Skip to content


Arvind Singh (Legal Heir of Maharana Bhagwat Singh Who Was Legal Heir of the Deceased Junior Rajmata Smt. Gulab Kunwar) Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference No. 45 of 1977
Judge
Reported in(1986)52CTR(Raj)286; [1986]160ITR908(Raj); 1985(2)WLN789
ActsIndependence Act, 1947; Constitution of India - Articles 291 and 366(22); Hindu Adoption and Maintenance Act, 1956; Income Tax Act, 1961 - Sections 2(24), 10, 10(2), 10(19), 256(1) and 260(1); Income Tax Act, 1922 - Sections 9(1), 14(1) and 23(5)
AppellantArvind Singh (Legal Heir of Maharana Bhagwat Singh Who Was Legal Heir of the Deceased Junior Rajmata
RespondentCommissioner of Income-tax
Appellant Advocate Rajendra Mehta, Adv.
Respondent Advocate B.R. Arora, Adv.
Cases ReferredRaja Ragavendra Singh v. State of Punjab
Excerpt:
income tax act, 1961 - maintenance allowance received by junior rajmata out of privy purse of maharana of udaipur--held, it was not to be taxed as income.;the amount received by the deceased assessee junior rajmata smt gulab kanwar of udaipur in the relevant years 1970-71 and 1971-72, out of the privy purse amount of maharana bhagwat singh was not liable to be taxed in her hands as income.;reference answered in favour of assessee - section 2(k), 2(1), 7 & 40 & juvenile justice (care and protection of children) rules, 2007, rule 12 & 98 & juvenile justice act, 1986, section 2(h): [altamas kabir & cyriac joseph, jj] determination as to juvenile - appellant was found to have completed the age of 16 years and 13 days on the date of alleged occurrence - appellant was arrested on 30.11.1998..........bhupal singh, and according to that covenant, the said maharana of mewar was to be paid an annual privy purse of rs. 10,00,000. the said covenant has been submitted as annexure a. we may reproduce article xi of the covenant, annexure a, which is as under ;' (1) the ruler of each covenanting state shall be entitled to receive annually from the revenues of the united state for his privy purse the amounts specified against covenanting state in schedule 1 : provided that the sums specified in the schedule in respect of the rulers of jaipur, bikaner and jodhpur state shall be payable only to the present rulers of the said states and not to their successors each of whom shall be entitled to receive annually a sum of rupees ten lakhs as his privy purse. (2) the said amount is intended to cover.....
Judgment:

S.K. Mal Lodha, J.

1. This reference by the Income-tax Appellate Tribunal, Bombay Bench ' A ', Bombay (for short ' the Tribunal '), has arisen in the following circumstances : Udaipur State known as Mewar was an Indian State prior to the independence of the country in 1947. After the Independence Act, 1947, the United State of Rajasthan was formed and with effect from that very date, the very said State of Udaipur known as Mewar was integrated along with other Indian States into the United State of Rajasthan. A covenant was entered into between the Government of India and the said integrated State including Mewar (State of Udaipur). The covenant was signed by the Maharana of Mewar, Maharaja Bhupal Singh, and according to that covenant, the said Maharana of Mewar was to be paid an annual privy purse of Rs. 10,00,000. The said covenant has been submitted as annexure A. We may reproduce article XI of the Covenant, annexure A, which is as under ;

' (1) The Ruler of each Covenanting State shall be entitled to receive annually from the revenues of the United State for his privy purse the amounts specified against Covenanting State in Schedule 1 :

Provided that the sums specified in the Schedule in respect of the Rulers of Jaipur, Bikaner and Jodhpur State shall be payable only to the present Rulers of the said States and not to their successors each of whom shall be entitled to receive annually a sum of rupees ten lakhs as his privy purse.

(2) The said amount is intended to cover all the expenses of the Ruler and his family including expenses on residence, marriages and other ceremonies, and shall neither be increased nor reduced for any reason whatsoever.

