Decided on April 28,1954



CHOPRA, J. - (1.) THE facts giving rise to this reference under Section 66 (1) of the Indian Income-tax Act, 1922, are these : the assessee company, M/s. Dalmia Dadri Cement Ltd., Dadri, before it was started entered into an agreement with the Ruler of the erstwhile Jind State, on 1st April, 1938. THE document was duly executed and signed by one of its promoters on behalf of the company and by the then Chief Minister on behalf of the State Government. By clause (1) of the agreement, the State granted and conferred upon the company termed as licensee the sole and exclusive monopoly right of manufacturing cement in the Jind State, both for consumption in the State and for exporting outside, on the terms and conditions for a period of twenty-five years commencing from the date of agreement and gave an option to the licensee to renew it for successive periods of twenty-five years each up to an aggregate of 100 years counted from 21st July, 1936. Besides other benefits that the State or its subjects were to derive from the said agreement, it was stipulated that 6% cumulative preference shares fully paid-up of the face value of Rs. 1,00,000 and ordinary shares fully paid-up of the total face value of Rs. 50,000 would be allotted by the company to the State or its nominee without any payment whatsoever. Out of a number of other balancing and reciprocal terms one with which we are primarily concerned is clause (23), the relevant portion of which reads as follows :- "THE company shall be assessed to income-tax in accordance with the State procedure but the rate of income-tax shall always be four per cent. upto a limit of the income of rupees five lacs and five per cent. on such income as is in excess of rupees five lacs."
(2.) CLAUSE (24) bound the State not to impose or realize any export or import duty or any other tax on the licensees business under the agreement or on his machinery, materials etc. By clause (25), the licensee was made subject to all statutory enactments for the time being in force in the Jind State so far as they were not inconsistent with or repugnant to the provisions of the agreement. In clause (31) it was agreed that the licensee would not be entitled to claim any compensation for the agreement or any part of it becoming inoperative in consequence of the State joining the proposed federation of India or any change in constitution or for any other reason beyond the control of the State. It is not disputed that the Maharaja, the sovereign authority of the legislative, executive and judicial functions of the Government of Jind, could and did validly enter into the agreement and grant the concessions embodied in it. It is also common ground between the parties that the Maharaja chose to abide by the obligation contained in clause (23) of the agreement and that it remained in force so long as the State had its existence as a separate entity. No tax was thus charged on the income of the company during the period under the Jind State Income-tax Act, 1938, which came into force on 1st April, 1938, or under the Jind State Income-tax Act, 1947, Section 19 of which repealed the earlier Act. On 15th August, 1947, the Ruler of Jind, like the Rulers of a number of other Indian States, acceded to the Dominion of India with respect to Defence, External Affairs and Communications. Later on, on 5th May, 1948, the Rulers of eight of such States, including the Ruler of Jind, with the concurrence and guarantee of the Government of India, entered into a Covenant and agreed to unite and integrate their territories in one State with a common executive, judiciary and legislative by the name of the Patiala and East Punjab State Union. On 20th August, 1948, the Ruler as stipulated in the Covenant, made over the administration of their respective States to the Raj Pramukh of the new State (Patiala and East Punjab States Union). Article VI of this Covenant on which reliance is placed by the assessee reads as follows :- "(1) The Ruler of each Covenanting State shall, as soon as may be practicable, and in any event not later than 20th of August, 1948, make over the administration of his State to the Raj Pramukh; and thereupon, (a) all rights, authority and jurisdiction belonging to the Ruler, which appertain, or are incidental to the Government of the Covenanting State shall vest in the Union shall hereinafter be exercisable only as provided by this Covenant or by the Constitution to be framed thereunder; (b) all duties and obligations of the Ruler pertaining or incidental to the Government of the Covenanting State shall devolve on the Union and shall be discharged by it; (c) all the assets and liabilities of the Covenanting State shall be the assets and liabilities of the Union; and (d) the military forces, if any, of the Covenanting State shall become the military forces of the Union." Provisions for the administration of the new State were made in Article X of the Covenant and it runs thus :- "(1) There shall be formed, as soon as may be practicable, a Constituent Assembly in the manner indicated in Schedule II; and it shall be the duty of that Assembly to frame a Constitution of a unitary type for the Union within the framework of this Covenant and the Constitution of India, and providing for a Government responsible to the legislature. (2) Until a legislature elected in accordance with the terms of the Constitution framed by it comes into being, the Constituent Assembly as the interim Legislature of the Union : Provided that until the Constitution framed by the Constituent Assembly comes into operation after receiving the assent of the Raj Pramukh, the Raj Pramukh shall have power to make and promulgate Ordinances for the peace and good government of the Union or any part thereof, and any Ordinance so made shall have the like force of law as an Act passed by the Constituent Assembly; but any such Ordinance may be controlled or suspended by any such Act, and if promulgated after the first meeting of the Constituent Assembly, shall not be in force for more than six months from its promulgation." On the day the administration of the eight States got vested in the Raj Pramukh, i.e., 20th August, 1948, he, in exercise of the powers conferred on him by the above proviso to Article X (2), made and promulgated an ordinance No. 1 of 2005 Bk. (1948) by the name of the Patiala and East Punjab States Union Administration Ordinance, 2005. Section 3 of this Ordinance is to the following effect :- "As soon as the administration of any Covenanting State has been taken over by the Raj Pramukh as aforesaid, all Laws, Ordinances, Acts, Rules, Regulations, Notifications, Hidayats and Firman-i-Shahi, having force of law in Patiala State on the date of commencement of this Ordinance shall apply mutatis mutandis to the territories of the said State and with effect from that date all laws in force in such Covenanting State immediately before that date shall be repealed : Provided that proceedings of any nature whatsoever pending on such date in the Courts or Offices of any such Covenanting State shall, notwithstanding anything contained in this Ordinance or any other Ordinance, be disposed of in accordance with the Laws governing such proceedings in force for the time being in any such Covenanting State." This was followed by the issue, over the signature of the Revenue Secretary, of Notification No. 35, dated 27-5-2005/11th September, 1948, that the Patiala Income-tax Act of 2001 and the rules thereunder had come into force in the various Covenanting States from 20th August, 1948, and replaced the law or laws in force in that behalf in those States before that day. The Patiala Income-tax Act was subsequently repealed and ceased to have effect by virtue of Section 13 of the Finance Act, 1950, which came into force on 8th April, 1950. But with that legislation we are not for the present concerned as the assessment in question relates to an earlier period. Ordinance No. 1 of 2005 was repealed and was in substance re-enacted by the Pepsu General Provisions (Administration) Ordinance, No. XVI of 2005 Bk. promulgated on 4th Phagan, 2005/5th February, 1949. With slight variations in language of the corresponding section in the prior Ordinance, Section 3(1) of this later Ordinance lays down :- "As from the appointed day, all laws and rules, regulations, bye-laws and notifications made thereunder, and all other provisions having the force of law, in Patiala State on the said day shall apply, mutatis mutandis, to the territories of the State and all laws in force in the other Covenanting States immediately before that day shall cease to have effect : Provided that all suits, appeals, revisions, applications, reviews, executions and other proceedings or any of them, whether civil or criminal, or revenue pending in the courts and before authorities of any Covenanting State shall, notwithstanding anything contained in this Ordinance be disposed of in accordance with the laws governing such proceedings in force in any such Covenanting State immediately before the appointed day." The phrase "appointed day" means, as stated in Section 2(a) of this Ordinance, in fifth day of Bhadon, 2005/twentieth day of August, 1948, and the phrase "Covenanting States" means any of the States mentioned in Section 2(b); the State of Jind is one of the States mentioned therein. It is to be noticed that in or in the earlier Ordinance there is no saving as regards any income-tax concessions that may have been granted by the Rulers of the Covenanting States. The assessment in the present case is for the year 2006 Bk. (1949-50) and was made in accordance with the Patiala Income-tax Act, 2001, as applied to all the component parts of Pepsu by the Raj Pramukh under the powers conferred on him by Article X of the Covenant. The assessed profits and gains of the company for the "previous year", viz., calendar year 1948, were found by the Income-tax Officer to amount to Rs. 2,16,010. The amount was reduced by the Appellate Assistant Commissioner by Rs. 11,965 and by a further sum of Rs. 9,780 by the Appellate Tribunal. The tax and the super-tax demand amounted to Rs. 90,000. The contention of the assessee was, and now is, that according to the terms of its agreement with the Ruler of Jind the tax could only be charged at the flat rate of four per cent. on its income. Counted at this rate, the total tax payable comes to a little less than Rs. 8,000. The Tribunal turned down the contention by holding that in the absence of any new Notification by or under the authority of the Raj Pramukh or any ordinance promulgated by him subsequent to the formation of Pepsu recognizing the tax concession granted by the Jind State, the said concession could not be availed of by the assessee or deemed to be operative after 20th August, 1948. On an application by the assessee under Section 66 (1) of the Income-tax Act, the Tribunal has stated the case to this Court and formulated the following question for its decision :- "Whether the assessees profits and gains earned in the calendar year 1948 were assessable for S. 2006 (1949-50) at the rates in force according to the Patiala Income-tax Act of S. 2001 read with Section 3 or the Patiala and East Punjab States Union Administration Ordinance (No. 1 of 2005), as repealed and re-enacted in Section 3 of the Patiala and East Punjab States Union General Provisions (Administration) Ordinance (No. XVI of 2005), or in accordance with clause (23) of the agreement of April, 1938, above referred to ?" Mr. Sikri, at the fag end of his address in reply to the arguments of the assessees counsel, took exception to the jurisdiction of this court to deal with the matter in question on the ground that it was expressly barred by Article 363(1) of the Constitution. Since the objection relates to jurisdiction it would be better to dispose of it before proceedings to merits. The article says :- "Notwithstanding anything in this Constitution 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, covenant, engagement, sanad, or other similar instrument which was entered into or executed before the commencement of this Constitution by any Ruler of an Indian State and to which the Government of the Dominion of India or any of its predecessor Governments was a party and which has or has been continued in operating after such commencement, or in any dispute in respect of any right accruing under or any liability or obligation, arising out of any of the provisions of this Constitution relating to any such treaty, agreement, covenant, engagement, sanad, or other similar instrument." The argument is that the dispute relates to a term of the Covenant which was entered into and executed by Rulers of eight of the Indian States before the commencement of the Constitution and which has continued in operation thereafter, and, therefore, it is hit by the mandatory provision of the article. It is common ground between the parties that the Government of India was a party to the Covenant inasmuch as it concurred in the Covenant and guaranteed all its provision, and in confirmation thereof Mr. V. P. Menon, Secretary to the Government of India in the Ministry of States, appended his signature on behalf and with the authority of the Government of India. Mr. Pathak, learned counsel for the assessee, meets the objection by contending that since the present is only a reference under Section 66 of the Indian Income-tax Act in which the Court is not called upon to pronounce any final order or judgment but has only to express an opinion on the particular question referred to it, Article 363 can have no application. It is argued that the final order in the case is to be passed by the Appellate Tribunal, though it has to be in conformity with the decision of the High Court, and that the Court in expressing its opinion only acts as an advisory body. Counsel in his connexion relies on Tata Iron and Steel Company Ltd. v. the Chief Revenue Authority of Bombay. The point involved in that case, however, was altogether different and it cannot be regarded as an authority in support of the contention. The question there was whether a decision of the High Court on a reference under Section 51 of the Indian Income-tax Act, 1918, (now Section 66 in Act XI of 1922) was appealable to the Privy Council. This depended upon interpretation of the words "original jurisdiction" in clause 39 of the Letters Patent of the Bombay High Court. In the opinion of their Lordships, since these words were used in contradistinction to the words "made on appeal" mentioned earlier in the same clause the decision of the High Court from which an appeal could be taken to the Privy Council must be either a final judgment, or a final decree or a final order, and as the order made in its consultative or advisory capacity did not fall under that category it was held that the order was not appealable. It may be mentioned that in order to supersede this view Section 66A has been added to the Income-tax Act by its amendment of 1926, and any judgment of the High Court delivered on an income-tax reference is expressly made appealable to the Supreme Court. A similar question depending upon interpretation of clause 31 of the Letters Patent of the Patna High Court came up before their Lordships of the Supreme Court in Seth Premchand Satramdas v. The State of Bihar. The relevant portion of clause 31 ordained that an appeal to the Privy Council would lie from "any final judgment, decree or order" of the High Court of Judicature at Patna. On an objection that no appeal was competent Fazl Ali, J., observed that the order made by the High Court on a reference under Section 21 of the Bihar Sales Tax Act could not be regarded as a final order nor as an order passed in the exercise of the original or appellate jurisdiction of the High Court, because it was merely an advisory one and did not by its own force bind or affect the rights of the parties. It was consequently held that no appeal against the said order lay to the Federal Court. Much of argument is not required to show that the above cases or observations made therein have no bearing to the facts of the present case. Article 363 of the Constitution bars the jurisdiction of courts to go into any dispute arising out of any Covenant etc., and the word "jurisdiction" would include the consultative jurisdiction as well. In my view, therefore, if other requirements of the articles are satisfied it cannot be regarded as inapplicable on this ground.
