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TMI Blog1966 (2) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding for the charging of income-tax for any year at a certain rate, income-tax at that rate was to be charged for that year in respect of the total income of every individual; but by Section 3-A the Act was not to apply to His Highness, Her Highness, Heir-Apparent and his wife . By Section 4(1) the total income was to include all income, profits and gains received or deemed to be received or accrued or arisen in the State and all income, profits and gains accrued or arisen to a person resident in the State, it accrued or arisen during the previous year or brought into or received in the State during the previous year. Under the Government of India Act, 1935, the Rampur State like any other State was under the suzerainty of His Majesty the King of Great Britain. The paramountcy of the British Crown was based on Treaties, Engagements, Sanads as supplemented by usage and sufferance and decisions of the Government of India and the Secretary of State embodied in political practice. For external purposes the State territory and the State subjects were, for all practical purposes, in the same position as British territory and British subjects. The States had no international life and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leges, immunities, dignities and titles which he would have enjoyed had this agreement not been made . By Article 3 the Nawab became entitled to receive for his life time from the revenues of the State a certain sum annually for his privy purse free of all taxes . By Article 4 he remained full owner of all private properties belonging to him. By Article 5 all members of his family including his consorts and children became entitled to all the personal privileges, dignities and titles enjoyed by them . Administration over the territory of the Rampur State was taken over by the Government of India on 1-7-1949 in accordance with the agreement. The Taxation Laws (Extension to Merged States and Amendment) Act No. 67 of 1949 received the assent of the Governor-General on 31-12-1949. By Section 3 of it the Indian Income-tax Act was extended to the merged States including the Rampur State with effect from 1-4-1949. By Section 7 the Rampur Income-tax Act ceased to have effect. Under the Indian Income-tax Act the Nawab would be liable to tax on the income received or accrued in India including the territory of the former Rampur State now merged in India. The Constitution came into fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had refused to decide the claim of immunity on the ground that it arose out of the merger agreement and its jurisdiction to decide it was barred by Article 363 of the Constitution. The Nawab claimed before the Tribunal that on the same reasoning it should not refer the question. The Tribunal overruled his objection and referred it. 4. in this Court a preliminary objection was raised on behalf of the Nawab against our hearing the reference and answering the question on the ground that our jurisdiction to do so is barred by Article 363. There is no substance in the contention and it must be overruled. Sri Jagdish Swamp attempted to draw support for his preliminary objection from the decision of V. Bhargava and B. Upadhya, JJ., rejecting the Nawab's petitions for certiorari against the assessment proceedings for the assessment years 1931-52 and 1952-53. The learned Judges rejected the petitions on the ground that they were barred by the Article from considering, and giving effect to, the merger agreement. It does not follow from the rejection of the petitions that our jurisdiction to answer the question referred to us also is barred by the Article. The jurisdiction that we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the existence of the facts on the basis of which the immunity prior to the merger agreement was claimed but the interpretation of the law applicable to the facts and the effect of applying to them the law that was applicable were matters of contest before the Tribunal. The Department thereby denied that the Nawab possessed the immunity before the merger agreement. Then it further denied that the law applicable to the immunity, even if it existed, was what was asserted on the Nawab's behalf and that its effect was to continue it after the merger agreement and to render him exempt from taxation on any part of his income. The Nawab had to establish both that he possessed the immunity and that if was continued by virtue of the merger agreement so as to prevent his being taxed for the assessment year in question; if he failed to prove either he was to be taxed. The question referred by the Tribunal is about the Nawab's income being immune from taxation; though only one question is framed it really consists of the two questions, (1) whether he possessed the immunity before the merger agreement, and (2) whether the immunity has been continued by virtue of the merger agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he immunity was claimed existed. It was a question of fact which could not be, and has not been, referred to us. The controversy between the Nawab and the Department cannot be decided unless that question also is decided. This confirms that the dispute between the Nawab and the Department has not been referred to us. The dispute still continues before the Tribunal and it has only sought our advice on the two questions of law. One of the questions that we have to answer relates to the merger agreement but what is barred by Article 363 is not answering a question relating to a merger agreement but exercising