JUDGMENT
Narasimham, C.J.
1. These are applications under Article 226 of the Constitution by the former Rulers of the States o£ Sonepur, Talcher and Gangpur, against the orders of the Agricultural Income-tax authorities levying agricultural Income-tax and penalty in respect of the agricultural income derived by them from their private lands. As the points involved in all these applications are identical they were heard together and will be dealt with in one judgment.
2. The Rulers of the former feudatory States of Orissa entered into an agreement known as the merger agreement on the 18th December 1947 with the Government of India ceding full authority and jurisdiction over their States to the Government of India, with effect from the 1st January 1948. Thereupon, the Government of India in exercise of the powers conferred by the Extra Provincial Jurisdiction Act 1947, (Act (XLVII of 1947) took over the administration of these States and delegated to the then Provincial Government of Orissa full powers under Section 4 of that Act.
Section 4 conferred powers on the Central Government or its delegated authority to make such orders as may be deemed expedient for the effective exercise of extra provincial jurisdiction in the merged areas. Clause (a) of Sub-section (2) of that section further stated that any order so made may provide
“for determining the law and procedure to be observed, whether by applying with or without modifications all or any of the provisions of any enactment in force in any province or otherwise.”
The first order of delegation in favour of the Provincial Government of Orissa was made by the Government of India in the Ministry of States In their Notification No. 111-IB dated the 23rd December 1947, but that was superseded by a subsequent order of delegation (vide Government of
India, Ministry of States Notification No. 172-IB dated 23rd March 1948). Sonepur, Gangpur and Talcher were included in the States mentioned in that Notification of the 23rd March 1948.
In exercise of this delegated power the Government of Orissa made an order known as the Administration of Orissa States Order 1948, by which some of the laws in force in the then province of Orissa were applied to these Orissa States with or without modifications. The Orissa Agricultural Income-tax Act 1947 (Orissa Act XXIV of 1947) was in force in the old Province of Orissa with effect from the 12th July 1947, but its extension to the former Orissa States was somewhat delayed, and the first modification applying Section 1 of that Act to the Orissa States was issued by the Government of Orissa in the Home Department, in their Notification No. 980-States dated 19th January 1949.
There was a subsequent Notification dated 1st April 1949 (Finance Department Notification No. 5019-F, dated the 1st April 1949) by which the remaining sections of that Act, namely Sections 2 to 50, were also brought into force In all the former Orissa States with effect from that date. On the authority of this Notification the Orissa Agricultural Income-tax authorities, began to assess the income derived by the former Rulers of Orissa States from their private lands to agricultural Income-tax.
On the 12th January 1949, the Government of India Act was amended by inserting two new provisions, namely Sections 290A” and 290B by which the Governor-General was given power by order to direct that a State shall be administered in all respects as if it formed part of a Governor’s province specified in that Order. In exercise of the power conferred by Section 290(A) the Governor-General issued an order dated 27th July 1949 known as the States Merger (Governor’s Provinces) Order 1949, Paragraph 3 of that Order stated that the Orissa States mentioned in the Order shall be administered in all respects as if they formed part of the Province of Orissa, with effect from the appointed day which was fixed as the 1st August 1849.
In consequence of that Order all the former States became practically part of the old Province of Orissa and, as such, subject to the legislative jurisdiction of the Orissa Legislature, Including the extraordinary jurisdiction of legislation by Ordinance conferred on the Governor by the Government of India Act. On the 30th December 1949, the then Governor of Orissa promulgated an Ordinance known as the Orissa Merged States (Laws) Ordinance 1949 (Orissa Ordinance No. IV of 1949) by which the laws in force in the Province of Orissa, including the Agricultural Income-tax Act were applied to the merged areas. This Ordinance was subsequently replaced by an Act of the Orissa Legislature known as the Orissa Merged States (Laws) Act 1950 (Orissa Act 4 of 1950) by which also the Orissa Agricultural income-tax Act was applied to all Orissa States.
3. Thus, from the 1st April 1949 the Orissa Agricultural Income-tax Act was applied throughout the former Orissa States known as the merged areas, first by an appropriate order under Section 4 of the Extra Provincial Jurisdiction Act 1947 and subsequently by Orissa Ordinance No. IV of 1949, promulgated by the Governor which was subsequently replaced by an Act of the Orissa Legislature (Orissa Act XVI of 1950).
