1. Sawai Man Singh, the erstwhile Maharaja of Jaipur, was adopted on 24-3-1921 and he ascended the Gaddi on 7-9-1922. He died on 24-6-1970.
He ruled the Jaipur State as the Maharaja of Jaipur till 1947. With the independence of India, the Paramountancy lapsed. Thereafter, the State of Jaipur acceded to India by instrument of accession (date not given by the parties) and thereafter merged in the United State of Rajasthan on 30-3-1949. The covenant with the Government of India is dated 6-12-1949, which recognised the terms of accession under the terms of accession/covenants. The properties of Jaipur State, of which the Maharaja of Jaipur was the absolute owner up to the merger, were divided into two categories being State properties and private properties. Up to the assessment year 1969-70, the late Maharaja filed his returns of income in the status of an individual. For the assessment year 1970-71, a return of income was filed on 30-4-1970 in the status of an individual. That return is not available. A duplicate of that return was filed on 26-3-1970 declaring the status of an individual. A return dated 12-2-1971 was filed which was received in the office on 19-2-1971. This was termed as revised return and was signed by the legal heir declaring the status of a HUF. The ITO keeping in view the ancestral history of the late Maharaja, the fact of his being the ruler of the Jaipur State, the quality of the property and the way he treated the same assigned the status of an individual. In coming to that conclusion, he had taken note of the history of the case the ascension to the gaddi, the factum of the rulership, lapsing of the Paramountancy in 1947, merger in 1949, and the covenants of the same year. He had further taken note of the legal propositions and the alienation of the properties showing his absolute right of disposition.
The status assigned by the ITO was challenged before the AAC who tracing the history of the matter and relying on State of U.P. v. Raj Kumar Rukmani Raman Brahma  2 SCR 355 held that after the merger, the assessee ceased to be the absolute ruler of the State and, therefore, the correct status was that of a HUF. The department had come up in appeal.
2. Shri Ramachandran, the senior counsel for the revenue, has placed before us six propositions. We will enumerate them as follows: 1. (a) The history of the succession to the rulership of Jaipur (also earlier known as Amber) shows that there was an infallible rule which did not permit succession thereto of more than one person. Only a single heir could succeed to the gaddi.
In support of the proposition he has relied on Genealogical Table of the Kachhawahas (Vol. IV, p. 44), Genealogical Table of Rulers of Jaipur, Appendices' and II Vol. III, pp. 316 ett seqq.
3. He has sub-divided proposition No. 1 into three parts. In respect of the first one, he has relied on pages 44-45 of the paper book No. 4.
The second sub-head is that it is predominently the first son who is the ruler and in support of that he has filed a chart being the extract from the report of Jaipur Administration, 1937-38, pages 59-60. In respect of the evidence for the proposition, he had relied on page 306 of paper book No. 3 filed by the assessee.
The fact that there were wars between brothers or contenders proves the rule that only one person could ascent the gaddi.
He referred to his printed matter of the Jaipur through the Ages and submitted that this supported the second proposition.
5. In respect of proposition (c), even during the lifetime of the assessee, the rule was recognised: Raj Kumar Bhawani Singh was declared as heir apparent and that status was maintained even after merger.
6. in respect of proposition (d), it was submitted same as what had been submitted in 1(a), (b) and (c). In respect of the proposition 1(e), he relied on the following: No distinction existed between State property and private property of the ruler: pp. 479-481, White Paper on Indian States, Article XII(3) of Merger Agreement. Vol. XI, pp. 21-24, 51, 48.
He relied on pages 6, 7, 8, 9 of the typed extracts of the book by Shri V.P. Menon. He further relied on the document of merger in Vol. II of page 172, Article 12 and also invited our attention to the Schedule. He further invited our attention to the pages 21-24 of the same vol. and also page 52.
From 1922 when the assessee ascended the gaddi till the merger of his Stale, the assessee was an independent sovereign of the native State of Jaipur having full and complete powers of disposition both as regards State properties as well as with respect to what are now specified as personal properties, which were impartible in nature.
