H E H MIR OSMAN ALI KHAN BAHADUR NIZAM AND RAJPRAMUKH OF HYDERABAD Vs. COMMISSIONER OF INCOME TAX ANDHRA PRADESH HYDERABAD

JUDGEMENT

(1.) This reference is made by the Income-tax Appellate Tribunal under section 66 (1) of the Indian Income-tax Act and the substantial questions that have been referred to by the Tribunal are set out hereunder. The relevant accounting years are the years commencing from 1st April, 1949 and ending with 31st March, 1950 and 1st April, 1950 to 31st March, 1951, the assessment years being 1950-51 and 1951-52. The assessee is the erstwhile ruler of Hyderabad State prior to its integration with India and after the inauguration of the Constitution he became the Rajpramukh of the Part' B ' State of Hyderabad. He submitted his returns for the concerned years claiming exemptions and deductions. As the assessing authority disallowed the exemption in regard to certain items of income, he preferred an appeal to the Appellate Assistant Commissioner, Hyderabad, but did not succeed in getting any relief. He unsuccessfully carried a further appeal to the Income-tax Appellate Tribunal, Hyderabad Bench. However, that Tribunal referred these questions for the opinion of this Court :-

(2.) As the last question is not properly framed, we have recasted it as follows :- "Whether, on the facts of the case, the interest of Rs. 1,97,180 on the Government of India securities should be regarded as having accrued in the Hyderabad State and therefore chargeable at the rate obtaining under the Hyderabad Income-tax Act ?" It would be seen that the first two questions pertain to both the assessment years. While the third relates to the assessment year 1950-51 only, the others bear on 1951-52 only. We shall now proceed to deal with them seriatim.

(3.) The point presented by Sri Palkiwala for the assessee is that upto the merger of Hyderabad State in the Indian Union, His Exalted Highness the Nizam was a sovereign Ruler and as such enjoyed immunity from taxation under the Indian Income-tax Act by reason of International Law under which a sovereign prince is not amenable to the Municipal law of another State. This contention did not prevail with the Department or the Tribunal in the view that, while the Indian Income-tax Act narrates exemptions of several kinds, no mention is made of exemptions granted to sovereign Rulers and that this discloses the manifestation of the intention of Parliament not to conform to the principles of International Law. We are not persuaded that this represents the correct view. In our judgment, the assessee is entitled to exemption upto 25th January, 1950, notwithstanding the absence of specific mention of such an exemption in the Indian Income-tax Act. Indisputably, a sovereign Ruler enjoys immunity from taxation under International Law and it is only in cases where this rule is superseded by express words that this should be denied to him. If a Legislature wants to depart from these principles and bring such a Ruler to tax, there must be clear indication in the enactment itself.