September ax v. THE STATE OF ORISSA & Anr.

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 income-tax. The High Court also held that even though the appel lant wa.e the Ruler of a former Ori1111& State, he was a "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 to pay agricultural \ . 1 S.C.R. SUPREME COURT REPORTS 783 1950-51. Against the orders. dismissing the applica- tions for setting aside the assessments in respect of years 1950-51, 1951-52 and 1900-53, these appeals Sltehh• s;,.1i D••. have been. preferred with certificate granted by the · v. Sl•I• •f o,;,.. High Court under Art. 132 of thfl Constitution. 9 s.tdhansu 1 6 • . 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 a 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 a 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 a Ruler 6f a State, situate in a foreign State. The appellant says that by Arts. 4 and 5, the Dominion Government guaranteed to him all 784 SUPREME COURT REPORTS [1961] 5 v. r96o Shah ]. his personal rights, privileges, dignities anq titles enjoyed within or without the territory immediately 5 ;,,0 :, ;;~;,. 0 , 0 before the 15th August, 1947, and that any atfempt 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 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 a 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 a 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 the definition of the expression is true that in " 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. I S.C.R. SUPREME COURT REPORTS 785 60 '9 v. Shah ]. Sudhansu agricultural income-tax was, in our judgment, not evinced. Between the da~es on which the Act was enacted and the Adaptat10n of Laws Order, 1950, Shekha. Singh Dn several political events of far reaching effect had taken place, in consequence of which· the appellant State of O>issa had ceased to he 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 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 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 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 Constitution payment the commencement of 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 786 SUPREME COURT REPORTS [1961] 1 9° 0 Sudh•"-"' co,·crR a.II agreements a.nd C'ovenants PntRred into by the H.ul, er~ <>_£ ln.dian State~ before the co~meneom.rr~t v. Sh•h J. Shtkha' Srngh Dco of the Const1tut10n whereby t hA uer<mnal r1ght~, priv1- 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 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 a 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 A 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 a 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 1 S.C.R. SUPREME COURT REPORTS 787 5 v. 1960 dh•••~ raised before 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 Shekh:, Sin&A Deo account, the income of those villages was not liable to be taxed in his hands. It appears from the assessment State of Orissa order that this contention was 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. Shah J. • .., 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 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 a ques tion which was never raisea 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 cost~. There will be one hearing fee. Appeala dismissed.