1. The main question involved in this Reference is a simple one, but certain facts of history bound up with it tend it an appearance of difficulty and at the same time make it interesting.
2. The assessee is the Nawab Bahadur of Murshidabad and the Reference is concerned with his assessment for the four assessment years 1944-45 to 1947-48. For each of those years the Nawab Bahadur of Murshidabad has been assessed on a certain amount as his income from property, on a second amount as his income from a certain Imambara and on a third amount as his income from forest produce.
As regards his income from other sources, he has been allowed collection charges at the rate of 12 1/2 per cent. His contention is that he is not liable to be assessed on any income from property at all, because he is not the owner of the properties which have been taken into account, that the Imambara is held under a trust wholly for religious purposes and, therefore, the income derived from it is exempt from taxation, that the income from forest produce is agricultural income and that the rate at which collection charges have been allowed is unduly low. On the above contentions, four questions have been referred to this Court. I shall take them one by one.
3. The first question reads as follows : 'Whether on the above facts and in the circumstances of this case the income of the properties styled as 'State Properties' is not liable to-be taxed under Section 9, Income-tax Act?'. The question is based on a misconception. Although at the one time there were certain properties which were given the name of 'State Property', there are no such properties at the present moment. All properties which were once called State Property and other properties purchased with the sale proceeds of jewels from a certain stock of jewellery are now of the same class and their incidents are the same.
If there be other properties purchased with the personal income of the Nawab Bahadur or with money provided by him from other sources, the same are not within the ambit of the question.
4. The contention of the Nawab Bahadur is that his sole interest in the properties is limited to the receipt of income from them, but the ownership lies vested in the Government. The facts are as follows :
5. The assessee is the premier nobleman of Bengal, Bihar and Orissa and that status rests on the fact that it was from an ancestor, of his, who was the last independent or semi-independent Sovereign, that the British took over the administration of those territories.
It appears to have been considered fitting that although deprived of the status of a ruling prince, that ancestor of the assessee and his descendants should be enabled to maintain themselves in appropriate state and dignity and, to that end, a personal income for the head of the family and allowances for members were provid-ed from the revenues of Bengal, Bihar and Orissa.
The head of the family for the time being was called the Nawab Nazim and it would appear that although actual sovereignty was no longer enjoyed by tile holder of that title, some kind of fictional or titular sovereignty was still accorded to him. In course of time, instead of the stipend and allowances being provided out of the public revenues of Bengal, Bihar and Orissa, certain properties came to be set apart, which were held by the Government and the income from which was applied to the payment of the stipend and allowances.
There was also a large and valuable stock of Jewellery which consisted of the heirlooms and the family jewels and of which also possession, bad been taken over by the British Government. About 1773, when Sir Syed Mansur Ali was the Nawab Nazim, he incurred large debts and disputes arose between him and his creditors as to whether the properties which were being held by the Government belonged to the public domain or whether they were his personal property which could be proceeded against for his debts.
To terminate those disputes and relieve the Nawab Nazim of his embarrassment, Government had an Act passed which was Central Act 17 of 1873, one of the objects of which was stated to be to free the Nawab Nazim from suits and attachments, to discharge and settle his debts and to render him incapable of contracting further pecuniary obligations.
Apparently, it was the desire of the Government that the Nawab Nazims of Murshidabad should be prevented from reducing themselves to the condition of the impoverished and encumbered nobility, familiar in many countries. As the first step towards taking permanent measures in that behalf and placing the Nawab Nazims on a footing of financial stability, the Act provided for the appointment of a Commission and by 8. 12 charged the Commissioners to ascertain, what jewels and immovable properties were held by the Government of India for the purposes of upholding the dignity of the Nawab Nazim for the time being.
In due course, the Commissioners submitted a most illuminating and instructive report, to which they added six schedules. Schedules I and II set out what was described as State Property and the nature of those properties was stated to be that they were properties which had been originally designed for the maintenance of the title and dignity of the family and which were being held by the Government of India for the same purpose.