jurisdiction in a dispute arising out of it. The claim made by the Nawab that by virtue of the merger agreement the immunity possessed by him previously is being continued and he is immune from taxation is a dispute arising out of the merger agreement and the Tribunal is exercising jurisdiction over it; but it is retaining the whole of the jurisdiction and only seeks our advice as to the effect of the operation of the law on certain facts. It has not transferred the dispute to us. It was argued that jurisdiction in any dispute means not jurisdiction over any dispute' but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adjudicate upon the claim (as it did). It had also full jurisdiction to refer any question of law arising out of the adjudication to this Court under Section 66(1). It would have been anomalous if it had the jurisdiction all right to adjudicate upon the claim and to refer it to this Court's jurisdiction to answer it were barred by the Article. Under Section 66(5) the Tribunal on receipt of an answer to the question from this Court would be obliged to decide the case conformably to it. The object behind the provisions of Section 66 is that on questions of law arising before the Tribunal it should be governed by the answers given to them by the High Court. This object would be completely defeated, and the provisions rendered useless, if it were held that a question of law arising out of a merger agreement is within the sole jurisdiction of the Tribunal and that the High Court has no jurisdiction to answer it. There was no justification for the Constitution to distinguish between a question of law arising out of a merger agreement and all other questions of law and conferring exclusive jurisdiction to answer the former upon the Tribunal. The Tribunal itself is under a duty to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided answering it does not itself amount to deciding the dispute. 8. A Court is an authority created under a statute as a Court whereas a tribunal is not created as a Court though it is created for deciding certain matters. All Courts are tribunals but all tribunals are not Courts. Article 227 of the Constitution laying down that every High Court shall have superintendence over all Courts and tribunals suggests that Court is not synonimous with tribunal . There are provisions in the Constitution, such as Articles 228 and 235, which are expressly applicable to Courts and do not seem to be applicable to tribunals. J. F. Garner in his Administrative Law pp. 155, etc., writes that a Court is normally a body which has historically and formally been so regarded whereas a tribunal has some special statutory origin, a Court is presided over by the ordinary Judges whereas a President of a tribunal is not necessarily a lawyer and often is not a Judge and that the accepted rules of evidence govern proceedings before a Court but not proceedings before a tribunal. There is much truth in his statement that whether a body is a Court or tribunal is primarily a matter of statute law, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g upon the Department because it failed to get Hie question regarding its being debarred from deciding the Nawab's claim referred to this Court. If the Department's case was that it is a Court, whether it was debarred from deciding the Nawab's claim or not should have been the first question to be got referred. The Department by not getting it referred submitted to the decision of the Tribunal and is now estopped from contending that it was wrong. 9. The Tribunal, not being a Court, could decide the claim by considering, and giving effect to, the merger agreement. It would be meaningless for this Court, to say that it cannot consider and give effect to the merger agreement when answering it. If the Tribunal could consider and give effect to it but not this Court when answering the question, the Tribunal would be bound to maintain its order on receiving the Court's answer given without considering, and giving effect to it. The Tribunal has to decide the dispute after adjudicating upon the Nawab's claim based upon the merger agreement and whatever answer this Court, if it is precluded from considering the merger agreement, gives would be of no use to the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to decide a matter involved in the question referred to us in order to decide whether we have jurisdiction over the question or not, One cannot proceed to exercise jurisdiction without deciding that one has the jurisdiction or for the purpose of deciding whether one has it or not. One cannot lose jurisdiction on the basis of a rinding reached on a certain matter in the exercise of the same jurisdiction; jurisdiction cannot be lost simply by being exercised. Further, if we have no jurisdiction to answer the question any finding given by us that the Nawab did not possess the immunity before the merger agreement would itself be a finding without jurisdiction and of no validity. We ourselves would be debarred from giving effect to it by giving a further finding that we have no jurisdiction to answer the question referred to us. The existence of the immunity prior to the merger agreement is not a condition precedent to our exercising the jurisdiction over the question; it is not that we have jurisdiction over the question if the immunity did not exist. Our jurisdiction not being dependent upon the existence of the immunity we are not required to decide about its existence before as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwar Singh, AIR 1952 SC 252 and Jagannath Behera v. Harihar Singh, AIR 1958 SC 239. The Article did not come