There is nothing in the history of the rulers of Jaipur to indicate that any other member of the family of the ruler for the time being of Jaipur; had ever claimed a share in the properties. On the other hand, both as regards State properties and as regards private properties the ruler of Jaipur had absolute and exclusive power of disposition over the properties as well as enjoyment of the income, since he was the sovereign. This was also understood to be so by the assessee during his lifetime even after the merger of his State in Rajasthan. The assessee did not make any distinction between his private properties and State properties and he also disposed of immovable property as well as gold and other movable properties in the same way as an absolute owner would do: Assessee's letter dated December 3/12, 1975 at vol. I pp. 18-20, vol. IT., pp. 194, 195, 232, 234, 235, 236.
8. In respect of the second proposition, he invited our attention to page 18 of paper book No. I styled as vol. I beginning from page 6. He further invited our attention to vol. II pages 194, 195, 232, 233 and 235. He further invited our attention to vol. IV, pages 55, 56 and 57 indicating that the Maharaja was the absolute owner even after the merger. He further brought to our notice page 58 of vol. IV giving a specimen of the deed.
it is also inherent in the position of a State that the ruler ought not in law be subject to obligations in relation either to ownership of his private properties or to income therefrom. In other words, the properties held by the Maharaja, by the mere fact that he was the sovereign of a State, were impartible in nature. If the private properties held by the assessee during his lifetime were impartible in the sense that no other member of his family could lay claim to any right if ownership to these properties or to require the sovereign to apply the income therefrom in a particular manner, then the only status in which the assessee could have been assessed in relation to the income from these properties, irrespective of whether they were his personal property or ancestral property, would be as an 'individual'.
Mulla's Hindu Law (14th edn.), pp. 621, 622, 6 MIA 164 at 187-191, 12 MIA 523, 540, 541, Sahdeo Narain Deo v. Kusum Kumari AIR 1923 PC 21, CIT v. Dewan Bahadur Dewan Krishna Kishore  9 ITR 695, 701, 702, 706,707, 709 (PC). See also Raja of Bobbili v. CIT  5 ITR 78 (Mad.) approved in Dewan Bahadur Dewan Krishna Kishore's case (supra).
He referred to Muller's Indian Appeals, page 10, and Annexure I, Babu Ganesh Dutt's 1855. Six Mules Indian Appeals 164. He further relied on terms as Annexure II being 1869/12, MIA 523 and Annexure III Rani Jagadamba Kumari v. Wazir Singh AIR 1923 PC 59. He further relied on a judgment of their Lordships of the Privy Council in the case of Dewan Bahadur Dewan Krishna Kishore (supra). He further relied on Mulla's Hindu Law (14th edn.).
Neither the instrument of accession executed by the Maharaja nor the merger agreement between the rulers of various States including Jaipur purported to or in fact did, affect the nature of the ruler's right in relation to private properties. In fact the merger agreement contemplates full ownership of the properties belonging to the ruler. Personal rights were not affected and, therefore, up to the date of the passing of the Hindu Succession Act, 1956, the right which the assessee had in relation to the private properties remained unchanged 11. It will submitted that the merger agreement was a political document and not a private arrangement and, therefore, the property was the absolute property of the ruler. He invited our attention to the booklet termed as Annexure IV--'Letters collateral to the Government entered between the Government of India, Lt. General, and his Highness Man Singh, Sir Sawai Man Singh Bahadur of Jaipur.
The preamble to the Hindu Succession Act, 1956, indicates that the intention of the Act was only to operate in the region of succession. The Act was prospective in effect, its object was not to affect existing rights of holders of property living on the date of which the Act came into force, namely, 16-6-1956. No interpretation of the Act should be given having the effect of affecting existing rights since such an interpretation would result in the provisions of the Act contravening Article 19(1)(f) of the Constitution, i.e., affecting existing rights of property. If, on the passing of the Hindu Succession Act, the private properties in which the assessee had exclusive rights prior to that date are declared by the Act as being owned by the assessee and other members of the family, then there would be a clear violation of the Fundamental Right of the assessee under Article 19(1)(f)--M.K. Balakrishnan Menon v. ACED-cum-ITO  83 ITR 162 (SC).