(3) The Rajpramukh shall cause the said amount to be paid to the Ruler in four equal instalments 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.'

2. Maharana Bhupal Singh ji died in 1955. The President of India, in exercise of his political power under Article 366(22) of the Constitution recognised Maharana Bhagwat Singh as the Maharana of Mewar so as to entitle him to the privy purse payable under the said covenant. Junior Raj-mata late Smt. Gulab Kunwar of Udiapur was the step-mother and was being regularly paid by said Maharana Bhagwat Singh a sum of Rs. 36,000 per year as ' Hath Kharch Allowance '. This amount was paid in the first year. In the second year, the amount paid was Rs. 25,500. The deceased-assessee (Junior Rajmata Smt. Gulab Kunwar) was paid the said allowance at the rate of Rs. 3,000 per month up to August, 1970, and at the rate of Rs. 1,500 per month from September, 1970, onwards. The assessment years involved are 1970-71 and 1971-72.

3. The Income-tax Officer assuming that the deceased-assessee was paid Rs. 36,000 as allowance for each of the years added Rs. 36,000 to the total income of the deceased-assessee for each of the years under consideration observing that the said amount was assessable in her hands, as had been held by the Appellate Assistant Commissioner in the appellate order for the accounting period relevant to the assessment year 1968-69 and also for the following reasons :

' The monthly Hath Kharch Allowance in the hands of the assessee is attributable to legally enforceable custom or statutory obligation arising under the Hindu Adoption and Maintenance Act, 1956. It is not dependant upon the whim or bounty of the Ruler.

2. Scrutiny shows that the flow of the allowance is regular and was being received by the assessee regularly every month. However, the special feature of this year is that, the Ruler made an attempt to reduce the quantum of monthly Hath Kharch Allowance from Rs. 3,000 to Rs. 1,500 per mensem. Accordingly cheques of Rs. 1,500 were given every month with effect from September, 1970, but it appears that the assessee, namely, Jr. Rajmata, did not accept this arrangement and refused to encash these cheques. These cheques remained with her for some time and I am informed that these were returned to the Ruler in March, 1972 and in lieu thereof cash was obtained. As such, the fact remains that the Jr. Rajmata claimed the amount of Hath Kharch Allowance at the rate of Rs. 3,000 per mensem. In the circumstances, the amount had fallen due and, therefore, assessable in the hands of the assessee.

(3) The amount is not received by or on behalf of the Ruler as privy purse or as a result of any financial agreement with the Government and, therefore, exemption under Section 10(19) of the Income-tax Act, 1961, is not available in the hands of the assessee. The covenant is between the Ruler and the Government whereas Hath Kharch Allowance is between the Ruler and the assessee.'

4. The legal heir of the deceased-assessee (Jr. Rajrnata Sirit. Gulab Kun-war) filed appeals before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated February 11, 1975, held that the Income-tax Officer was justified in bringing to tax the amounts received by the appellant (legal heir of the deceased-assessee) during the two years under appeal from Maharana Shri Bhagwat Singh, ex-Ruler of Udaipur, out of the privy purse amount received by him from the Government of India. He, however, dismissed the appeal for the assessment year 1970-71 and partly allowed the appeal for the assessment year 1971-72 with a relief of RS. 10,000 per year from the total income of the deceased-assessee. A further appeal was taken by Maharana Bhagwat Singh of Mewar, legal heir of Junior Rajmata Smt. Gulab Kunwar, of Udaipur to the Tribunal. The same was dismissed. The Tribunal considered the question of exemption under Sections 10(19) and 10(2) of the Income-tax Act, 1961 (XLIII of 1961) (for short 'the Act'), and recorded the following findings:

(1) That the deceased-assessee has all along in the past been receiving the said allowance by way of periodical receipts accruing to her and that there can be no manner of doubt that the said allowance is income. The deceased-appellant succeeded in showing that her case falls under the statutory exemption provided in Section 10 of the Act;

(2) that the deceased-assessee is not entitled to exemption claimed under Section 10(2) of the Act and further that the exemption claimed under Section 10(19) is not available to her.