4. The main contentions of the applicants are as follows:
1. When the Rulers of the former Orissa States agreed to cede full authority and jurisdiction to the Government of India the latter in return recognized that the Rulers shall be entitled to full ownership, use and enjoyment of all their private properties. Hence the income from their private properties is not liable to taxation, as such taxation would detract from full ownership.
2. In any case in view of the decision of a Division Bench of this Court (Panigrahi C. J. and Mohapatra J.) reported in Harihara Singh v. Harihar Patnaik, ILR 1953 Cut 739: (AIR 1954 Orissa 101) (A), the provisions of the Orissa Agricultural Income-tax Act should be so construed as not to apply to the income derived by the Rulers from their private lands, in the absence of any express provision in the Act itself making it applicable to such income,
3. During the year 1949, when Legislatures Were not functioning in the merged areas the Executive Government had no authority to apply the Orissa Agricultural Income-tax Act to those areas and thereby arrogate legislative powers to itself.
4. The Ruler of a former Orissa State is not a ‘person’ as defined in the Orissa Agricultural Income-tax Act (see Section 2(1) ) and consequently he was not liable to pay any such tax.
5. In my opinion, none of these contentions can prevail. The first two points are concluded by the judgment of the Supreme Court reported in Vishveshwar RAO v. State of Madhya Pradesh 1952 SCJ 427 : (AIR 1952 SC 252) (B). There It was pointed out that the guarantee of full ownership and enjoyment of private property given to the former Rulers of Indian States did not in any way affect the legislative jurisdiction of the appropriate Legislature in respect of that property and that the position of such Rulers in respect their private property was no better than that of any other owner possessing private property (see Mahajan J.’s (as he then was) observations at page 438 (of SCJ) : (at p. 302 of AIR). In the aforesaid Supreme Court decision Das J. (as he then was) negatived the contention raised on behalf of the Rulers relying on Article 326 of the Constitution.
These principles have been summarised in a Division Bench decision of this Court reported in Jagannath Behera v. Harihar Singh, 21 Cut LT 102 (C) when the question of granting leave to appeal to the Supreme Court, under Article 133 of the Constitution against the Division Bench decision of this Court in ILR 1953 Cut 73- : (AIR 1954 Orissa 101) (A), was under Consideration. It Is unnecessary to repeat the reason fully discussed in that decision. It is sufficient to say that the decision of the Division Bench In ILR 1953 Cut 739: (AIR 1954 Orissa 101) (A) about the inapplicability of any law made by the Orissa Legislature to the private lands of the former Ruler of an Orissa State unless there is an express provision to that effect, must be taken to be no longer correct in view of the observations of the Supreme Court in 1952 SCJ 427: (AIR 1952 SC 252) (B).
That decision of the Supreme Court was given prior to the said Division Bench decision of this High Court and if the attention of the learned Judges, constituting that Division Bench, had been drawn to the Supreme Court decision, it is likely that the decision in that case would have been otherwise. I must, therefore, hold that the Orissa Legislature has jurisdiction to legislate for the purpose of levying agricultural income-tax, on income arrived from the private lands of the Rulers of merged areas and that the Orissa Agricultural Income-tax Act would apply to such private lands also unless they are specially exempted in the Act itself.
6. The third contention also is concluded by a previous decision of this Court. Mr. G. C. Das urged that prior to the insertion of Sections 290(A) and
290(B) in the Government of India Act, 1935 and the making of the States’ Merger (Governors’ Provinces) Order of 1949, no law in force in the old province of Orissa could be validly applied in the merged areas by a mere notification of the Executive Government, inasmuch as that Executive Government had no legislative authority. Mr. Das contended that even in exercise of the powers conferred by Section 4 of the Extra Provincial Jurisdiction Act neither the Central Government nor the Orissa Government, as the delegated authority of the Central Government, had power to legislate in those areas.