(3.) ON behalf of the assessee Shri Ved Vyas contended that the phrase "jurisdiction in any dispute" in Article 363 means the jurisdiction to give a final decision on a lis and that in a case like the present where the court is only to express an opinion on a question of law referred to it, it is not exercising jurisdiction to decide any dispute between two parties. I have not been able to appreciate the argument, nor do I see any relevancy of the decision in Commissioners of Inland Revenue v. Sneath which is cited as an authorised to decide it finally. Jurisdiction of a Court may be limited either locally, or personally, or as to amount, or as to the character of the questions to be determined. In the last case, the Court does have jurisdiction even though it is only to decided a particular question. It cannot also be said that there is no lis or dispute between two parties in the present case. An assessee has the right of appeal against an order of assessment as provided by Section 30 of the Income-tax Act. The assessee as well as the Income-tax Commissioner, under Section 33 of the Act, may appeal against an order passed by the Appellate Assistant Commissioner. This second appeal by the assessee or an appeal by the Income-tax Officer is presented to an heard and decided by the Appellate Tribunal. Under Section 66 of the Act the assessee or the Commissioner may by application require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and the Tribunal has then to draw up a statement of the case and refer it to the High Court. The Income-tax Commissioner and the assessee are parties to these proceedings, and obviously there is a lis or dispute between the two contestants before the High Court. In Commissioner of Inland Revenue v. Sneath the question was whether a decision of the Income-tax Commissioner in assessing super-tax for a previous year did operate as res judicata to prevent a contrary decision in assessing super-tax for a later year. This depended on the question whether there was any lis inter partes before the Commissioner. Their Lordship, therefore, proceeded to examine the function and power of the Commissioner and observed that his duty is merely to form an estimate in each year of assessment of the amount of the income of the taxpayer on which the sur-tax imposed for that year is to be charged. In estimating the total income of the taxpayer the Commissioner must necessarily form and express opinion upon various incidental questions of fact and law, but the only thing the Commissioner has jurisdiction to decided directly and as a substantive matter is the amount of taxpayers income for the year in question. His decision is final not as judgment inter partes but as a final assessment of the income which determines the tax payable. It was further observed that there can be no lis until the rights and duties are ascertained and thereafter questioned by litigation. Their Lordships did not regard Hoystead v. Commissioner of Taxation as an authority to the contrary, because in that case the decision which was treated as giving rise to an estoppel was the decision not of the Commissioner but of the Australian High Court. ON the basis of this authority it cannot, therefore, be urged that there is no lis inter partes even in the case stated to the High Court. The contention that the Covenant has not continued in operation after the Constitution, and, therefore, Article 363 has no application is equally fallacious. The argument is that some of the terms of the Covenant are already discharged because of their fulfillment and most of the rest of them have been incorporated in the Constitution of Indian, which has been adopted by the State. Counsel, therefore, maintains that the Covenant has practically ceased to remain in operation. The fallacy of the argument is self-evident. The main case of the assessee, as will be presently seen, is based on one of the terms of the Covenant itself, viz., Article VI and its enforceability. The very foundation of his case goes out if the Covenant along with its terms has ceased to exist. There are terms in the Covenant, for instance, Articles XI to XV and XVII which relate to the rights, privileges, privy purses, etc., of the rulers who were parties to the Covenant, and the guarantees given to the members of the public services of each of the Covenanting States. These provisions, till they are, if they can be, abrogated or amended, must be deemed to be in operation even after the Constitution. It is common ground that the Covenant has in no way been superseded or abrogated. It must, therefore, be regarded as having remained in operation even after the commencement of the Constitution. It is next urged that the case stated relates to period before the Constitution was adopted by the State of PEPSU and, therefore, Article 363 does not oust the jurisdiction of this Court to deal with the question in the manner it would have done before the Constitution. It is argued that the Constitution is only prospective and not retrospective and since jurisdiction was not taken away in express terms, it could not be so done merely by implication, Gondicalo Hypolito Constancio Noronha v. Damji Devji and Others is relied upon as an authority in support of the contention. In that case an action for possession of premises was brought in the Supreme Court of Kenya which then had admittedly jurisdiction to entertain the action. When the case was still pending the Ordinance, on which the action was started, was repealed by a new enactment and according to the latter jurisdiction to deal with the action was conferred upon the Rent Controller Board. On an appeal to their Lordships of the Privy Council, it was held that the latter Ordinance was not retrospective and had no application to suits begun in the Supreme Court before the Ordinance came into force and that upon