5. An application under Section 256(1) of the Act was filed by Maharana, Bhagwat Singh of Mewar, as legal heir of Junior Rajmata Smt. Gulab Kunwarji, to the Tribunal, praying that the following questions of law arise out of the order dated April 27, 1976, and they may be referred to this court for its opinion :

' 1. Whether the Tribunal erred in law in holding that the amounts of Rs. 36,000 and Rs. 25,000 received as 'Hath Karch' by the deceased in the financial years relevant to the assessment years 1970-71 and 1971-72, respectively, from Maharana Bhagwat Singh of Mewar out of the privy purse received by him was not exempt from income-tax under the provisions of Section 10(19) and/or Section 10(2) of the Income-tax Act, 1961, or otherwise ?

2. Whether there was any evidence, before the Tribunal to hold that the annual 'Hath Kharch allowance ' which was being paid to the assessee was in pursuance of an enforceable custom and, therefore, was not exempt from tax under Section 10(19) of the Income-tax Act, 1961 ?

3. Whether the Tribunal erred in not following the view of the Supreme Court in the case of Kunwar Shri Vir Rajendra Singh v. Union of India : [1970]2SCR631 , wherein it has been held that the privy purse is not an item of private property to which the Ruler succeeds and consequently rejecting the contention of the assessee that such payments made out of privy purse are exempt under Section 10(2) as they are payments made to the Hindu undivided family out of the joint family property ?

4. Whether the Tribunal erred in interpreting the Covenant of Merger dated March 30, 1949, guaranteed by the Government of India, Clauses 2 and 4 of which provided that the privy purse was intended to cover the maintenance expenses of all family members and that the entire privy purse was exempt from tax ?

5. Whether the Tribunal erred in holding that such payments made out of privy purse were not entitled to exemption under Section 10(19) of the Income-tax Act, 1961, in spite of Clauses (2) and (4) of the Covenant, but constituted income of by virtue of the definition of ' income' contained in Section 2(24) of the Income-tax Act, 1961 '

6. The Tribunal, has however, thought it fit to refer the following question for our opinion, as the question formulated by it is wide enough to include questions Nos, 3 to 5 :

' Whether, on the facts and in the circumstances of the case, the amounts of Rs. 36,000 and Rs. 25,500 received as ' Hath Kharch ' by the deceased, Her Highness late Jr. Rajmata Smt. Gulab Kunwarji of Udaipur, in the respective financial years relevant to the assessment years 1970-71 and 1971-72 from Maharana Bhagwat Singh of Mewar was exempt from income-tax under the provisions of Section 10(19) and/or Section 10(2) of the Income-tax Act, 1961, or otherwise '

7. After carefully examining the findings recorded by the Tribunal in its order dated April 27, 1976, and the controversial points arising therefrom, we consider it proper to reframe the question formulated by the Tribunal before answering it so as to bring out the real issue between the parties. Learned counsel for the Revenue did not question the proposition that it is open to this court, without raising new and different questions, to resettle or reframe the questions formulated by the Tribunal, before answering them so that the real controversy between the parties may findplace in it. In our opinion, the following question arises for our consideration in this case :

' Whether, on the facts and in the circumstances on the case, the Tribunal was justified in holding that the payments received by the deceased-assessee, Junior Rajmata Smt. Gulab Kunwar of Udaipur, in the respective financial years relevant to the assessment years 1970-71 and 1971-72 from out of the privy purse paid to Maharana Bhagwat Singh, was not liable to be taxed in the hands of the deceased-assessee as her income '