The interest which a Nawab Nazim for the time being had in those properties was not his private or personal interest which he could relinquish or convey at his pleasure, but he was only entitled to the enjoyment of the profits and the properties were really appanages of the Office and State of the Nawab Nazim.
Schedules V and VI to the report set out a number of immovable properties and articles of Jewellery, certain of which had been sold or had already been directed to be sold, and of the im-movable properties, those which had not been ac-tually sold or directed to be sold, were included in Schedules I and II.
Necessarily, of the articles of Jewellery, those which had not already been sold or directed to be sold, still remained. With regard to the Jewellery also, the report of the Commissioners was that a large part of them was an appanage to the Office of the Nawab Nazim and not private property in the ordinary sense.
6. It appears that the Commissioners were at considerable pains to discover the nature of the property which came to the possession and enjoyment of a Nawab Nazim upon his succession to tne office and the basis or the right upon or in which he held them.
After an extensive enquiry, they came to the conclusion that certain properties had always been attached to the office or State of the Nawab Nazim and when a succession opened, tne Person succeeding to the title and the State got the entirety of that property in an undivided condition to the exclusion of other heirs and he was equally bound to hand it down to the person succeeding him without any diminution of any kind.
These properties therefore were in the nature of an inheritance which fell to a successor to the office of Nawab Nazim by reason of his holding the dignity of the office and they were State Property in the sense that they did not actually belong to any Nawab Nazim for the time being, but existed merely for supplying the means with which the successive Nawab Nazims might maintain their dignity and status.
It was inherent in the nature of these properties that they could not be alienated by any holder of the office for the time being, because they were intended to pass down with the office to every holder of it, as one succeeded another. It was properties of that kind which the Commissioners marked out as state Property and they described the incidents of the properties so held by a Nawab Nazim in the following words ;
'Property, which the succeeding Nawab Nazim acquires by reason of his being appointed Nazim, is State Property.' And again, 'Property which has become State Property cannot be alienated without the sanction of Government and must remain State Property; and ail property becomes State Property which is acquired by the Nawab Nazim by reason of his holding the dignity.
Property acquired by the Nawab Nazim by purchase or by gift to himself is his own and may be alienated as freely as it is acquired; but if it is not alienated and on the death of the Nawab Nazim passes, to the successor appointed by Government because it belonged to the deceased Nazim, it becomes State Property.'
7. It will thus be seen that by describing certain properties as State Property, the Commissioners did not mean that they belonged to the Government. What tney meant was that the pro-perties belonged to the State of Murshidabad, if any such thing could be conceived of as distinguished from the individual who might, for the time being, be the Nawab of Murshidabad and their function was to serve as permanent source from which the successive Nawab Nazims might De supplied with the means of maintaining the dignity and state of their office.
One sees in that concept the well-known division between State Property and personal property of the ruler of a State which has been explained by the Judicial Committee on several occasions, notably in the Tippera State Cases. The concepts requires that there should be a State, as distinguished from the person who was its ruler for the time being and the concept was appropriate in the case of the NaWab Nazims of Murshidabad, because, in spite of the loss of the sovereign status, they were still being regarded by a fiction, as it were, as occupying the position of the Subedar of the Subas of Bengal, Bihar and Orissa.
8. When, however, the Government came to consider the report of the Commissioners and have another Act passed defining more precisely the nature of the properties and the right in whichthey were to be held, the entire basis of the ownership of the properties was changed.
The Government took the view that it was no longer necessary or desirable to maintain 'the office, title position, dignities and allowances' of the Nawab Nazim of Bengal and prevailed upon Sir Syed Hussan Ali, who was the Nawab Nazim at the time, to surrender his claim to the status of Nawab Nazim in lieu of the titles of Nawab Bahadur and Amirul-Omrah. Those titles were conferred in due course as hereditary titles and the Nawab Nazim of Murshidabad came to be the mere Nawab Bahadur of Murshidabad and Amir-ul-omrah.
