Official residence exemption requires actual Ruler occupation; let-out palace portions remain taxable wealth.

Section 5(1)(iii) of the Wealth-tax Act exempts only a building notified as the official residence of a Ruler and actually occupied by him. The Delhi HC held that, although the Khas Bagh Palace could be treated as one building for notification purposes, the exemption could not extend to portions that had been let out to tenants and were not in the Ruler's occupation. Substantial occupation of the palace as a whole was not enough to satisfy the statutory condition for the non-occupied portions. The value of the let-out buildings was therefore includible in the assessee's net wealth.

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Issues: Whether the value of buildings in the Khas Bagh Palace, Rampur, let out to tenants and not occupied by the Ruler, was exempt under section 5(1)(iii) of the Wealth-tax Act, 1957.

Analysis: The exemption under section 5(1)(iii) applies only to a building notified as the official residence of a Ruler and occupied by him. Although the entire palace could be treated as one building for the purpose of the notification, the statutory language still required occupation by the Ruler. The provision was therefore not satisfied in respect of portions of the palace that had been let out and were not in the Ruler's occupation. The Court rejected the argument that substantial occupation of the palace as a whole was enough to extend exemption to the non-occupied portions.

Conclusion: The let-out buildings were not entitled to exemption and their value was includible in the net wealth of the assessee.

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