8. Before we proceed to consider, examine and answer the above question formulated by us, we may state that the Tribunal while agreeing with the Appellate Assistant Commissioner with what was stated by him in paras. 12 to 14 of his order held that there is a custom and usage in the erstwhile royal family of Mewar for grant of the allowance for maintenance to the Maharanis of Mewar or that an admission to that effect was brought out by the Appellate Assistant Commissioner, from the legal heir of the deceased-assessee, which has not been proved to be wrong, and that abundantly proves the said custom. Mr. Rajendra Mehta appearing for Arvind Singh who is the legal heir of Maharana Bhagwat Singh who was legal heir of the deceased-assessee (Junior Rajmata Smt. Gulab Kunwar), submitted that this finding of the Tribunal was not questioned in the reference application filed under Section 256(1) of the Act and that the legal heir of the deceased-assessee did not desire any question to be referred to this court for answer covering the aforesaid finding that it was on account of usage and custom that allowance for maintenance was paid to the deceased-assessee by the Maharana of Mewar. In our considered opinion, this is not of much significance for the reason that we have to see whether the amount paid by Maharana Bhagwat Singh to his Junior Rajmata Gulab Kunwar of Udaipur out of the privy purse was her income or not. It does not matter whether the payment was made on account of custom or usage prevalent in the royal family of Mewar.

9. In these circumstances, it is necessary for us to consider the meaning of the word ' income '. Section 2(24) of the Act defines 'income'. It is an inclusive definition. It is well settled that when there is an inclusive definition, it means not only the things mentioned therein but also includes in its ambit the meaning of the term as generally understood. ' Income ' has been defined in Shorter Oxford English Dictionary, third edition, vol. I, as under :

' That which comes in as the periodical produce of one's work, business, lands or investments (commonly expressed in terms of money); annual or periodical receipts accruing to a person or corporation; revenue.'

10. The Judicial Committee of the Privy Council in CIT v. Shaw Wallace & Co. , observed as under (at p. 140):

'Income... in this Act connotes a periodical monetary return 'coming in ' with some sort of regularity, or expected regularity, from definite sources.'

11. It was further observed that though the source may not be productive, it must be one whose object is the production of a definite return. The word 'income ' was again considered in Maharajkumar Gopal Saran Narain Singh v. CIT [1935] 3 ITR 237 , by the Privy Council. It was stated therein that the word ' income ' is not limited by the words ' profits and gains ' and anything which can properly be described as income is taxable under the Act unless expressly exempted. Again, in Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1945] 11 ITR 513, the Privy Council tried to indicate as to what would constitute income. It is said that income is not necessarily the recurrent return from a definite source, though it is generally of that character. In respect of the connotation of ' income ' in a recent decision in CIT v. Shri Girdharram Hariram Bhagat : [1985]154ITR10(Guj) , the learned judges observed that the word ' income ' is of widest and indefinite import and there cannot be any strait-jacket formula by which one can determine the nature of the receipt as to whether it is an income which is liable to be taxed or not.

12. From the aforesaid decisions of the Privy Council and the Gujarat High Court, it is abundantly clear that the word ' income ' has to be given a very wide meaning and so on the face of it, the allowance drawn by the deceased-assessee, which is a periodical receipt, may be regarded as ' income ' in the wide sense or wide meaning of the term ' income '.

13. Section 9(1)(iv) of the Indian Income-tax Act, 1922 ('the old Act'), was examined in CIT v. Sitaldas Tiraihdas : [1961]41ITR367(SC) . In that case, the maintenance was payable to wife and children under a decree and the question arose whether it could be deducted when the amount is not charged. M. Hidayatullah J., as he then was, speaking for the court, observed as under (at p. 375):

' In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income. The matter in the present case would have been different if such an overriding charge had existed either upon the property or upon its income, which is not the case, '

14. The test laid down in Sitaldas Tirathdas' case : [1961]41ITR367(SC) , clearly shows that it is not every obligation to apply income in a particular way that results in the diversion of income before it reaches the assessee.

15. While considering Section 23(5)(a) of the old Act, in Murlidhar Himat-singka v. CIT : [1966]62ITR323(SC) , it was held that until and unless there is an overriding obligation, the amount received cannot be treated as income.