its true construction the Ordinance did not purport to deprive the Supreme Court of jurisdiction in actions then pending. It was further observed that no statute should be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary and distinct implication. That is no doubt the general principle of interpretation of statutes; but the case before us stands on a different footing. In the first instance, no proceeding was pending in the High Court of Pepsu when the Constitution came into force. Secondly, ours is a new Court that was created by the Constitution itself and it derives jurisdiction from the provisions made in the Constitution. The Court, which could have jurisdiction in the matter before the Constitution, no longer exists and the one that has taken its place can have no jurisdiction over matters expressly excluded by the Constitution. In the case State of Seraikella and Others v. Union of India and Another the Ruler of the State of Seraikella brought a suit under Section 204 of the Government of India Act, 1935, in the Federal Court of India against the Dominion of India and the Province of Bihar. In the suit, the plaintiff based his claim on the Instrument of Accession and challenged the taking over of the administration of his State by the defendant under various Acts, Orders and Notification. On behalf of the plaintiff it was urged that if there was any limitation of the jurisdiction of the Supreme Court to hear such a suit, if instituted in it under its original jurisdiction, such limitation was not relevant to be considered in respect of suits which stood transferred to the Supreme Court under Article 374(2) . It was further argued that as Article 363 was prospective and not retrospective it did not affect the suits field in the Federal Court before the Constitution of India came into operation. Kania C.J., repelled the objections with the following observation :- "It was argued that the article is prospective and not retrospective. Therefore, it only covers the cases which are filed in the Supreme Court after the Constitution comes into force and does not affect suits filed in the Federal Court before the Constitution of India came into operation. In my opinion this argument is based on a mistaken given to the words prospective and retrospective. It is not disputed that the Constitution is prospective. The question however is that the Supreme Court having been created by the Constitution itself on the day the Court proceeds to determine the matter, what, according to the Constitution of India, is the jurisdiction of this Court. This approach does not make the provision retrospective". Both the contentions were consequently overruled and it was held that the Supreme Court having been created by the Constitution its original jurisdiction to hear was limited by the proviso to Article 131 and Article 363(1), and that having regard to the subject-matter of the suit the Supreme Court had no jurisdiction to entertain the suit. This contention of the assessee must also, therefore, fail. Lastly, it is urged that for the application of the article it is necessary that the parties to the proceedings should be one of the Rulers of the Covenanting States on the one side and the Government of India on the other, and the dispute between them should be one arising out of the Covenant. State of Saurashtra v. Bholanath Jatashankar Thakar is cited as an authority for the proposition. while I may not be in agreement with the counsels contention that the article requires that one of the Rulers of the Covenanting State must be a party to the proceedings, I do agree with him that the dispute must be one that arises out of the provisions of the Covenant, agreement etc. referred to in Article 363(1) . There is no mention of the former condition in the article, nor can it be necessarily implied from it or any other provision of the Constitution; but the latter does form a necessary requirement of the article itself. The question before this Court cannot be regarded as a dispute arising out of the Covenant. One of its terms may be relied upon in support of the assessees assertion that obligations of the Ruler of Jind have become the obligations of the new State; but that does not amount to saying that the dispute between him and the Income-tax Department arises out of the Covenant. The dispute in fact arises out of the agreement with the Ruler of Jind and the subsequent income-tax law enforced by virtue of Section 3 of the Ordinances (Nos. I and XVI of 2005). It is the alleged conflict between these two, viz., the agreement and the subsequent law, that has given the rise to and is the cause of the dispute. The question referred to us makes no mention of any term of the Covenant or the binding nature of it. The contention that Article 363 bars the jurisdiction of the Court to go into and decided the question is consequently overruled. On merits, Mr. Pathak contends that taxation appertains or is incidental to the legislative functions of a Government. While some of the terms of the agreement between the company and the Ruler of Jind State related to executive matters, exemption from the ordinary rules of Income-tax Act and the concession granted by its clause (23) appertain to a legislative matter. The Ruler of Jind combined in him both the executive and legislative powers of his Government. He was the undisputed head of the State and his power and authority were unrestricted, in theory as well as in practice. He could make and administer laws. He was the fountain-head of justice. His word was law or in fact had the force of law. Exemption that he made in favour of the company was, therefore, the law of the time and as such was to be respected and followed till lawfully set at rest or repealed by competent authority. Counsel further points out that there is nothing illegal or unusual in making a special