The test to see whether the Act applied during the lifetime of the holder living on the date of commencement is to see whether any other member of his family could have demanded a partition during his lifetime as of right.
13. He invited our attention to sections 4 and 5 particularly, Section 5 of the Hindu Succession Act, Clause (v). He further invited our attention to Section 6 of the Hindu Succession Act. He also relied on the judgment of their Lordships of the Supreme Court in the case of M.K. Balakrishnan Menon (supra) and the observations at page 166. In respect of the sixth proposition, he relied on the commentary of the Hindu Law by Raghvachari (6th edn.) at page 863 and also a judgment of their Lordships of the Patna High Court in Bhaiya Ramanuj Pratap Deo v.Lalu Maheshaui Pratap Deo AIR 1968 Pat. 463 and observations at page 469 particularly paragraphs 1 and 9.
14. in summarising his submissions, it was submitted that the assessee was the absolute monarch up to 1949 in whose family the law of premogniture was followed. As there was ample evidence to show that the Late Maharaja was holding and impartible estate, the correct status was that of an individual. It was further submitted that in view of conduct of the Maharaja in treating the properties as his private properties and as he did not maintain any distinction between the private and the State properties he was the absolute owner of the property before merger and after merger. He further submitted that if the character of the property changed, it changed only after his death and not during his lifetime.
15. Shri Palkhivala, the learned senior counsel for the assessee, opening the assessee's case submitted that the case laws on which the learned counsel for the revenue relied, relate to the Zamindars who were governed by local laws. But the case before us was not the case of a Zamindar or a Chieftain but of a King who made his own laws and absolute powers. He further submitted that simply because the properties were the absolute properties of the late Maharaja as a ruler and he had the right of exclusive enjoyment like that of a impartible estate, that did not convert the properties of Maharaja into an impartible estate. He further submitted that the properties may have the same characteristics as of an impartible estate but what has to be seen is whether the properties were similar in quality or not. He further submitted that in a case of a self-acquired property, the owner has the right of enjoyment and right to nominate his successor but that does not mean that the self-acquired property constitutes an impartible estate.
16. Thereafter Shri Palkhivala continuing from 26-11-1979 fairly conceded in the very opening that there was no dispute about the facts.
He further submitted that the issue was legal. He submitted that the property was ancestral being a kingdom before 1947 because no British Indian Law was applicable to the assessee. But after the merger, the assessee was reduced to the position of an ordinary citizen. He further submitted that if the assessee had not been the ruler, he would have been assessed as a HUF and, therefore, when the rulership ceased, he lapsed into the fray of the personal law. In respect of the proposition of the senior or counsel for the revenue that it was a case of impartible estate till the death of the assessee and thereafter the case of a HUF, he submitted that it was a proposition which was unstatable. He submitted that there were found undisputed tests which distinguished the kingdom from an impartible estate which are as follows: 1. The king is the head of Monarchical Government which the owner of the impartible estate is not.
2. The King was the law maker and none of the law touched him. He was the founder of the law and the law relatable to the impartible estate did not apply to him. He further stated that the reference to 1972 SC (sic) did not apply to the assessee's case because the tests laid down therein did not apply to a King because nobody could claim Kingdom by survivorship.