16. We have already reproduced article XI of the covenant and keeping in view the tests laid down by the Supreme Court, we have to see whether by that article, any charge was created for payment of allowance of maintenance or there was an obligation on the part of the Maharana of Udaipur to pay from the amount of privy purse, the allowance for maintenance, or though there was no overriding charge on the amount of the privy purse, but the Maharana of Udaipur, out of the privy purse amount, applied apart of the amount for providing allowance for maintenance to the Maharanis. As per the finding of the Tribunal, there was no charge on the amount of privy purse for payment of the allowance of maintenance to the Maharanis, Here, without making a further probe into the matter, it may be stated that while considering the question whether the amount paid as allowance for maintenance to the Junior Rajmata Smt. Gulab Kunwar by the Maharana Bhagwat Singh was income or not, we will have to confine ourselves to the covenant and not to the custom, for privy purse was paid to the Maharana as per the stipulations contained in the covenant and, therefore, the custom will not prevail over the covenant. At this stage, we may observe that the finding that the allowance for maintenance was paid by the Maharana of Udaipur to the Maharanis on account of custom and usage may become relevant while considering the question of Section 10(2) and not otherwise. In our opinion, for the purpose of seeing whether that was an income in the hands of the deceased-assessee, the nature of the obligation, according to the tests laid down in Sitaldas Tirathdas' case : [1961]41ITR367(SC) , is a decisive factor and if by article XI, which is the only relevant article for our purpose, there was no obligation for payment of the allowance for maintenance, to Maharanis by the Maharana, then, it will not constitute income so as to be liable as to be taxed under the Act. In other words, since there could not be diversion of income and there was no diversion of the amount of privy purse received by the Maharana until it reached his hands, then in that case any payment made out of that amount for allowance of maintenance to the Junior Rajmata, Smt. Gulab Kunwar of Udaipur, will not be income in her hands. This conclusion of ours stands fortified by the decision rendered in CIT v. Yuvrani Premkumari : [1979]117ITR908(Guj) . Inthat case, from the time when the Maharaja began to receive the amount' of privy purse till its abolition, the Maharaja used to pay annually to his adopted son, the Yuvraj, the assessee, and also to Yuvraj's wife (Yuvrani), sums of moneys which were not uniform throughout but varied in different periods. The Income-tax Officer held that the said amounts received by the Yuvraj and Yuvrani were assessable to income-tax. In second appeal, the Appellate Tribunal held that the amounts were not liable to income-tax. The question was referred to the High Court whether the Tribunal was justified in law in holding that the payments received by the assessee from out of the privy purse paid to the Maharaja of Porbandar was not liable to be taxed in the hands of the assessee as her income The Gujarat High Court held that the amount of privy purse paid to the Maharaja was immune from income-tax under the covenant of 1948, under article 291 of the Constitution, under Section 4(3)(x)(a) of the old Act and under Section 10(19) of the Act and thus any amount received by the Maharaja as privy purse was not liable to be included in the total income of the Maharaja for any previous year. The learned judges observed as under (at p. 914):

' It is obvious, in the light of the test laid down in Sitaldas Tirathdas' case : [1961]41ITR367(SC) , that there was no diversion of any part of the amount of privy purse before it reached the Maharaja and, therefore, if the Maharaja had been liable to pay tax in respect of the privy purse, the entire amount of Rs. 3,80,000 would have been includible in his total income. Payments to different members of the family would be instances of application of the income after it reached the hands of the Maharaja. Therefore, so far as the persons who receive the money from the Maharaja were concerned, the said recipients would not be liable to payment of income-tax for the receipts by them because the money that they would be receiving was merely an instance of the application of the income of the Maharaja. Since these are mere instances of application of the money out of the privy purse amount by the Maharaja and not instances of diversion of the amount of the privy purse before it reached the Maharaja, there would be no question of treating these amounts as income in the hands of the two assessees before us.'

