HIDAYATULLAH, - (1.)THE following Judgment of the court was delivered by
(2.)THE appellant, Rajah S. V. Jagannath Rao, was the Jagirdar of Jatprole Samasthan in the former Hyderabad State. In the year 1357 Fasli, the Income-tax Act (1357 Fasli) was passed by the Legislature, to come into force on Azur 1, 1357 Fasli. THE present appeals, with special leave, concern the assessment of the appellant's income to income-tax and super-tax under the Act of 1357 Fasli for the assessment years, 1357 Fasli and 1358 Fasli, corresponding to the-years, 1948-49 and 1949-50. THEy are directed against a common judgment of the High court of Hyderabad, by which certain questions of law referred by the Income-tax Appellate tribunal, Bombay, in the assessment of the present appellant and some others, were answered by the High court of Hyderabad against the present appellant.
The appellant had submitted returns of his income for the two accounting years under protest. According to him, the Income-tax Act, 1357 Fasli was ultra vires the by legislature. For the account year 1356 Fasli, corresponding to the assessment year, 1357 Fash, the appellant had urged that the Act could not affect the income of that year, because it came into force only from Azur 1, 1357 Fasli. The appellant also claimed to deduct certain expenses (details of which will be given later) under as. 14(5)(a) and (b) of the Act. These were the three matters on which the Income-tax Appellate tribunal framed the following three questions for the decision of the High court : '1. Whether the Hyderabad Income-tax Act is ultra vires in so far as it seems to levy a tax on Jagirs and Samasthans ? 2.Whether the provision relating to the taxation of income of 1356-F in the Hyderabad Income-tax Act is intra vires ? 3.Whether the sum of Rs. 14,390.00 and Rs. 38,079.00 or a part thereof, could be allowed as revenue deduction under section 14(5)(a) or 14(5)(b) of the Hyderabad Income-tax Act ?' As stated already, all the three questions were answered by the High court against the appellant. He obtained special leave from this court on three separate petitions for special leave, on 17/12/1966, and 9/04/1957, and filed the present appeals.

The second question mentioned above is covered by the decisions of this court in Union of India v. Madan Gopal Kabra (1) and Rajputana Mining Agencies Ltd. v. The Union of India and another (2) and was, therefore, rightly answered against the appellant. Mr. A. V. Viswanatha Sastri, counsel for the appellant, conceded frankly that he had nothing to urge against the decision of the High court on that question. We shall, therefore, confine ourselves to the two remaining questions in these appeals. It may be mentioned that the ,first question also arises in Civil Appeal No. 17 of 1961, and what we say here will govern the disposal pro tanto that appeal also.

The contention of the appellant on the validity of the Act is this : The Act was passed by the Hyderabad Legislative Assembly and was assented to by His Exalted Highness, the Nizam. Under the Hyderabad Legislative Assembly Ain, there was a prohibition on the introduction of certain kinds of bills in the Assembly. The appellant relies upon sub-ss. (8) and (9) of s. 18 of the Ain, which in their English translation read as follows '18. There shall not be introduced into, or moved in the Assembly,, any bill, or motion, or resolution, or question, or other proceedings relating, to or affecting the following matter: (8)The relation of His Exalted e Highness with the holders of Samasthans and Jagirdars and with such other grantees as derive grants from sanads. (9)The powers of His Exalted Highness over the present or future grants, whether they be in the form of land or-cash.'.

These two Ss. deal with laws affecting the relations between the holders of Samasthans and Jagirs on the one hand, and His Exalted Highness the Nizam, on the other. The Act in question imposes a tax and does not seek to affect the relations aforesaid. It is a little difficult to read into the Income-tax Act any encroachment upon the relations between the holders of Samasthans and Jagirs and the Nizam. Even if the Income-tax Act can be said to affect indirectly those relations, it is manifest that it was passed with the assent of the Ruler, which admittedly was given.

(3.)THERE have been a number of rulings of this court on the powers of Rulers of Indian States to promulgate laws in their States in the exercise of their sovereignty and on the nature of their sovereignty. Two such cases of this court Considered the legislative powers of His Exalted Highness the Nizam, and in those cases, it was held that the legislative power of the Nizam was not subject to any limitations or control of any kind whatever. The first of these cases, Ameer-un-Nissa Begum v. Mahboob Begum (1) dealt with a Firman issued by His Exalted Highness the Nizam, and. in dealing with his powers, in general and his legislative powers, in particular, it was observed by this court as follow: 'It cannot be disputed that prior to the integration of Hyderabad State with the Indian Union and the coming into force of the Indian Constitution, the Nizam of Hyderabad enjoyed uncontrolled sovereign powers. He was the supreme legislature, the supreme judiciary and the supreme head of the executive, and there were no constitutional limitations upon his authority to act in any of these capacities. The 'Firmans' were expressions of the sovereign will of the Nizam and they were binding in the same way as any other law;-nay, they would override all other laws which were in conflict with them. So long as a particular 'Firman' held the field, that alone would govern or regulate the rights of the parties concerned though it could be annulled or modified by a later 'Firman' at any time that the Nizam willed.' The same view was reaffirmed in the second case reported in Director of Endowments, government of Hyderabad v. Akram Ali (1).
It is contended that a limitation on the powers of the Legislative Assembly in Hyderabad State was created by the Ain, which was, in essence the supreme law, and any bill introduced in contravention of the Ain was void ab initio. According to the learned counsel for the appellant, a law which was void at its inception remained so, even if subsequently assented to by the Nizam. If one were to think in terms of a legislature of limited jurisdiction, this might be true. Laws are really commands embodying rules of conduct emanating from one whose will is sovereign, or, in other words, supreme. Legislative Sovereignty must be found to uphold the laws. It depends upon the Constitution of a particular State, where it resides. It may not reside in a Ruler but in a legislature where the Ruler has surrendered or been made to surrender his powers, as, for example, the King in Parliament in England, or it may reside in' an absolute and sovereign Ruler, who has not parted with it, the legislature being merely his amanuensis. In the latter case, the will of the Ruler expressed as a rule of conduct is the law, whether made by him directly or through his legislature. The Ain itself derived its authority from the Nizam only, and the Nizam, as the supreme legislator, could frame a law in derogation of the Ain, which was his own creation. The Ain was not a supreme law such as a Constitution, the limits imposed by which could not be exceeded even by the Nizam. The Ain prohibited the, introduction of laws of a particular kind in the Assembly, and the Nizam could reject them as being in contravention of the Ain even if passed by the Assembly. The position, however, was not the same when a law which the Nizam could refuse to accept was accepted by him. As a supreme legislator, the Nizam could have written out the entire Income-tax Act in his own hand-writing and signed it; and it would have been as valid and binding as the Ain itself. It made no difference if the law was passed by a body of men and was sent to the Nizam for his assent, because on his assent, the law was as effective as if made by the Nizam himself. The Nizam could withhold his assent to a law contrary to the Ain if he chose; but once he assented to it, the law derived its vitality, not from the act of the Legislative Assembly but from the act of the Nizam. It could not be questioned any more than a Firman issued by the Nizam. The Income-tax Act must, therefore, be regarded as binding upon those affected by its terms, and the question whether it could be introduced in the Legislative Assembly hardly arises. It must be regarded as a law emanating from His Exalted Highness the Nizam, the supreme legislator in the State, whose laws promulgated in any manner were binding upon the subject. See Madhaorao v. State of Madhya Bharat (1).

The first question was thus answered correctly by the High court.