the Raja undisturbed in what is now the State of Tripura. As I have said, a they did not return to him Chakla Roshanabad and, a therefore, that property no longer forms part of the State. The British authorities, however, seem to have realised that the loss of Chakla Roshanabad to the then Raja was a serious matter and they settled the zemindary with him and the land has been so settled since the permanent settlement. It appears to me that the obvious inference is that the British, while not prepared to return Chakla Roshanabad to the State, a were equally not prepared to deprive the State of the whole of the income from that property. It appears to me that it was for that reason that Chakla Roshanabad was settled with the then Raja and has remained part of the State property to this d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it seems clear that their Lordships of the Privy Council regarded this property as forming part of the royal possessions of the ruling prince. At page 534 Lord Chelmsford who delivered the judgment of the Board stated : The suit was one in the nature of and ejectment..... to recover a very valuable zemindary, being that part of the royal possessions of the Rajah of Tipperah which lies within the Indian territories of the British Crown. The Rajah of Tipperah, though in respect to these lands subject to the laws and Courts of British India, is in fact an independent price with a considerable territory known as the Tipperah Hills, and as the title to the zemindary and to the Raj is the same, the dispute respecting the former involves a question of the right of succession to the Musnud or throne of the independent principality . It seems clear from this case that their Lordships treated Chakla Roshanabad not as the personal property of the then ruling Rajah, but as property belonging to him in his capacity as ruler. The matter was again considered by a Bench of this Court in Beer Chunder Manikya v. Raj Coomer Nobodeep Chunder Deb Burmono. Cal, 535. In that case a member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddee on the death of the then ruler. Though the precise point which has to be considered in this case did not arise in the three cases to which I have made reference, it is clear, however, that the Courts treated Chakla Roshanabad not as the personal property of the ruler, but as part of the royal possessions which were situate outside the State of Tripura. For these reasons I am satisfied that the opinion of the Board of Agricultural Income tax that Chakla Roshanabad is the personal property of the Maharajah cannot be sustained. It has in law been regarded as royal property descending with the gaddee and a right to the gaddee gave a right to the possession of the zemindary. In my view it is also clear that the Maharaja is an independent ruler and, therefore, not amenable to the ordinary jurisdiction of the Courts in India. International law always gives to the ruler of an independent state certain privileges. In Halls International Law, 8th Edition, at page 220, it is said :- A sovereign, while within foreign territory, possesses immunity from all local jurisdiction in so far and for so long as he is there in his capacity of a sovereign. He cannot be proceeded agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to its own public property, the same immunity must be granted by each state to similar property of all other states. The dignity and independence of each state require this reciprocity. It is clear from this last observation that state property of a particular state is not subject to the jurisdiction of another state though the property lies in the latter state. It was contended, however, that the principles of international law applicable to independent sovereigns had no application to rulers of Indian States because the latter were not, in the true sense of the word, independent. It is clear from the reply of His Excellency the Crown Representative that the Maharajah of Tripura is not independent in the full sense of the word. In internal matters he is undoubtedly independent. But he was not in control of foreign relations and was subject to the British Crown as the paramount power. The reply which I have set out makes it clear, however, that the Indian Government did not regard Tripura as part of British India and treated the ruler as independent. He was treated as an independent prince having the privileges conferred by Section 86 of the Code of Civil Procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign in the true sense of the word, was treated by the Court as a sovereign prince. It is clear, therefore, from these cases that English Courts have treated Indian rulers as independent and entitled to the privileges granted to such rulers by international law. There are provisions in the Code of Civil Procedure relating to suits brought by and against Indian rulers, namely, Sections 86 and 87. Section 86 makes it clear that an Indian prince or chief may be sued in an Indian Court with the consent of the Crown Representative, but such consent cannot be given except in certain special cases set-out in sub-section (2). He can under this sub-section be sued if he is in possession of immovable property situate within British India and the suit is with reference to such property or for money charged thereon. From the provisions of Sections 86 and 87 of the Code of Civil Procedure sit is clear that the Government of India does not grant to the rulers of Indian States the full rights granted by International law. But it is clear that Indian rulers are normally regarded as out-side the law and can only be sued in very special cases with the consent of the Crown Representative. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing in the Act to show that the Provincial Legislature intended to take away the privileges of a foreign sovereign and that being so, we must so construe the Act as to preserve such privileges. During argument reference was made to certain provisions in the Government of India Act and, in particular, to Section 155 which made it clear that the property of Indian States was not liable to Federal taxation. In my view, however, these provisions cannot assist the Court in deciding this question as Federation never came into existence. It is quite clear, however, from the provisions of the Government of India Act that the Government of India had no authority over Indian States. For these reasons it appears to me that the rulers of Indian States are not amenable to taxation in British India, particularly where the property is State property as I have held Chakla Roshanabad to be. The question whether an Indian ruler is liable to taxation in respect of income arising from property in British India has been considered on a number of occasions. In Commissioner of Income-tax, Bombay City v. A. H. Wadia, as Agent to the Gwalior Durbar a Bench held that income arising from shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s true that the learned Judges who decided the case came to the conclusion that the Maharaja of Benares, though a ruling prince, was not wholly independent, but that does not appear to be the ground for their decision. The case