17. In respect of third test, he submitted that the King was immune from taxation before merger whereas the impartible estate was liable to taxation and so was the case with other laws. He further submitted that the provisions of the Hindu Succession Act did not apply. He further submitted that the King created the impartible estates and the Zamindars were mere donees and the King the donor. Referring to the provisions of the Government Trading Taxation Act, 1926, he submitted that the trading activities of the erstwhile ruler were taxable only under the Government Trading Taxation Act. In favour of his proposition he relied on the decision of the Federal Court in A.H. Wadia v. CIT  17 ITR 63 and referred to the observations at pages 77-78. He also referred to the Calcutta High Gourt's decision in Maharaja Bikram Kishore of Tripura v. Province of Assam  17 ITR 220 and the case of Accountant General v. CIT  16 ITR 78 (Bom.). In respect of a judgment of their Lordships of the Federal Court in the case of A.H.Wadia (supra), he submitted that the trading activity of ruler of the Gwalior was taxed only under the Government Trading Taxation Act and the Indian Income-tax Act, 1922, was not applicable. In respect of a judgment of their Lordships of the Calcutta High Court in the case of Maharaja Bikram Kishore of Tripura (supra), he submitted that the rule laid down by their Lordships of the Calcutta High Court was that the ruler was not taxable to Indian Tax Laws. In respect of Accountant-General's case (supra), he submitted that the judgment of their Lordships of the Bombay High Court was to the effect that the sovereign was not subject to Municipal Laws of India and therefore, the taxation laws were not applicable.
18. His fourth proposition was that the impartible estate was abolished by the Land Reforms Act or the Abolition of State and Zamindari Act but it was not so with the State of Jaipur. The King of Jaipur acceded by covenants on terms of equality. He further invited our attention to paragraphs 584 and 584(ii) at page 621 of Mulla's Hindu Law (14th edn.). He further submitted that all the case laws relied upon by the revenue was in respect of Zamindaries and not the Kingdom and, therefore, were not applicable. He submitted that the covenants divided the properties into State and personal properties. The State properties were taken away by the Government and the personal properties remained with the Kingdom. After that event, therefore, it was submitted that the personal law was applicable to the personal properties. He further submitted that if the assessee had not been a King, he would have been assessed only as karta of HUF. He further referred to the judgment of their Lordships of the Andhra Pradesh High Court in AIR 190 AP 423 (sic) in support of his proposition. Regarding the applicability of the personal laws, he brought to our notice that the Nizam filed an appeal before the Supreme Court but it was withdrawn. He further relied on the judgment of their Lordships of the Punjab and Haryana High Court in Kunwar fir Rajindra Singh v. Union of India AIR 1963 Punj. 461 and brought to our notice that the judgment of their Lordships of the Punjab and Haryana High Court was upheld by their Lordships of the Supreme Court in Rustom Cavasjee Cooper v. Union of India 530. Thereafter, he referred to pages 1, 2, and 4 of Vol. I and pages 61, 62, 65 and 70 of the AAC order. Thereafter he submitted that in respect of the disposition of the properties if the legal position was ambiguous, the conduct of the ruler was relevant but when the legal position was clear, the conduct was rendered irrelevant. He further submitted that if the karta could alienate small portion of the properties, the assessee also could and the smallness should be taken with reference to the wealth of the assessee which was running into crores. He further gave an illustration that if the trust was clear, the innumerable acts of any trustee benefiting himself would not create any ambiguity about the existence of the trust. He further invited our attention to pages 71, 72, 73, 74. 75, 76 and 77 of vol. I. He further invited our attention to judgment of the Bombay Tribunal at pages 8-95 of vol. I. Thereafter he referred to the decision of their Lordships of the Punjab and Haryana High Court at pages 96-118 of the paper book. He did not refer to the Gujarat High Court's decision placed at pages 119-166. Thereafter he referred to the judgment of their Lordships of the Supreme Court in the case of CIT v. H.H. Raja of Bhor  65 ITR 634 where their Lordships of the Supreme Court observed that after the death of the ruler the properties were that of the HUF. In respect of the paper book vols. II and III, he made a passing reference. In respect of vol. IV of the paper book, which was filed by the revenue, he submitted that as all the properties were ancestral and none of them were self-acquired the properties were of the HUF. In respect of the proposition of the revenue detailed above he submitted that the provisions of the Hindu Succession Act were not relevant and he, therefore, did not address us on the alternative arguments raised by him before the AAC.19. The senior counsel for the revenue in reply reiterated what he had stated earlier and submitted that up to the merger nobody other than the ruler had any control over the property and the quality of that right was not affected by merger. He further submitted that the distinction made out by the learned counsel for the assessee between the kingdom and the impartible estate actually advanced this case. He further submitted that the HUF property was created either voluntarily by an act of throwing the same into the common hotchpotch or by declaration of law. He further submitted that the case law relied upon by the learned counsel for the assessee did not advance his case because the Punjab and Haryana High Court decision and the Supreme Court decision thereon on which the learned counsel for the assessee had relied had nothing to do with the nature of the property. In respect of the decision of their Lordships of the Andhra Pradesh High Court he submitted that the same was also not relevant because that related to the rights of the persons after the death of the ruler and so was the case with H.H. Raja of Bhor's case (supra).