in for discussion in the former case. In the latter case an ex-Ruler of a native State was the defendant, who himself set up the merge)- agreement executed between him and the Dominion of India and pleaded the bar of the Article. The suit was brought against him for possession by tenants whom he had dispossessed from the land which he claimed to be his personal property. The dispossession was against the law in force in the State but he claimed that by virtue of the agreement he had the right to eject the plaintiffs. The Supreme Court held that he could not rely upon the Article to prevent the jurisdiction of the civil court over the suit brought by the plaintiffs against him. The plaintiffs' suit did not raise any dispute arising out of the agreement; it was based on the illegality of their dispossession by the defendants. It was the defence that was based upon the agreement and could be beyond the jurisdiction of the civil court. So the suit could go on and the civil court would be debarred from considering the defence if it was based on the agreement. The Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt observed at p. 786 (of SCR): (at p. 199 of AIR) that if, despite the recommendation that due regard shall be had to the guarantee .....given under the. . . .agreement, the Parliament or the Legislature of a State makes laws inconsistent with the personal rights, privileges and dignities of the Ruler. .... .the exercise of the legislative authority cannot, relying upon the agreement. ... .be questioned in any court, and that is so expressly provided by Article 363 . it rejected the contention of the ex-Ruler that he was not seeking to enforce the terms of the agreement by stating that in truth, the appellant sought by his petitions under Article 226. . . .to enforce the terms of. . . .the merger agreement (see at p. 786) (of SCR): (at p. 199 of AIR). 14. So far I have dealt with the first part of Article 363. The second part of the Article is to the effect that no court shall have jurisdiction in any dispute in respect of any obligation arising out of any provision of the Constitution relating to any treaty, agreement etc. referred to in the first pArticle The first part of the article itself might be said to be a provision relating to such a treaty, agreement etc. and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r agreement. This question arises because of Article 2 of the merger agreement continuing to him the personal rights, privileges, immunities etc. It was contended by Sri Jagdish Swarup that the adjective personal governs the noun rights immediately following it and not the nouns privileges , immunities , dignities and titles which follow subsequently, Sri Gulati contended on the other hand that the adjective governs all the nouns. Dignities and titles are more of a personal nature than rights, privileges and immunities. I do not know why the parties chose to confine the guarantee to personal rights and not the personal privileges, personal immunities, personal dignities and personal titles. There was no point in not having the guarantee in respect of rights other than personal when they were having it in respect of privileges, immunities, dignities and titles other than personal privileges, immunites etc. According to the rules of grammar the word personal can be read with rights alone and also with rights , privileges , immunities , dignities and titles . If the legislature intended that it should be read only with the word rights it would have made its meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... privileges and immunities' when used in a statute of the kind under consideration are certainly full and ample for the purpose of granting an exemption from taxation contained in the first or original statute, and when in granting to still another company certain rights the word 'immunities' is dropped, its absence would seem and ought to have some special significance...... The word 'immunity' expresses more clearly and definitely an intention to include therein an exemption from taxation than does either of the other words. Exemption from taxation is more accurately described as an 'immunity' than as a privilege, although it is not to be denied that the latter words may some times and under some circumstances include such exemption (p. 661). So the exemption from taxation by the Nawab was his privileges or immunity. However, Sri Jagdish Swarup expressly gave up the contention that it amounts to a privilege and rested his submissions on its amounting to immunity. 18. So long as the Rampur Income-tax Act was in force in the territory of the former Rampur State the Nawab was exempt from payment of Income-tax to the Rampur State on any income whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f paramountcy. He, therefore, did not become immune from taxation under the Indian Income-tax Act on the income accrued to him in the Indian Dominion. In Philadelphia and Wilmington R. R. Co. v. The State of Maryland, (1850) 13 Law Ed 461, Taney, C. J. stated that the taxing power of a Stale is never presumed to be relinquished, unless the intention to relinquish is declared in clear and unambiguous terms . This was confirmed in the cases of White Worth, (1886) 29 Law Ed 833 and Phoenix Fire and Marine Insurance Co., (1896) 40 Law Ed 660. In the latter case it was stated that the claim for exemption must be made out wholly beyond doubt because 'it is the settled doctrine of this Court that an immunity from taxation by a State will not be lecognised unless granted in terms too plain to be mistaken' (p. 661). Thus before the merger the Nawab had the immunity in respect of