9. The charge made with regard to the right in which the properties were to be held was consistent with the change introduced in the Status of the head of the Murshidabad family. The new arrangement took the form of a deed of settlement executed by and between the Secretary of State for India and Sir Syed Hussain Ali, the Nawab Bahadur for the time being, on 12-3-1891. It is not necessary to refer to the historical recitals in that document.
All that is necessary to mention for the purposes of the present case is tnat the deed set out in Schedules I and II the properties which nad been previously specified in Schedules I and II of the report of the Commissioners, and in a third Schedule were set out the properties which nad been purchased with the sale proceeds of the jewels, specified in Sch. V and VI of the Commission's report. All these properties were dealt with by the deed of settlement in the same way and the provision made with regard to all of them was that they.
'shall henceforth and forever be held and enjoyed by the said Nawab Bahadur and such one among his lineal heirs male as may be successively entitled to hold the said titles in perpetuity With and subject to the incidents, powers, limitations and conditions as to inalienability and otherwise hereinafter contained.'
The deed of settlement was confirmed by Act XV of 18&1 of which it was made part. The deed itself provided that the Nawab Banadur or any of his successors to the titles held by him would have no power to sell, mortgage, devise or alienate the properties or any of them otherwise than by lease or demise, 'the terms and conditions of wnich have been previously approved by the Governor of Bengal in Council.'
The words I have quoted were substituted by Act XXV of 1923 for the words 'for a term not exceeding twenty-one years and under a rent without bonus or selamee.' It was provided further that if the Nawab Bahadur or any of his lineal heirs male successors to the titles should at any time, in contravention of the terms of the deed, attempt to sell, mortgage, devise or alienate otherwise than in the approved manner any of the immovable properties, referred to in the deed, or should by a course of extravagance or by waste or mismanagement of the properties disable himself from duly maintaining the dignity of his position and station, then the Secretary of State would have the right to enter into and upon the immovable properties and hold and take possession thereof and receive the rents and profits.
These were the restrictions imposed on the Nawab Bahadur and his successors to the title held by him. On the other hand, Section 5 of tne Act stated that the properties 'shall descend and, subject to the provisions of the said indenture, be enjoyed for ever by the Nawab Bahadoor of Moor-shidabad for the time being.'
10. It is the ownership of those properties or subsequent additions to them which falls to few determined in the present case. Before dealing with the actual provisions of the deed and the Act, I may point out that the answer to the first question referred lies in the change brought about in the status of the Nawab of Murshidabad.
Had the Nawab been allowed to continue as a Ruling Chief, whether titular or actual and had anything like a State of Murshidabad been conceivable, as distinguished from the Ruler of the State for the time being, it might be possible to contend that the real owner of the properties was the State and not the holder. In such a case, the income from the properties would perhaps have fo be taxed separately, as the State's income, although it might have still to be taxed in the hands of the holder himself in his capacity of tne representative of the State.
It appears to me that no such conception is possible under the terms of the deed of settlement and Act XV of 1891. The effect of the deed and the Act was clearly to reduce the Nawab to tne state of an ordinary zamindar, owning and holding his properties, although the exercise of the rights of ownership was placed under restraint in many respects. His position became virtually like that of the zamindars under the Encumbered Estates Acts who are owners of their properties, but whose freedom to deal with them is severely restricted.
As the status of a Nawab Nazim ceased to exist and as the Nawab of Murshidabad was no longer to be regarded as a Ruler holding a State in any sense, a duality of status as the holder of the State and as an individual ceased to be possible in his case with the deed of settlement and the Act of 1891.
11. Looking at the matter from another pointof view, it may be asked that if the Nawab Bahadur is not the owner of the properties, who is? Ifthe Government be the owner, it should have beenpossible for the Government to transfer or dealwith the properties in any manner at their pleasure, but it is clearly impossible to contend thatthe Government have any right of ownership inthe properties.
