Delhi HC rules that last maharaja of Jaipur had filed returns as ‘Hindu Undivided Family’. So, when the ancestral property is divided, it won’t attract taxes.
New Delhi: More than 48 years after his death, the Delhi High Court has ruled that tax returns filed by Sawai Man Singh — the last princely ruler of Jaipur — should be treated as having been filed as a Hindu Undivided Family (HUF) and not as an individual.
The high court’s ruling came on a batch of appeals on the issue of tax liabilities of the erstwhile maharaja. The issue at hand pertained to whether the considerable estate left behind by the late maharaja is to be taxed as a HUF, as claimed by his legal heirs, or as an individual, as claimed by the tax authorities.
The question had been pending before the Delhi High Court for 37 years, owing to confusion about whether Singh’s final tax returns were filed as an individual or representing his HUF.
Why is this question important?
Simply put: A lot of tax is saved if a family is acknowledged as HUF.
Under the Income Tax Act, HUF and individuals are treated differently. On the death of the ‘karta’ (literally, doer) of a HUF, the ancestral property vested in him or her cannot be willed and continues to vest in his undivided family, with all members owning it jointly till it is divided among them.
For tax purposes, when the ancestral property is divided, it doesn’t attract taxes, unlike property acquired by an individual or by the ‘karta’ after becoming the head of the HUF.
This issue is important because if the maharaja had filed taxes on behalf of his family, his legal heirs could have claim on his sizeable estate under the status of HUF.
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However, if the high court had ruled otherwise, the estate could not have been divided, and would have to devolve according to primogeniture — the right of succession belonging to the first-born child — at least for income tax purposes.
“The answers to these questions are necessary, not only to assess the returns filed at the time of the late Sawai Man Singh’s death, but also treatment of the assets and income derived by those properties and other sources of income,” a division bench of Justices S. Ravindra Bhat and A.K. Chawla said.
The court also observed that succession to the throne of an erstwhile principality (gaddi) had no consequence, except as a social custom. Thus, members of royal families are citizens of the Republic of India.
Who was Sawai Man Singh?
Sawai Man Singh, born Mor Mukut Singh, was the last ruling maharaja of Jaipur. He was adopted by Sawai Madho Singh in 1921, and ascended the throne a year later at the age of 10.
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He married three times — his third wife was the famous Gayatri Devi of the Cooch Behar princely state.
Singh ruled Jaipur state till 1949, when it acceded to the Dominion of India. He was succeeded as the titular maharaja of Jaipur by his firstborn, Lt Col. Bhawani Singh, upon his death in 1970.
He also served as ‘Rajpramukh’ of Rajasthan — predecessor to the position of governor — between 1949 and 1956, and later as India’s ambassador to Spain.