Per Dr. S. Narayanan, Accountant Member - These two appeals, one by the revenue and the other by the assessee as well as the assessees cross-objections are disposed of by this common order.
This appeal is by the assessee. The assessee is an individual. He was recognized as the Ruler of Jhabua after the demise of his father H. H.Raja Sir Dilip Singhji on 23-2-1965. The valuation date is 31-3-19765.
The WTO noted that the assessee had received Rs. 3 lakhs as a payment from the Government of India during the year which ended on 31-3-1976.
The assessee explained that this was a payment consequent upon the abolition of privy purse. According to the assessee, this amount was not taxable. The WTO rejected this claim nothing that the exemption claimed was Act, 1957 (the Act) or under any other statutory provision.
The assessee appealed.
3. Before the AAC reliance was placed on article 11 of the Covenant entered into by the rulers of Gwalior, Indore and other States with the Government of India to contend that the above sum of Rs. 3 lakhs was not taxable. This article provided that the ruler of each State shall be entitled to receive annually for his privy purse specified in the related Schedule of the Covenant and that the said amount shall be free of all taxes. Reliance was also placed upon paragraph 230 of the White Paper issued by the Government of India in March 1950. It was sought to be argued on the basis of the above that the sum of Rs. 3 lakhs was not chargeable to wealth-tax for this assessment year.
4. The AAC rejected the assessees claim in this regard. He first of all referred to the relevant provisions of article 11 as well as the relevant portion of paragraph 230 of the White Paper. These are extracted below from the order of the AAC : "11. (1) The ruler of each Covenanting State shall be entitled to receive annually from the revenues of the united Stated for his privy purse the amount specified against that Covenanting State in Schedule I : Provided that the sums specified in the schedule in respect of rulers of Gwalior and Indore shall be payable only to the present rulers of these states and not to their successors for whom provision will be made subsequently.
(2) The said amount is intended to cover all the expenses of the ruler and his family including expenses of his residence, marriages and other ceremonies, etc., and shall subject to the provisions of paragraph (1) neither be increased nor reduced for any reason whatsoever.
(3) The Raj Pramukh shall cause the said amount to be paid to the ruler in four equal installments at the beginning of each quarter in advance.
(4) The said amount shall be free of all taxes, whether imposed by the government of the united state or by the Government of India." "230. Under the terms of the convenants and agreements of merger the privy purses of the rulers are to be free from all taxation. The exemption in respect of taxation applies only to the amounts of privy purses and does not extended to any other income of the members of their families. The right of the rulers of this exemption has been accepted because in their own territories the rulers were recognised as sovereigns and were free from all kinds of taxation. This agreement is also covered by article 291 which provides that any sum paid to a ruler as privy purse, which is charged on the consolidated fund of India shall be exempt from all taxes on income." According to the AAC it was clear from the above that the amount received (upon abolition of the privy purse) when the assessee had ceased to be the rule would not be covered by the covenant. The assessee is, hence, in further appeal.
5. Shri M. N. Joshi, the authorised representative of the assessee, reiterated the submissions before the authorities below to claim exemption of the sum of Rs. 3 lakhs from wealth-tax. He also referred to the commentary on the Wealth-tax Act by A. C. Sampath Iyengars the three new taxes, sixth end., Vol. I, it is observed there as under : "Privy purses granted by the Government of India to the rulers of the erstwhile princely states are in the nature of an annuity during their lives. These annual grants are under the terms of the grant not computable. Hence, these annual sums may not be included in the computation of net wealth of the Rulers. But any unspent amount would, however, from part of the net wealth of a subsequent year." (p. 298) The contention for the assessee is that any unspent balance out of the said sum of Rs. 3 lakhs would be taxable from the assessment year 1977-78 but not before. The departmental representative, Shri Gujarati, relied upon the orders of the authorities below. he submitted that there was no specific provision in the Act to justify such an exemption. On the other hand, the Income-tax Act, 1961 (the 1961 Act) contained a specific provision in section 10(18A) exemption from tax any ex gratia payments made by the central government consequent upon the abolition of privy purse. This provision was introduced by the Rulers of Indian States (Abolition of Privileges) Act, 1972. with effect from 9-9-1972. This amendment was made well after the enactment of the 1957 Act, and, hence, it could not be said that the Legislature was unaware of the taxability or otherwise of the amounts paid on the abolition of privy purse to Wealth-tax. The submission, therefore, is that there was no merit in the assessees grievance.
6. We have heard the parties. No doubt, the particular article of the covenant extracted above says that the amount shall be free of all the taxes whether imposed by the government of the united state or by the Government of India. This Covenant was entered into when the Act was not on the statute book. The Covenant could only refer to the taxes in force at that time. If indeed the intention of the contracting parties had been to cover future levies also, that would have been spelt out specifically in the aforesaid articles. This was not done. Our laws are not immutable as the laws of the Medes and the Persians. The Legislature is always at liberty to attach new consequences to old acts. We find that there is no specific provision in the act exemption the kind of asset which is in dispute before us. Nor, as already noted, is the language of the relevant provisions of the covenant specific enough to justify the exemption claimed here. In fact, in the act itself, the following provision is made : "5. (1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and as such assets shall not be included in the net wealth of the assessee : (iii) any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part-B States (Taxation Concession) Order, 1950;" This shows that the Legislature was aware of the transaction of the status of the former rulers from being sovereigns of their States to citizens of the Indian Union. If indeed, it had been the intention of the legislature to exempt the kind of payment in dispute before us, there would have been evidence in the taxing statute itself, of such intention. There is no such evidence available. It is not possible to read any authority for the exemption claimed, either in the Covenant or in the White Paper relied on by the assessee. The passage from A. C.Sampath Iyengars the three new taxes seems to refer to the right to receive an annual amount as privy purse and not to the amounts already received. Hence, it is of no assistance to the assessee. we decline to interfere.
7 to 12. [These paras are not reproduced here as they involve minor issues.]