the State income but not in respect of the income accrued to him outside the State. With effect from 1-4-1949 the Rampur Income-tax Act which exempted him from taxation on the Rampur State income ceased to be in force and he became liable to tax on the Rampur State income also under the Indian Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. An altogether different consideration arises when the act of a sovereign has reference not to the rights of his subjects but to the acquisition of territories belonging to another sovereign; that is a matter between independent sovereigns and any dispute arising therefrom must be settled not in a municipal court of either State but by resort to diplomatic action or force. Clause in a treaty entered into by an independent Ruler providing for the recognition of the rights of his subjects are incapable of enforcement in the law of a new sovereign. Transactions of independent States between each other are governed by laws other than those which municipal courts administer. When a treaty is entered into by sovereigns of independent States were no sovereignty in a territory passes from one to the other, clauses in it providing for the recognition by the new sovereign of the existing rights of the residents of the territory must be regarded as invested with the character of an act of State and no claim based thereon can be enforced in a court of law. In Reference by the President of India under Article 143(1) of the Constitution of India on the implementation of the Indo-Paldstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confronted with the preliminary objection of the assessee that Article 363 of the Constitution bars us from answering--at all events, effectively--the referred question. Sri Jagdish Swamp, counsel for the assessee, has put forth the objection in this way: the Income-tax Appellate Tribunal (hereinafter called the Tribunal) has examined and interpreted the Merger Agreement, dated 15-5-1949, between the assessee, as the former Ruler of the erstwhile State of Rampur, and the Dominion of India and has held that Article 2 of the said agreement granted the assessee immunity from taxation under the Indian Income-fax Act (hereinafter called the Act). We cannot examine and interpret the Agreement, and should not, therefore, answer the referred question. 23. Clause (1) of Article 363, in so far as it is material, reads : Notwithstanding anything in this Consti tution but subject to the provisions of Article 143, neither the Supreme Court nor any other court shall have jurisdiction in any dispute arising out of any provision of a treaty, agreement, cove nant, engagement, sanad or other similar instru ment which was entered into or executed before the commencement of this Constitution b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;dispute'; and for the words 'arising under' we have here the words 'arising out of. Further, while Articles 132, 133, 134, 135 and 136, which deal with the litigation ordinarily arising between two or more persons or between a person and the Government, use the words 'case' and 'matter', Article 131, which deals with litigation between States or between the Union Government and States, and Article 363 use the word 'dispute'. 27. Are those changes purposeful? if so, what is their purpose? According to Professor Corwin 'Controversies' are Civil actions or suits; 'cases' may be either civil or criminal (1). One of the elements of a 'case' or 'controversy' is the presence of adverse litigants presenting antagonistic assertion of rights (2). Another element is that the party initiating it must be asking the Court for a remedy, or 'execution'. (3) 28. The word 'matter' also connotes the same attributes, and precludes the rendering of an advisory opinion. . .... .we do not think that the word 'matter' in Section 75 means a legal proceeding, but rather the subject-matter for determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g v. Commonwealth Court of Conciliation and Arbitration, 70 Com W. LR 141 (152-154). 31. There is, however, unanimity on one point: a case does not arise under the Constitution or a Federal law or a treaty, if it can be decided on any other basis and without reference to the Constitution or the Federal law or the treaty. McCain v. City of Des Moines, (1899) 43 Law Ed 936 (939), Miller v. Hawies, 5 Com-W. LR 89. Here, the Supreme Court has held that a dispute arises out of a treaty, agreement, etc., if it is founded on such treaty, agreement, etc. State of Seraikella v. Union of India, 1951 SCR 474 : (AIR 1951 SC 253), or if it questions the existence of such treaty, agreement, etc. Ibid at page 496 per Patanjali Sastri, J. It lias also been held that if the claim of a party may be decided without reference to the treaty, agreement, etc., then the dispute does not arise out of such treaty, agreement, etc. AIR 1958 SC 239 (242). 