Her Highness Maharani Kesarkunverba vs Commissioner Of Income-Tax, Bombay

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 15 March, 1960

Coram: J.L. Kapur, M. Hidayatullah

In the matter styled Her Highness Maharani Kesarkunverba versus Commissioner of Income‑Tax, Bombay, the Supreme Court of India rendered its judgment on 15 March 1960. The judgment was authored by Justice Kapur, with Justice Hidayatullah also sitting on the bench. The case arose as an appeal by special leave from the decision and order of the High Court of Bombay. The appellant, identified as Her Highness Maharani Kesarkunverba Saheb, who held the title of Raj Mata of the former Morvi State, challenged the determination of the respondent, the Commissioner of Income‑Tax for Bombay North. The central issue presented for determination was whether the annual cash allowance that the appellant received, under the specific circumstances described, fell within paragraph fifteen sub‑paragraph i of Part B of the States (Taxation Concessions) Order, 1950, and consequently qualified for exemption from income tax under that provision.

The historical facts reveal that the appellant had been receiving from the Morvi State, since the year 1922, an allowance known as Jiwai, which functioned as a maintenance allowance. A resolution dated 26 September 1946, passed by His Highness Lukhdhirji of Morvi—who was the appellant’s husband—resolved that a sum of five thousand rupees per month should continue to be paid to the appellant, and that the Treasury Office should make provision for this amount in the budget in the same manner as previously. Following this, on 21 January 1947, His Highness Lukhdhirji abdicated the throne, and his son, His Highness Mahendra Sinhji, succeeded to the rulership. The covenant establishing the Kathiawar State’s Union was subsequently signed on 23 January 1948. On 26 February 1948, a resolution was issued by the appellant’s son, granting to her the village of Mota Dahisara. The resolution stated that, “From ancient times there has been a tradition in our family to grant a village to the Maharani for her enjoyment in order to maintain her status and dignity… it is resolved to grant her the village of Mota Dahisara, under our control, with the area and boundaries as per annexures hereto… for enjoyment to our Maharani after the lifetime of our mother Kesar Kunverba Sahib in accordance with the above tradition.” A formal grant dated 16 March 1948 reiterated this tradition, declaring, “In order to preserve permanently your status and dignity the village of Mouje Mota Dahisara is hereby granted to you as a gift in pursuance of the immemorial tradition of this State… You may enjoy the same in peace exclusively. Upon your death the right of enjoyment, together with the restrictions mentioned herein, shall vest in our Akhan Saubhagvanta Maharani Shri Vijay Kunvar of Rangpur.” Subsequently, on 20 March 1948, the State of Morvi took further administrative action concerning the grant.

After the State of Morvi became part of the Saurashtra Union, the Government of Saurashtra declined to continue the maintenance allowance that had previously been granted to the appellant and also refused to recognise the grant of the village Mota Dahisara in her favour. The appellant subsequently lodged several representations, and following a number of conferences and discussions a copy of an order issued by the Political Department was forwarded to her. That order stated that the village would be resumed and that a cash amount, computed on the basis of the average revenue of the village for the preceding three years, would be paid to her as a lifetime allowance. The appellant objected to this proposal, and her son, the Maharaja of Morvi, wrote a letter to the Rajpramukh of Saurashtra asserting that the village had been illegally resumed and that her Jiwai allowance had also been discontinued. In response, the Rajpramukh dated his reply 19 May 1949, confirming that the decision to resume the village and to provide a cash allowance in lieu of the grant had been taken, and he advised the Maharaja of Morvi not to pursue the claim set out in his letter, urging the appellant to accept the resumption and the cash allowance instead. The appellant replied on 26 May 1949, reiterating her insistence that she should continue to retain the village. Later, on 19 November 1949, the appellant’s husband addressed a letter to the Regional Commissioner, Mr Buch, indicating that he and his son, the Ruler, had reluctantly persuaded the appellant to accept a monthly sum of Rs 5,000 and to forgo any further demand. He explained that the appellant, being a sentimental lady, feared that her “Abru” would be lost if she surrendered the village, and therefore they suggested that she receive the income that the village would have generated, with any excess paid as Jiwai, resulting in a total annual amount of Rs 60,000 so that her prestige would remain intact. On 30 March 1950, the Government of Saurashtra passed a resolution, pursuant to the decision reached at the Jamnagar Conference, that the grant of the village Mota Dahisara would be resumed and that, in lieu of the grant, a cash annuity of Rs 35,807 would be paid to the appellant. In addition, the appellant was granted a Jiwai allowance as Rajmata of Rs 24,193 per year, thereby continuing the overall annual payment of Rs 60,000, or Rs 5,000 per month. On 19 June 1950, the tax authority held that the grant of the village was liable to income‑tax, reasoning that the appellant received the cash sum in exchange for two assets: the right to the former maintenance allowance and the right to enjoy the village’s income during her lifetime. When the matter was appealed before the Appellate Assistant Commissioner, the amount of Rs 35,807 was held to be taxable, whereas the Rs 24,193 Jiwai component was not.

The lower tax authority had decided that only the cash annuity of Rs 35,807 was subject to income‑tax, while the separate sum of Rs 24,193 was not liable to tax. The appellant challenged this assessment before the Income‑Tax Appellate Tribunal, and the Tribunal held that the whole amount of Rs 60,000 was exempt from both income‑tax and super‑tax because it fell within paragraph 15(1)(i) of the relevant Order. In its reasoning the Tribunal observed that, on the facts, the transaction amounted to a maintenance allowance of Rs 60,000 granted to the assessee. It noted that the assessee desired some connection with the village of Mota Dahisara for reasons of prestige, and that the cash annuity of Rs 35,807 was paid in place of the village. The Tribunal explained that the village had been given to the assessee to preserve her status and reputation as Rajmata, and therefore the grant of the village constituted maintenance within the meaning of the exemption provision. The respondent then invoked section 6(1) of the Income‑Tax Act and asked the High Court to consider whether there was sufficient material for the Tribunal to classify the Rs 35,807 as a maintenance allowance exempt under paragraph 15(1)(i) of the Part B States (Taxation Concessions) Order, 1950. The High Court framed the question in the same terms. Upon examination, the High Court concluded that the two sums – Rs 35,807 and Rs 24,193 – represented distinct categories of cash annuity: the former was paid in lieu of the village of Mota Dahisara, while the latter was a Jiwai, i.e., a maintenance payment. The Court found that the appellant had been receiving a maintenance allowance of Rs 5,000 per month from her husband since September 1947, and that the grant of the village was not a maintenance benefit. In reaching this conclusion the Court considered several documents, including the original grant, a letter dated 23 March 1949 from the appellant’s son to the Rajpramukh of Saurashtra, a letter dated 19 November 1949 from the appellant’s husband to Mr Buch, and the government resolution of 30 March 1950. On the basis of these materials the Court held that the resolution of the Saurashtra Government had provided the appellant with a cash annuity of Rs 35,807 as compensation for the village and not as maintenance. The appellant appealed this judgment to this Court by way of special leave. The dispute that remains between the parties centres on the character of the village grant. The appellant maintains that the grant of the village should be treated as maintenance, similarly to the earlier cash allowance, and thus should fall within the exemption provided by paragraph 15(1)(i) of the Order.

In this case the issue was whether the sum received by the appellant fell within the exemption provided in paragraph 15(1)(i) of the Order, which stipulated that “Any income falling within the following classes shall be exempt from income‑tax and super‑tax and shall not be included in the total income or total world income of the person receiving them: (i) any sum which the widow or the mother of a person who was the Ruler of an Indian State receives as her maintenance allowance out of public revenue.” The respondent argued that the language of the resolution dated 26 February 1949, together with the terms of the grant, indicated that the village was given not as maintenance but merely to preserve a family tradition of upholding the appellant’s “status and dignity.” The respondent pointed to the recitals in the resolution which read, “From ancient times there has been a tradition in our family to grant a village to the Maha Rani for her enjoyment in order to maintain her status and dignity,” and submitted that this showed the grant was ceremonial rather than a maintenance allowance. The respondent further relied on a letter dated 19 November 1949 from the appellant’s husband, in which His Highness warned that the appellant’s “Abru” (prestige) would be lost if she were to forfeit the village. In addition, the respondent cited the appellant’s own letter of 26 May 1949, wherein she objected that taking away the village would be unreasonable, arbitrary and contrary to the spirit of the covenant.

The Court held that the appellant’s position was well supported by the record. The Tribunal, after examining all the relevant documents—including the resolution containing the phrase “to maintain her status and dignity” and the husband’s letter that referred to “Abru”—concluded that the grant of the village constituted maintenance. The Court explained that the fact that the appellant’s relatives might have preferred a “face‑saving device” by dividing the total annual amount into separate forms did not alter the character of the transaction. Accordingly, the village grant was treated as equivalent to the cash allowance known as “Jiwai,” both being forms of maintenance. The Court observed that maintenance must be assessed in light of the recipient’s position and status and is not limited to merely providing food and clothing. It further noted that the appellant, as the wife of a ruling prince and, at the time of the grant, the Raj Mata, could not have her entitlement recharacterized simply because the grant language referenced “status and dignity” or an ancient family custom. The Court acknowledged the appellant’s desire to retain the village, as it provided her with a tangible agricultural asset and a reliable source of income. Nevertheless, the Court emphasized that the reference in the resolution of 30 March 1950 to a sum paid in lieu of income did not change the fundamental nature of the grant, which remained a maintenance allowance under paragraph 15(1)(i) of the Order.

In this matter, the Court noted that the nature of the grant, which was made to the appellant by way of maintenance, would remain unchanged even though it arose from the village. The principal question that had been referred to the High Court concerned whether there existed sufficient material to hold that the sum of Rs 35,807 constituted a maintenance allowance. The High Court, however, reformulated that question, examined a variety of documents, and arrived at a conclusion that differed from the Tribunal’s findings; it therefore reversed the Tribunal’s decision and answered the question in a manner that suggested an appellate rather than an advisory jurisdiction. The Court expressed the view that the High Court could not disregard the findings of the Tribunal. Even accepting the High Court’s reformulated question, the issue for determination was whether, based on the facts found by the Tribunal, the sum of Rs 35,807 granted to the appellant fell within paragraph 15(1)(i) of the Order as maintenance. The Tribunal had previously found that the appellant had been receiving a maintenance allowance since 1922 and that the grant of the village was also by way of maintenance; consequently, the answer to the reformulated question was clearly that the sum of Rs 35,807 was maintenance within the referenced paragraph. Counsel for the respondent attempted to support the High Court’s approach by arguing that the High Court had examined the Resolution of 30 March 1950 together with the documents that led to it, thereby construing a document of title. The Court observed, however, that the Resolution of 30 March 1950 must be interpreted in the context of the facts and circumstances that gave rise to it, and that the unavoidable conclusion was that, since the village had been granted as maintenance, the sum of Rs 35,807 likewise represented a maintenance allowance. In the Court’s assessment, the High Court erred in holding that Rs 35,807 was not a maintenance payment and therefore was not exempt from taxation under paragraph 15(1)(i) of the Order. Accordingly, the Court allowed the appeal, set aside the High Court’s order, and answered the question in favour of the appellant, directing that the appellant receive costs both in this Court and in the High Court. The appeal was thereby allowed.