was decided upon to the terms of the instrument of transfer which created the independent State of Benares. It is pointed out that in Section 26 of the instrument of transfer it was distinctly stated that in the other estates in possession of His Highness; which were outside the State of Benares - and presumably the income derived in the case which was sought to be assessed was from such estates - he was to continue to have the status and responsibilities of a landholder under the ordinary law. In other words, the instrument of transfer created the independent State of Benares and in terms made the Maharaja liable for other properties held by him outside the boundaries of the State land within British India. With respect to such properties he was to continue to have the statues and responsibilities of a land-holder under the ordinary law. One of the liabilities of a land-holder under the ordinary law is to pay income-tax son income derived from the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment shall be; made under this section, unless the appellant has had a reasonable opportunity of showing cause against such enhancement . The Board of Agricultural Income-tax appears to have thought that all that the Assistant Commissioner did on appeal was to confirms the assessment, but he changed the assessment on an association of individuals to assessment upon the Maharaja personally. It appears to me that he did far more than confirm the assessment. He in fact set aside the original assessment and assessed the Maharaja personally for the first time. The Maharaja personally had never had an opportunity of contesting the matter before the Income-tax Officer land in my judgment the Assistant Commissioner on appeal had no power to vary the assessment and to make the Maharaja liable for the first time. It was in fact an entirely new assessment upon a new assessee and his act can in no way be described as a confirmation, reduction, enhancement or annulment of the assessment. In such a case the Assistant Commissioner should in my view have acted under the provisions of sub-section (5)(b) of Section 24 of the Act and set aside the assessment and sent the matter backs to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1939). It will be remembered that the Income-tax Officer made no assessment in the first place as he was of opinion that Chakla Roshanabad lay within the State of Tripura and, therefore, clearly outside the Act. Later, however, he seems to have changed his view land issued a notice under Section 30 claiming that the income had escaped assessment; for the year 1939-40. It certainly had not been assessed for that year because the Income-tax Officer thought that the income was not assessable. The question which arises, therefore, is whether income has escaped assessment because Incomes-tax authorities have wrongly assumed or held that such income was not taxable. In a sense it can be said to have escaped assessment. but on the other hand this income was made the subject of an enquiry by the Income-tax Officer land was; held to be not assessable. The Board of Agricultural Income-tax was of opinion that this income had escaped assessment and, therefore, the provisions of Section 30 applied. On behalf of the assessee, however, it was income does not escape assessment unless it has been overlooked land it was urged that in a case such as the present one the proper procedure was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to re-open the assessment and assess such amount. This case appears to be some authority for the proposition that if income is not taxed by reason of an error of the taxing authorities it has escaped assessment. A similar view was taken by this Court in In re Messrs. P. C. Mallick and D. C. Aich, in which a Bench held that the words escaped assessment in Section 34 of the Indian Income-tax Act mean also has not been assessed . In the view of the Bench there was nothing in the section to restrict the operation of the section only to cases of non-inclusion of the income sin the return, hence an item which was allowed to be deducted from total assessable income could be said to have escaped assessment. The construction so Section 34 of the Indian Incomes-tax Act was considered by their Lordships of the Privy Council in Rajendranath Mukherji v. Commissioner of Income-tax, Bengal. At pages 290 and 291, Lord Macmillan who delivered the judgment of the Board observed :- The appellants, however, submit that this is a case of income escaping assessment within the meaning of Section 34. Assessment. They argue, is a definite act, indeed the most critical act in the process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax v. U. Lu Nyo, it was held that Section 34 of the Indian Incomes-tax Act did not entitle an Income-tax Officer to go behind and revise an assessment made by his predecessor which was completed and had become final. It appears that in the course of assessment for 1929-30 the Incomes-tax Officer rejected the accounts of the assessee for the year 1928-29 respect of his tobacco business and upon the materials before him assessed the income under Section 23(3) of the Income-tax Act. In the following year another Income-tax Officer in the course of assessment proceedings for the year 1930-31 took the view that his predecessor had estimated the quantity of tobacco at too high, and the profit at too low a figure, and purporting to proceed under Section 34, assessed what he regarded as the income which had escaped assessment; for the year 1929-30. The Court was of opinion that the provision of Section 34 could not; be prayed in aid to overcome the effect of a possible mistake made in an earlier assessment. At page 121, Page, C.J. observed :- The Income-tax Officer had no jurisdiction to revise the assessment for the previous year which was completed and had become final. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date, is payable is a capital receipt. It is a single payment made to purchase the general right to enjoy the benefits granted by the lease. In Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo of Ratugarh, a bench of three Judges of the Patna high Court of which I was a member held that salami could not be regarded as income as a matter of law. It might in certain cases be regarded as payment of rent in advance and in such cases it could be rightly regarded as income. If it could not be regarded as rent in advance it could not be regarded as income and would, therefore, not be taxable. Prima facie salami is not income and it is for the Income-tax authorities to say that there do exist facts which would make salami income. In that particular case it was held that upon the facts stated the salami was not income. A similar view was taken in three Patna cases : Raja Shiva Prasad Singh v. The Crown, Commissioner of Income-tax v. Maharajadhiraj Kumar Visweshwar Singh and Rani Bhubaneshwari Kuar v. Commissioner of Income-tax, Bihar and Orissa. There is however a case of this Court, Birendra Kishore Manikya v. Secretary of State for India, in which it was held tax salami or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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