It appears to me that the notion that the properties belonged to the Government arose from a confusion as to what the term 'State Property' in the report of the Commissioners meant and because the word 'State' was taken as meaning the Government of the country, whereas it really meant the State of Murshidabad or the State of the Nawab Nazim, the Government of the country were not the owners of the property at any time and they are not the owners now.
Dealing with the deed and Act XV of 1891, Pearson and Malik JJ., observed in 'Civil Partition Case No. 1251 of 1931 (Cal) (A)' decided on the 29th February 1932 (unreported) as follows:
'There is nothing here to confer any rights or ownership or disposition on the Secretary of State with or without the concurrence of the Nawab Bahadur.'
With respect, it appears to me that the learned Judges held rightly that any right of ownership in the Government was out of the question.
12. If the ownership be not in the Govern-ment, it must be in some one and It appears me that it can be in no one other than the Nawab Bahadur himself. Indeed, unless he was the owner and had the right to deal with and dispose of the properties In that capacity, there could be no meaning in putting his rights of disposition under restraint. Nor could there be any meaning in Section 5 of the Act of 1891 providing that the pro-perties would descend from Nawab to Nawab.
It is perfectly clear that when the deed saidthat the properties would be 'held and enjoyedby the Nawab Bahadur', it used words of conveyance in the habendum clause and when it proceeded to impose limitations on the Nawab's rights of transfer, it did so on the basis that the Nawabwas the owner of the properties and, without suchlimitations, would have unfettered rights to dealwith them. Even the bar imposed by the deedof settlement is not absolute, since the NawabBahadur is only restrained from making a demiseexcept with the approval of the Governor ofBengal.
I am accordingly of opinion that the concept on which the deed of settlement is based and its actual provisions, both make it clear that the Nawab Bahadur was made the owner of the properties, subject to certain restrictions as regards the right of alienation, as distinguished from the holder of them for the time being, which was possible and appropriate when the Nawab was a Nawab Nazim and he had a notional State.
13. There are certain indications to show that the Legislature itself regarded the Nawab as the owner of the properties whenever it had occasion to refer to them. The preamble to the Act of 1873 spoke of 'the said Nawab Nazim and his property'; and the long title of the Murshi-dabad Estate Administration Act, 1933, is 'An Act to provide for the appointment of a Manager on behalf of the Secretary of State of the properties of the Nawab Bahadur of Murshidabad and to define the powers and duties of the manager'.
It appears from the Gazette of India of 9-9-1933, that Bill No. 44 of 1932 which subsequently became the Murshidabad Estate Administration Act was published along with the long title and must, therefore, have been considered and passed by the Legislature. I do not rely much on these indications in the statutes, but I may point out that the long title of the Murshidabad Estate Administration Act does show that, in the view of that Act, the properties referred to in it were properties of the Nawab Bahadur.
'It is now settled law.' observed Maxwell,'that the title of a statute is an important partof the Act, and may be referred to for the purpose of ascertaining its general scope, and ofthrowing Jight on its construction. This rule seemsto apply alike to the 'long' and the 'short' title.'(See Maxwell on Interpretations of Statutes, NinthEdition, page 44). I need only add that the properties with whichthe Murshidabad Estate Administration Act is concerned are 'immovable properties of the estate'and that term has been defined in the Act asmeaning the properties contained in the Schedulesto the indenture included in and confirmed by theAct f 1891, together with certain subsequent additions.
They, therefore, are the same properties as those specified in Schedules I and II of the report of the Commissioners and Schedules of the same numbers to the deed of settlement as also those specified in Schedule III to the deed.
14. Some light may also be drawn from references to the properties and the status of the Nawab in judicial decisions. In the case of --'Wasif Ali v. Karnani Industrial Bank Ltd.' , it was contended before the Judicial Committee that the rents derived, by the Nawab Bahadur from the properties were' of the nature of a political pension and, therefore exempt from attachment under head (g) of the exceptions to Section 60(1), Civil P. C.
