1. This appeal with special leave has been filed by the Salar Jung Estate Committed through its Executive Secretary against the judgment and order of the High Court of Hyderabad dated April 15, 1955, in respect of the assessment of the appellant for the year 1557 Fasli. The respondent is the Commissioner of Income-tax, Hyderabad Division.
2. The following questions were referred by the Income-tax Tribunal, Bombay, for the decision of the High Court :
'1. Whether the sum of Rs. 1,32,613 allowed by the Appellate Tribunal as a revenue deduction under section 14 (5) is in accordance with law
2. Whether the Hyderabad Income-tax Act is ultra vires
3. Assuming that the Hyderabad Income-tax Act is intra vires, whether the income of the previous year, that is to say, the income of 1356F, could be validly taxed in 1357 F ?'
3. These questions were all answered against the appellant by the High Court. In so far as questions Nos. 2 and 3 are concerned, we have already decided the same questions raised in Civil Appeals Nos. 166 to 168 of 1959. Following that decision, we answer questions Nos. 2 and 3 against the assessee. In so far as question No. 1 is concerned, it may be stated that the appellant had claimed a deduction of Rs. 2,65,226- 11-10 under clauses (a) and (b) section 14 (5). The Appellate Tribunal allowed half of it as expenditure. The High Court different from the Tribunal and disallowed the deduction on the ground that no sanad or order of the grant or enjoining such expenditure had been produced in the case. In the connected appeals, we have quoted an extract from the judgment of the High Court, in which the reason for disallowing the deduction in connection with the Jatprole jagir has been set out. It was on that very reason that the present deduction was disallowed.
4. For the reasons which we have given in Civil Appeals Nos. 166 to 168 of 1959, we do not think that the High Court has correctly approached the matter under clause (a) of section 14 (5). In the assessment order, the details of the expenses have been put under three sections. Section (A) contains the expenditure over the army which the estate had to maintain, and this expenditure has been allowed both by the Tribunal and by the High Court. Section (B) includes an expenditure of Rs. 37,681-13-6. This expenditure is over chobdars, bandar and bhalebardars, barchi bhardar, etc. These are attendants, who attended upon the sanadholder in his capacity as Jagirdar. These were not his private servants, who have been separately shown in section (C), expenses under which were disallowed. Though we were referred to some of the items in section (C), no serious attempt was made to bring them within clause (a) of section 14 (5). These assessee, however, contended that the expenditure in section (B) must be allowed, because it was not an expenditure of a private or personal nature. The items in section (B) include certain attendants not as private servants but as retinue of the jagirdar. They are part of the administrative machinery, which cannot run unless it has a certain status and position. They are the necessary concomitants of the position as Jagirdar, and must be regarded as part of the administrative machinery. Any expenditure on this account must be regarded as connected with land and its administration.
5. In our opinion, the expenditure amount in to Rs. 37,681-13-6 ought to have been allowed. The Tribunal followed a rough and ready method of dividing the total amounts of sections (B) and (C) into two parts, one half of which was regarded as personal and private expenditure, and the other half, as for administration. Such a rough and ready test is not possible in this case. The tree sections have been made advisedly. Section (A) deals with expenditure over the army; section (B), with expenditure over the official retinue and section (C), with expenses in the palace. Even if section (C) contains some items of expenditure on administration, such items are incapable of being disentangled from the rest, and unless there is clear proof, the assessee cannot claim the deduction. The expenditure under section (B), on the other hand, is clearly one connected with the administration of the land, and ought to have been allowed.
6. We accordingly answer the first question by saying that Rs. 37,681-13- 6 should be allowed as deduction, in addition to the deductions already granted. The appeal is partly allowed, and in the circumstances, the parties shall bear their own costs in this court.
7. Appeal partly allowed.