32. it is unnecessary to attempt a definition of the expression 'arising out of. As the question referred to us can be answered without reference to the Merger Agreement, I am of opinion that Article 363 does not stand in our way. It cannot be dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The State of Rampur, like other Indian States, was recognised as a suzerain of the British Crown, which was acknolwedged by it as the Paramount Power. The relations between the British Crown and the State of Rarnpur were governed by Treaties, Engagements, Sanads as supplemented by usage and sufferance and the decision of the Government of India and the Secretary of State embodied in political practice. The Paramount Power was responsible for the defence of the State against external aggression and enjoyed the exclusive authority of making peace or declaring war or negotiating or communicating with foreign Slates. As regards relations with foreign State, the State of Rampur did not enjoy any authority, and was considered in its external relations as part of the Indian Empire, The State had no international personality of its own. In his Law and Custom ol' the Constitution (2), Anson observed: The King is Emperor of India, the Rulers of the Native States owe political allegiance to him, and though their territories are not British territory, they are for international purposes included in the Indian Empire. . . To the same effect is the comment of Oppenheim in his work on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction. Article 2, which is of particular relevance, provided: The Nawab shall continue to enjoy the same personal rights, privileges, immunities, dignities and titles which he would have enjoyed had this agreement not been made. The Merger Agreement then declared the assessee entitled to receive for his lifetime a Privy Purse free of all taxes and recognised him as full owner of his private properties. Article 5 continued in the members of his family all the personal privileges, dignities and titles enjoyed by them. 37. The State of Rampur, before its merger with the Dominion of India, was governed by the Rampur State Income-tax Act, 1944. Its provisions corresponded closely with those of the Indian Income-tax Act, 1922, Section 3-A, however, declared that the Act did not apply to the Ruler. The assessee was, (here-fore, exempt from tax under that Act. By the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, which received the assent of the Governor-General on December 31, 1949, the Indian Income-tax Act, 1922, among other Indian statutes, was extended to all the merged States, and Section 3(2) specifically declared that the Indian Income-tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to the assessee. The contention of the assessee before the Appellate Tribunal was that as sovereign Ruler of the State of Rampur he was immune from income-tax under international law before the merger of the State into the Dominion of India, and that by virtue of Article 2 of the Merger Agreement that immunity was continued. The Income-tax Department disputed that contention. 40. Mr. Jagdish Swamp, appearing for the assessee, has raised a preliminary objection. He urges that the reference cannot be entertained by us because it is barred by Article 363 of the Constitution and that we should decline to answer the reference. 1 am of opinion that the preliminary objection must be overruled. 41. The question referred by the Appellate Tribunal is couched in wide terms. In order to determine its scope, it is necessary to ascertain what were the questions raised before the Appellate Tribunal. The assessee did not contend that if the provisions of the Indian Income-tax Act alone be considered the Act did not apply. No dispute was raised as to its applicability it regard was confined merely to its provisions. What the assessee contended was that he was immune from tax under the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nied him by Article 363. In the instant case, on the contrary, the reference has been made at the instance of the Commissioner. The Commissioner can succeed if he is able to show to the Court that the assessee never enjoyed the pre-merger immunity claimed by him. It he succeeds in that, the entire defence of the assessee against the assessment of his personal income under the Indian Income-tax Act must fail. In my opinion, the earlier decision of this Court dismissing the assessee's petitions cannot sustain his preliminary objection. 43. The first question, therefore, which must be considered is: Was the assessee a Sovereign Ruler of the State of Rainpur before it merged into the Dominion of India and, therefore, entitled to immunity from tax under the Indian Income-tax Act? Here, again, the question is divisible into two parts: was the assessee a Sovereign Ruler, and, if he was, was he entitled to immunity from tax under the Indian Income-tax Act? The Appellate Tribunal answered the two parts of the question in favour of the assessee, it held that the assessee was the Sovereign Ruler of the State before its merger into the Dominion of India and, therefore, he enjoyed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Indian Income-tax Act, That is the position as regards personal income which accrued to him outside the State of Rampur in the taxable territories contemplated by thff Indian Income-tax Act. 45. A contention was raised on behalf of the assessee that the personal income earned by him within the territories comprising the State of Rampur before its merger into the Indian Dominion was exempt from the operation of the Rampur State Income-tax Act and consequently as regards that income the assessee enjoyed immunity from taxation. Now, that contention, I think, cannot be raised before us. The immunity claimed by the assessee before the Appellate Tribunal was immunity from taxation under the Indian Income Tax Act and it was an immunity said to rest in international law. It was never the assessee's case before the Appellate Tribunal that he was ininune from taxation because of the operation of the Rampuv State Income-tax Act. It is well settled that a question which has not been raised before the Appellate Tribunal in appeal, or, even if not raised, has not been decided by it, cannot be said to arise out of its appellate order. In my opinion the assessee is nol entitled t ..... 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