In repelling that contention, the Judicial Committee observed that the Nawab Bahadur drew therents in question not as a pensioner, 'but as the limited owner of the properties which yield them.' When the same case was in the High Court Rankin C. J. with whom C. C. Ghose J. concurred, observed that the properties which did not belong to the Nawab's predecessors as of right, but which belonged in effect to the public domain were by the deed and the Act of 1891 'given over upon terms of the agreement to the successive Nawabs upon certain limitations.'
It would appear from these references to the nature of the Nawab's interest in the properties that he had been judicially held to be the owner, although the question did not arise directly for decision.
15. Mr. Bose who appears on behalf of the Nawab Bahadur took three short points. He contended in the first instance that the properties were State Properties and had been held to be such by the Commissioners appointed under the Act of 1873 and that the Income-tax Department itself had, in 1927-1928, refrained from taxing the income from the properties in the view that they did not belong to the Nawab. What the Income-tax Department did in the past is not material.
As regards the description of the properties as 'State Property' in the report of the Commissioners, it is only necessary to point out that Mr. Bose was referring to a state of things which had ceased to exist.
Even in the view of the Commissioners, the properties were not properties belonging to the Government, as I have tried to explain; and consequently, whatever the nature of the properties might originally have been, after the change in the status of the Nawab Bahadur and the execution and the enactment of the deed and the Act of 1891, the position has entirely changed and it is no longer possible to say that the Nawab Bahadur is not the owner of the properties.
Mr. Bose contended that the deed of settlement ought not to be construed like a deed between two private contracting' parties, inasmuch as it was in the nature of a treaty between sovereign & sovereign. There are two answers to that contention. In the first place, it is wrong on tne facts. The contracting parties to the deed arc the Secretary of State on one part and Sir Syed Hussan All, the Nawab Bahadur of Murshidabad on the other part, who was no longer the Nawab Nazim.
In the second place, it will appear from S. S of the Act of 1891 that the indenture is to be treat- ed as duly stamped and registered under all relevant enactments and admissible as such. If the deed was a deed between sovereign and sovereign, it was not necessary to save it from the effect of non-registration or non-payment of stamp duty by a special provision like Section 6.
16. If was lastly contended by Mr. Bose that the word 'owner' in Section 9, Income-tax Act meant a full owner and not a limited owner and he re- lied upon the decision of -- 'Commr. of Income-tax, Punjab v. Dewan Bahadur Dewan Krishna Kishore' .
In that case, the Judicial Committee observed that what Section 9 contemplated was the owner of the property and not the owner of the actual value of the property, but that remark was made in connection with the property which was an impartible estate descending by the rule of primogeniture and which belonged to the family and which, therefore, could not at the same time belong to the person who was entitled for the time being to its income.
The case was one where the undisputed owner-ship of the property was known and the income was sought to be assessed in the hands of a person who only received the income and it was in thatconnection that the Judicial Committee observed that the receiver of the income could not, on the basis of merely being entitled to it, be assessed under Section 9.
The case before us, in my view, is entirely different. Here the ownership cannot be shown to lie vested in anyone else, nor is anyone else entitled to the income or the annual value. The case is one of a full owner who is entitled to the whole income, but who is under certain restrictions with regard to the disposition of the properties. I am unable to hold that a person in such a position is not an owner, as contemplated by Section 9, Income-tax Act.
17. Mr. Meyer referred to the decision in --'Ballygunge Bank Ltd., Calcutta v. Commissioner of income-tax, Bengal' : AIR1947Cal159 and contended that it was good authority for the proposition that a limited owner was included in the term 'owner', as contemplated by Section 8. I do not think that the decision relied upon by Mr. Meyer is of any assistance, inasmuch as it is concerned with the case of a lessee who was undoubtedly the owner of the building concerned to the exclusion of everyone else so long as the period of the lease lasted. There was, therefore, no difficulty in applying the term owner to mm.