law relating to one individual or a company or with respect to a particular matter. It is then contended that a private or special law can exist side by side with the general law and a later general law, unless an intention to do so is specifically declared, is not to be taken to rip off the earlier special law. Corporation of Blackpool v. Star Estate Co. Ltd. is cited as an authority for the proposition that a general statute will not, in the absence of clear words, be constructed as derogating from special provisions in a private statute. It is, therefore, urged that clause (23) of the agreement could be abrogated only by express terms and since no mention of it was expressly made in Section 3 of Ordinance No. I or XVI of 2005, it should be deemed to be still subsisting. The phrase "all laws in force in such Covenanting States...... shall be repealed" in the one and "all laws ...... shall cease to have effect" in the second Ordinance, it is contended, cannot have the effect of putting an end to the special law in favour of the assessee. Reliance has also been placed on the principles laid down in Section 6 of the General Clauses Act, though it is conceded that the Act itself has no application to the present case. Force of the general principles enunciated by the learned counsel cannot be disputed. There can be a special law and clause (23) of the agreement may be regarded as one of kind. It was valid when made and continued to have the force of law up to the formation of Patiala and East Punjab States Union. It is also correct that a special law can be repealed only expressly or by necessary intendment by a subsequent legislation. It is equally clear that after the Covenant and prior to the setting up of a duly constituted legislature in the new State, the legislative authority vested in the Raj Pramukh of the State as laid down by the proviso to Article X(2) of the Covenant. The Raj Pramukh had thus the authority in him to repeal all laws, special or general, or to enact that they had ceased to have any effect and to make and promulgate laws for the peace and good government of the new State. At no time the agreement has been expressly abrogated or superseded. The question that remains to be seen is : Has it been so done by implication or necessary intendment ? In this connexion it has to be remembered that repeal did not come from the same source of legislative authority. Generally it is the same legislature which can repeal an earlier legislation. That seems to be the reason for enacting, in Section 3 of the Ordinance XVI of 2005, that all previous laws in force in the Covenanting States "shall cease to have effect". At the time the Union was formed there was diversity of laws in the various States. The Rulers of the Covenanting States did not make up their mind and decide by what laws was the new State to be governed. They gave that power to the Raj Pramukh. To remove the diversity and bring about uniformity in the matter of laws for the Union the Raj Pramukh decided and ordained that all laws and rules, regulations, bye-laws and notifications made thereunder, and all other provisions having the force of law, in the Patiala State "shall be the laws in the Union" and that all such laws in force in the Covenanting States before that day "shall cease to have effect". This the Raj Pramukh did on the very first day he assumed administration of the Union, i.e., 20th August, 1948. By virtue of this Ordinance the Patiala Income-tax Act, 2001, was enforced and hereafter in matters of income-tax this Act was to be the law for all the subjects of the newly formed State. No discrimination of any kind or any exemption in favour of any individual was made. If there was any earlier legislation in any of the States or any exemption in favour of any individual, introduction of this legislation, by necessary implication, put an end to all these statutes or special laws by which any exemption was created. After the enforcement of this legislation the question whether or not the income of an assessee is taxable has to be decided in accordance with the new Act. In the case Rajendra Narayan Bhanja Devi v. Commissioner of Income-tax, Bihar and Orissa, the Raja of State was assessed to income-tax after his estate was included in the Province of Orissa. He claimed exemption in respect of certain incomes on the ground that under a treaty with the Government in 1803, the Government had, in view of his undertaking to pay a special annual tribute to the Government, agreed that "no further demand, however small, shall be made on the said Raja". The case having been stated to the High Court of Patna, it was held that the Income-tax Act, by imposing a tax on all persons in British India without exemption, must be deemed, by necessary implication, to have repealed the earlier exemption, and that the income in question was taxable under the Act. Courtney Terrell, C.J., in the course of his judgment observed as follows :- "If there be any earlier legislation or a treaty between the Sovereign power and the subject for special exemption from future taxation, followed by the introduction by the Sovereign power at a later date of legislation which admittedly, but for the claim to the earlier exemption, applies to and includes the person who was originally exempted, if follows that by necessary implication the later state repeals the earlier statue or other Act under which the exemption is claimed". I am, therefore, of opinion that if the legislation was within the authority of the Raj Pramukh and if it cannot be attacked on any other ground the Patiala Income-tax Act, 2001, irrespective of any previous agreement with the Ruler of Jind, must decide whether the income of the assessee in this case is taxable or not and also the rate at which it is to be taxed. ;

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