20. Thereafter Shri Palkhivala clarified that in respect of H.H. Raja of Bhor's case (supra), the facts were similar to the facts obtaining in the instant case.
21. After both the parties have closed their cases, it was put to the parties, whether the issues broadly were as follows: Up to the merger the ruler was the absolute owner in respect of all the properties and even after the merger he continued to treat them in the same manner as is evidenced by the conduct of the assessee in respect of all the properties as also the returns filed and the status declared up to the assessment year 1968-69.
The ruler being the sovereign was the King who made the law. But after merger when he ceased to be the ruler, he became an ordinary citizen and was, therefore, governed by the personal law. The conduct after merger is irrelevant when the legal position is clear.
22. We have given our most careful consideration to the rival contentions and have gone through the voluminous paper books numbering three by the assessee as also the paper books filed by the revenue. We have also gone through the case laws relied upon by both the parties referred to above as also the provisions of the Hindu Law as enunciated by Mulla and Raghavachari. There being no dispute about the facts, we do not intend to refer to them once again.
23. The first issue which calls for consideration and decision thereon is whether the late Maharaja of Jaipur was the holder of an impartible estate. If he was, the consequences and affect on the status would be different. But if he is not, then the question of status has to be decided on different lines. Before we decide as to whether the late Maharaja of Jaipur was the holder of the impartible estate, we have to decide as to what is an impartible estate. The consensus of judicial opinion on this issue is that a holder of an impartible estate is an absolute owner of the estate and the mode of succession is determined by the custom being in favour of the rule of premogniture. That being so, we have to decide as to how an impartible estate comes into existence. An impartible estate which is normally ancestral is conferred by a ruler on a person for meritorious services rendered by that person to the overlord, who is the ruler of the State. The holder of the impartible estate derives authority from the overlord and, if we may say so, the impartible estate is held under the pleasure of the overlord. That is why an impartible estate has been treated as Zamindari to which all the laws of the Government are applicable. The most famous Zamindari/impartible estate is that of Maharaja Adhiraj of Dharbhanga to which all the Indian laws were applicable even before the abolition of Zamindari. Bettiah Raj was another Zamindari in Bihar and an impartible estate but it was not immune from Indian laws as would be apparent from the innumerable litigations even on tax matters by both Zamindars and they being reported cases need not be referred to support the proposition that the Zamindari/impartible estate were amenable to the Indian laws. That being so, the question which arises for determination is whether the Maharaja of Jaipur was a holder of the impartible estate. The history of Jaipur lies deep in the hearty past which may be called medieval and it cannot be said that it was an impartible estate as understood in law. The rulers of Jaipur were absolute rulers, monarchs and, if we may call them, kings who made all laws, who were the fountains of all laws and administered them in the manner they wanted. Up to 1947, when India attained independence, no Indian law was applicable to the ruler including the Indian Penal Code and the tax laws. He administered the State as an absolute overland and the King was undisturbed by any laws of the British India, if we may call it so, before 1947. That being the position, though of course the characteristic of the impartible estate of being the absolute holder was there in case of the ruler, but the fact that he was not amenable to any Indian laws being the absolute owner lends different colour to the estate of the ruler. It was not an impartible estate but a kingdom.