17. The facts in Yuvrani Premkumari's case : [1979]117ITR908(Guj) are, to a very great extent, similar to the facts of the case on hand, and we find no difficulty in applying the observations excerpted hereinabove in support of the conclusion, which we have arrived at, for, in our opinion, this is a correct approach, from the legal point of view, to be made. As stated above, the present is the case of the application of a portion of the income to discharge the personal obligation which the Maharana ofUdaipur had in regard to the Maharanis or Junior Rajmata, as the case may be, and it is not a case of an overriding charge. The payment of an allowance for maintenance made by Maharana Bhagwat Singh in respect of the two assessment years under consideration wholly rested on the discretion of the Maharana and, as stated above, it was not in the nature of an obligation. So, even at the risk of repetition, it may be stated that it was an application of the part of the amount of privy purse which was paid to the Junior Rajmata Smt. Gulab Kunwar as allowance for maintenance and, therefore, Junior Rajmata Gulab Kunwar being the recipient of that amount, that amount in her hands was not liable to tax.

18. In the order of the Tribunal, reference has been made to Section 10(19) of the Act. We feel compelled to observe that the fact that the amount of privy purse received by the Maharana of Udaipur was itself exempt under Section 10(19) of the Act does not make any difference whatsoever so far as the payment of allowance of maintenance to the Junior Rajmata, Smt. Gulab Kunwar, from that amount is concerned.

19. Now, we are to consider Raja Ragavendra Singh v. State of Punjab , which was relied on by the Tribunal in support of its conclusion. We have read that decision with requisite care. In that case, the assessee-appellant was the half-brother of the late Maharaja of Patiala. After the merger of the State of Patiala with the Union of India, the appellant was sanctioned an amount of Rs. 2,000 per month as allowance out of the sum of Rs. 5 lakhs set apart for the relations of the late Maharaja. In pursuance of the circular issued by the Finance Department, the Treasury Officer, Patiala, on May 17, 1955, started making advance deductions of income-tax from the appellant's allowance. There was a protest by the appellant, but that was rejected by the Commissioner of Income-tax on August 25, 1965. A writ petition was filed challenging the imposition of income-tax on the ground that he was being paid this allowance as a member of the Hindu undivided family out of the income of the family, as also on the ground that the erstwhile State of Patiala was an impartible estate and that this fund was being paid out of the income of the holder of the estate belonging to the family. The learned single judge dismissed the petition. An appeal was filed to the Division Bench of the Punjab and Haryana High Court. The Division Bench held that the erstwhile State of Patiala lapsed when its Ruler executed an instrument of accession in favour of the Union of India and that the property of the family or the impartible estate, if any, came to vest in the Union of India. Under a political arrangement, the Union of India agreed to pay maintenance allowance to the relations of the Ruler of the erstwhile State which was paid out of the Consolidated Fund of the Union incontradistinction to the income of the joint Hindu family or an impartible estate and, therefore, the case of the appellant did not fall within the exemption in Section 14(1) of the old Act or Section 10(2) of the 1961 Act. The finding against the appellant-assessee that he was liable to payment of income-tax was upheld* The facts stated clearly show that the facts of the case on hand are distinguishable and it has no bearing. We, however, agree with the meaning of the term ' income ' as considered by the learned judges of the Punjab and Haryana High Court in that case.

20. For the aforesaid reasons, our conclusion is that the amount received by the deceased-assessee, Junior Rajmata Smt. Gulab Kunwar of Udaipur, in the relevant years 1970-71 and 1971-72, out of the privy purse amount of Maharana Bhagwat Singh was not liable to be taxed in her hands as income. The Tribunal was not right and justified in holding that the amounts received by the deceased-assessee (Junior Rajmata Smt. Gulab Kunwar) were her income and, therefore, liable to be taxed under the Act. In other words, we answer the question reframed by us hereinabove, in the affirmative, i.e., in favour of the petitioner (who represents the deceased-assessee) and against the Revenue.

21. In the circumstances of the case, we leave the parties to bear their own costs of this reference.

22. Let a copy of this judgment be sent to the Tribunal in accordance with Section 260(1) of the Act.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //