Official residence exemption covers the entire palace, including let-out portions, where the property is declared as one residence.

Rental income from Umaid Bhawan Palace was held to fall within the exemption for the official residence of an ex-ruler, because a palace declared as such cannot be split into separate portions for differential tax treatment. Once the entire palace is treated as the official residence, the statutory exemption extends to the whole property, including the let-out portion. The Tribunal was therefore justified in treating the rental income as exempt under section 10(19A), and the reference application was not accepted.

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Issues: Whether the Tribunal was justified in holding that the rental income from Umaid Bhawan Palace was exempt under section 10(19A) of the Income-tax Act, 1961.

Analysis: The question had already been settled in the assessee's favour in earlier proceedings concerning the same palace and the same assessee. The Court accepted the view that a palace declared as the official residence of an ex-ruler cannot be split into separate parts for the purpose of granting exemption only to the portion in self-occupation and denying it to the portion let out. Once the entire palace is treated as the official residence, the statutory exemption extends to the whole property.

Conclusion: The Tribunal was justified in its view that the rental income from Umaid Bhawan Palace was exempt under section 10(19A) of the Income-tax Act, 1961, and the application for reference did not merit acceptance.

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