Therefore, during days of his rulership, he being the King, no law including the personal law was applicable to him. But with the lapse of Paramoun-tancy in 1947 and the merger/covenants in 1948, the position changed. The rulers ceased to be the rulers, he was given all the trappings of the ruler but actually he was reduced to the position of an ordinary citizen. He become amenable to all the laws of India as it came to be called after independence including the Indian Penal Code and the Taxation laws. That is why he filed his returns of income under the Indian Income-tax Act, 1922, and, thereafter under Income-tax Act, 1961. Therefore, the first question which arises for consideration is as to the nature of the status of the ruler after the merger. When the King became an ordinary citizen after the merger and ceased to exercise all the powers of the King, the King being a Hindu, lapsed into the bosom of the personal laws. The ruler, therefore, came to be governed by the provisions of the Hindu law. Therefore, our finding is that before the merger he being the absolute ruler was not governed by the Hindu law but after the merger as he laped into the bosom of the personal law being a Hindu, he constituted a HUF with his legal heirs.
In coming to that conclusion, we have taken note of the fact that the ruler did not have any self-acquired property but had only his ancestral property which had come to him through his ancestors and the origin of the ancestral nature of the property is burried in the remote past.
24. At this stage his filing of returns in the status of an individual and dabbling with the properties in the manner he liked without caring for his limitations under the personal law become relevant. It is undoubtedly true that the Ruler filed his returns of income up to the assessment year 1969-70 in the status of an individual and was assessed so. But the question is whether his declaring a status of an individual up to the assessment year 1969-70 could jeopardise claiming of the correct status as assignable under the law. It is also true that the conduct of the assessee is relevant for the purpose of determining the issue of the status but that is not the sole determining factor. An assessee may not be aware of his correct status in law but as and when he knows his correct status, he has the right to claim the correct status. There can be no dispute about the legal proposition. In respect of the fact that the assessee continued to dispose of properties by way of transfer, gifts, etc., even after the merger, that may be a conduct which may appear to go against the assessee to some extent but on a deeper thought it is not so. It is well settled that the karta of a HUF has a limited right of disposition of HUF property. If we were to look into the claim in terms of money in respect of the immovable properties disposed of by the ruler, the figure appear to be substantial. That may be so if the properties of an ordinary HUF are taken as the touch stone. But if the huge dimension of the properties of the Jaipur State are taken to be account (the value of the properties running into crores and crores) the disposition so made by the ruler are reduced to an insignificant figure. We, therefore, hold that the disposition made by the ruler of Jaipur did not detract anything from the claim of the status of a HUF.25. At this stage it would be fruitful to refer to the proposition of the revenue detailed above. The revenue had fairly conceded that after the death of the ruler the status was to be taken as that of a HUF. But the other proposition propounded by the revenue cannot be accepted because neither the assessee was the holder of an impartible estate nor the Indian laws were applicable to him before merger. At this stage we should refer to the decision of their Lordships of the Supreme Court in 1970 3 SCR 631 (sic) and H.H. Raja of Bhor's case (supra).
26. We have not referred to the provisions of the Hindu law as referred to by the revenue because they relate to the impartible estate and we have refrained from referring to the cases referred by the revenue relating to the Zamindari/impartible estate also the case laws relied upon by the learned counsel for the assessee but for H.H. Raja of Bhor's case (supra) and 1970 Vol. III SCR 631 because both the judgments clearly lay down the propositions in favour of the assessee.
As regards the provisions of the Hindu Succession Act relied upon by the learned counsel for the revenue, we need not refer to the same because that does not solve the controversy before us.
(ii) That he was the absolute Ruler, the King, monarch up to the merger and after the merger in 1949, he was reduced to the position of an ordinary citizen to whom the provisions of personal law applied, he being a Hindu, the Hindu law.
(iii) That the filing of the returns in the status of individual could not operate as res judicata by conduct against the assessee from claiming his correct status of a HUF for income-tax purposes.
(iv) The disposition of properties by the late assessee during his lifetime constituted an insignificant part of the properties of the HUF keeping in view the size of the assets of the HUF.28. In the result, the revenue appeal is dismissed and the order of the AAC is confirmed.
29. IT Appeal Nos. 2580 and 2581 (Delhi) of 1977-78 and GT Appeal No.51 (Delhi) of 1977-78 being merely consequential are also dismissed and the order of the AAC is confirmed. All the four appeals of the revenue are dismissed.