This point was negatived in a Special Bench Decision of this Court reported in Saradhakar Naik v. The King, ILR 1949 Cut 1: (AIR 1950 Orissa 67) (D). where it was held that under Section 4 of the Extra Provincial Jurisdiction Act the appropriate authority could validly legislate fn the merged areas by determining what the law shall be for those areas, either by applying the laws in force in the old Province of Orissa or otherwise. Hence it must be held that the Orissa Agricultural Income-tax Act was validly applied throughout the former Orissa States by the Government of Orissa, Finance Department, Notification No 5012-F dated 1st April 1949.
7. To appreciate the last contention of Mr. Das it is necessary to state some more facts. In the Orissa Agricultural Income-tax Act 1947 as it originally stood the expression ‘person’ was defined in Section 2(1) as follows:
“(1) ‘person’ means any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law, and includes a Hindu undivided family, firm, company and the Ruler of an Indian State.” Section 2(p) contains the definition of “Ruler of an Indian State”. When the laws were adapted by the Adaptation of Laws Order 1950, with a view to conform to the provisions of the Constitution 6. 2(p) of the Agricultural Income-tax Act was omitted and similarly in the definition of the expression ‘person’ occurring in Section 2(1) the words “Ruler of an Indian State’ were also omitted.”
Mr. Das therefore contended that the applicants are still recognised as Rulers by virtue of the Merger Agreement and also by virtue of the special definition given in Article 366(22) of the Constitution. In view of the adaptations made to the Orissa Agricultural Income-tax Act omitting all references to the Ruler of an Indian State in the definition of ‘person’ it must according to Mr. Das necessarily follow that such a Ruler was completely exempt from the operation of that Act. This argument also is quite untenable. It is true that for the purpose of construing some of the provisions of the Constitution even the former Ruler of Orissa State was recognised as ‘Ruler’ of an Indian State.
But so far as the existing laws or any new laws that may be made by the appropriate State Legislatures were concerned, that expression ceased to have any meaning. It was for that reason that in the Adaptation of Laws Order 1950 all references to ‘Rulers’ were omitted. In paragraph 13 of that order any reference to an Indian State or an Acceding State in any Provincial law was omitted because after the commencement of the Constitution there could be no separate Indian State or acceding State as understood prior to the commencement of the Constitution.
Hence the mere omission of the expression “Ruler of an Indian State” in the definition of the expression ‘person’ in Section 2(1) of the Orissa Agricultural Income-tax Act, 1947, would not mean that the ex-Ruler has ceased to be a person. He comes within the remaining portion of the definition of that expression. In this connection I may invite a reference to a decision of the Nagpur High Court reported in Pravir Chandra Bhanj Deo v. State of Madhya pradesh, AIR 1953 Nag 86 (FB) (E).
8. It must therefore be held that all the petitioners are bound to pay agricultural income-tax in respect of agricultural income derived from their private lands.
9. In O. J. Cs 18 of 1954 and 138 of 1954 a special prayer was made by the applicants for cancellation of the penalties levied on them by the agricultural income-tax authorities for non-submission of returns. We consider, however, that as the law on the subject was not clear at that time and the claim of the applicants for immunity from agricultural income-tax derived some support from the Division Bench decision of this Court in ILR 1953 Cut 739: (AIR 1954 Orissa 101) (A), the applicants had some justification for not submitting to the jurisdiction of the agricultural income-tax authorities or sending their returns in time. Hence we consider that the order levying penalties as described in these applications should be set aside.
10. In O. J. C. No. 61 of 1954 which was filed by the former Ruler of Talcher the agricultural income-tax was assessed for the four years, namely 1943-50, 1950-51, 1951-52 and 1952-53. It Was rightly conceded by the learned advocate for the department relying on a decision of this Court, reported in Biswambar v. Collector of Agricultural Income-tax, Orissa, ILR 1954 Cut 725 (F) that the levy of agricultural income-tax for the year 1949-50 is invalid as the income of the previous year was not derived from ‘taxable territory’. Hence the assessment of agricultural income-tax for the assessment year 1949-50 must be cancelled and the tax, if paid, should be refunded.
11. Subject to the aforesaid modifications all the applications are dismissed. “There will be no order as to costs as the constitutional position was somewhat doubtful till the decision of the Supreme Court in 1952 SCJ 427: (AIR 1952 SC 252) (B). Both parties will bear their own costs.
P.V.B. Rao, J.
12. I agree.