Slightly more apposite was the other citation by Mr. Meyer which was the decision in -- 'D.M. Vakil v. Commissioner of Income-tax' AIR 1946 Bom 350 (E). There, a trustee who was bound by the terms of a deed of trust to allow certain persons the right of residence in a certain residential house was held to be liable to be taxed under Section 9 in respect of it, although clearly, being bound to provide residential accommodation to the persons named in the deed, he could not possibly sell or let out the house.
The case was thus a caste of some restriction on the full exercise of the Tight of ownership, put the decision seems to have proceeded on the basis that in order to be liable to tax under Section 9, it was not necessary that the owner should be in a position actually to derive an income from it. I do not think that the decision takes us any further.
18. On the general reasons I have given, I am of opinion that the assessee in the present case was rightly regarded as the owner of the properties and was rightly assessed in respect of them under Section 9.
19. The second question reads as follows: 'Whether on the above facts and in the circumstances of this case the income of the Imambara is exempt from taxation under Section 4(3)(i), Income-tax Act?'
20. In view of the findings recorded by the Tribunal, the question is capable of only one answer. It has been found that the assessee owns the Imambara and that it had not been established that the Imambara was one endowed for a public religious or charitable purpose or that any portion of it was mausoleum or a tomb. It has also been found that there is no evidence that the Maharam is celebrated in it or if it is celebrated, the public are entitled to participate in the cele-bration.
The Municipality, it has been found further, had not exempted the Imambara from the general tax. I am unable to see how, in view of those findings which we must accept and proceed upon, it can be held that the income from the Imambara was exempt from taxation.
21. The third question reads as follows:
'Whether the income of the forest produce is agricultural income and as such exempt from taxation under Section 4(3)(viii) of the Act?'
Again, I find it impossible to see now, in view of the findings recorded by the Tribunal, the ques- tion can be answered except in the negative. It has been found that the forest consists of sal trees which are of spontaneous growth and it is said that the only circumstance that was relied upon in support of the claim of exemption was that a staff was maintained for the purpose of watching, supervising and marking of the trees which were not to be cut down.
There was thus, according to the Tribunal, no evidence led to show that anything in the nature of cultivation or in the nature of any operation on the soil had been carried out. Mr. Bose complained that his client had been systematically denied an opportunity of adducing relevant evidence on the point and that if such an opportunity had been given, he would be able to establish all the particulars required in order to substantiate the claim that the income was agricultural income.
We find, on the other hand, that the Tribunal observes that the assessee had been given sufficient opportunity by the Income-tax Officer to produce evidence, but none had been produced. We are sitting here as a Court of Reference and therefore we must proceed on the basis of the facts found and submitted to us by the Statement off Case.
On those facts, I am wholly unable to hold that the assessee's claim of exemption on the ground that the income was agricultural income had been made out. If Mr. Bose's client had really a grievance and had been denied a proper opportu-nity to adduce evidence, he had other remedies of which he might have availed himself. It is wholly impossible for us, in view of the nature of the jurisdiction in which we are sitting, to entertain complaints of the kind which Mr. Bose made.
22. The last question reads as follows: 'Whether the estimate of collection charges at 12 1/2 per cent. is unreasonable?' I am unable to see how this question could hare been referred as a question of law. I am saying nothing as to whether the charges allowed are actually reasonable or unreasonable, but an estimate of the collection charges which ought to be allowed is not and cannot be a matter of law, unless it be that some statute had laid down some principle somewhere which had not been followed.
It was not contended that any principle had been laid down in the Act or under the Rules to which no attention had been paid. The question is one of pure fact and I cannot see how any law can be made out of it.
23. In the result the answers to the questions referred should, in my opinion, be as follows:
Question (1): The income is liable to be taxed under Section 9 of the Act.
Question (2): 'No'.
Question (3): 'No'.
Question (4): Does not arise, as it is not question of law.
24. In view of the circumstances that the main question involved in this case was not too clear and that the Department had not made any attempt to tax the assessee since 1927 or 1928, we shall make no ordef for costs in this Reference.
25. I agree.