TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 585
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....Laxman Singh Vs. C.I.T. (1986) 160 ITR 103 (Raj.), in which it was held that under Section 10(19A) of the Income Tax Act, 1961, the annual value of any one palace in the occupation of a Ruler is exempt from tax in computing his total income. The Division Bench, while interpreting the phraseology "the annual value of any one of the palace in the occupation of Ruler", relied on judgment of the Supreme Court in Industrial Supplies (P.) Ltd. Vs. Union of India - AIR 1980 SC 1858, for distinction between 'owner' and 'occupier', wherein meaning of these words was considered and it was held that in legal sense the 'occupier' is a person in actual occupation. The Division Bench also relied on the Delhi High Court judgment in Mohammad Ali Khan Vs. C.W.T. - 1983 (14) ITR 948. The word "occupation" means that the Ruler (occupier) continues to occupy the palace, i.e., it should be in his actual use or actual possession and he should exercise actual physical control over the palace. When a portion of the palace has been let out to tenants on rent, the Ruler is not in occupation of the entire palace and cannot be said to be in actual possession or in actual use of the portion of the pala....
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.... The Central Government in pursuance of the provisions of Clause (iii) of Paragraph 15 of the Concession Order 1950 by notification SRO 1619 dated 14.05.1954 declared 'Ummed Bhawan' and 'City Palace' of the Ruler of Kota as his official residence, which were listed at Clause 21 of the said Notification, as the "palaces" so exempt from income-tax and super tax. Indisputably, till the passes of the Constitution (Twenty-sixth Amendment) Act, 1971, the bona fide annual value of the residential palaces or palace of the Rulers declared by the Central Government, as unalienable ancestral property, was exempt from income-tax and super tax. By the said Act however Article 291 of the Constitution of India, relating to privy purse sums of Rulers and Article 362 relating to Rights and Privileges of Rulers of Indian States, were omitted. Article 363-A was inserted, which provided that recognition granted to the Rulers of Indian States would cease and privy purses would stand abolished. New definition of "Ruler" was inserted by Clause (22) of Article 366. Simultaneously, a new enactment in the name of Rulers of Indian States (Abolition of Privileges) Act 1972 was passed by the ....
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.... official residence under the Concession Order of 1950. The Concession Order of 1950 uses word "palace" and the notification issued in the case of assessee on 14.05.1954 had declared two palaces as his official residence. The word "building" in WT Act is used in the light of the definition of "assets" as mentioned in Section 2(e) of the Act. The building, which is exempt, must be official residence of the Ruler. Meaning thereby, the legislature has granted exemption only to the building, which was his official residence by virtue of declaration under the Taxation Concession Order of 1950. It means that "building" mentioned in the WT Act and the "palace" mentioned in the IT Act, are one and the same. Shri R.B. Mathur, learned counsel for the Revenue, has submitted that the first direct judgment on the issue is of the Delhi High Court in the case of Mohammad Ali Khan Vs. CWT - 1983 (14) ITR 948. This has been upheld by the Supreme Court vide its judgment reported in 1997 (224) ITR 672 with the same title. Earlier Division Bench judgment of this Court in Maharawal Laxman Singh Vs. CIT - 1986 (16) ITR 103 rightly followed the Delhi High Court judgment in Mohammad Ali Khan, supra. In f....
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....n in respect of the income tax and super tax on annual value of palaces, which were declared as official residence of the Ruler. There was at that time no wealth tax, as the WT Act came into effect from 01.04.1957. Clause 15(iii) of the Taxation Concessions Order of 1950 incorporated such exemptions. It is argued that only effect of sub-section (19A) inserted in Section 10 of the IT Act, following the enactment of Indian States (Abolition of Privileges) Act 1972, was that instead of several palaces in occupation of Ruler, annual value of any one palace in occupation of Ruler, was exempt from the income tax. It is argued that even if one part of the palace is in the self occupation of the former Ruler and another part has been let out, the exemption under Section 10 (19A) would still be available for the entire palace. It is argued that no contrary decision was cited by the Revenue, and this court while deciding the reference, considered the decision of the Madhya Pradesh High Court in C.I.T. Vs. Bharat Chandra Bhanjdeo - 1985 (154) ITR 236 (MP). The Madhya Pradesh High Court in C.I.T. Vs. Bharat Chandra Bhanjdeo, supra, vide order dated 29.01.1985 held that the significant words i....
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....e Division Bench in Maharawal Laxman Singh has completely lost sight of this aspect and intention of the legislature in bringing about this amendment. No other High Court has approved the line of reasoning expressed by the Division Bench in Maharawal Laxman Singh, supra. The Madhya Pradesh High Court in C.I.T. Vs. Bharat Chandra Bhanjdeo, supra, has rightly held that case of Mohammad Ali Khan, supra, having arisen out of WT Act, is not applicable for the purpose of interpreting Section 10 (19A) of the IT Act. The latter Division Bench judgment of this court in C.I.T. Vs. H.H. Maharao Bhim Singhji, supra, therefore rightly followed C.I.T. Vs. Bharat Chandra Bhanjdeo, supra. Shri Ajeet Kumar Sharma, learned senior counsel, further argued that the Division Bench in Maharawal Laxman Singh has wrongly held that "occupation means actual physical control over the palace and actual possession or in actual use of the portion of the palace". There is no word in Section 19(19A) in respect of actual physical control over the palace and actual possession or actual use of the portion of the palace, and therefore no such intention is discernible from the language of that provision. Learned seni....
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....s, and has attained finality, those decisions having not been challenged any further, it is no longer open to the Revenue to plead to the contrary. Not only that the Revenue has accepted two decisions in favour of the assessee, it has also not challenged the judgments of the Madhya Pradesh High Court in C.I.T. Vs. Bharat Chandra Bhanjdeo, supra, and C.I.T. Vs. Princess Usha Trust - (1985) 157 ITR 650, which took the same view. The Income Tax Department being one all over the country, the question of correctness of assessment in respect of the year 1978-79 by it in present case is wholly illegal. Learned senior counsel referred to Section 2(2) of the IT Act for definition of "annual value" and Sections 22 and 23 of the IT Act, and argued that for the purpose of Section 10(19A) of the IT Act, the annual value of the whole palace has to be determined. The first and prime condition for the purpose of "House Property Income", and for the "Annual Value of the property", the Annual value of such property, of which the assessee is owner, has to be determined. In other words, the palace, which is owned by and belongs to assessee, i.e. the Ruler, has to be treated as his house. Section 23 o....
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.... the word actual is 'conspicuous' by its absence. Even if part of the palace is in possession of the tenant, the same continues to be in symbolic or constructive possession of the Ruler. Even if Ruler is not living in palace or even if he may be living in rented house or has vacated the palace for repair, such temporary absence of the Ruler from actual possession of the palace or any part of it, the Ruler by such temporary absence does not seize to be in occupation. The exemption can be denied only in a situation where the Ruler has parted with the possession of the entire palace. The occupation therefore is determined by dominant use of the palace. If it is principally being used by the Ruler as his residence, merely because he has rented out some parts of it, such as the garage, outhouse, quarters, go-downs or any other part of the building, it does seize to be his official residence. Learned senior counsel lastly submitted that in case of exemption, the language of the statute has to liberally construed. This being a charging Section, the benefit of any ambiguity has to go to the assessee. Even if the word "Occupation" used in the context of Section 10(19A) of the Act of 1961 a....
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.... entire one palace, which is otherwise chargeable to income-tax under Section 23 of the Act. It is the reason why word "palace" in place of "building", (as used in Section 5(1)(iii) of the WT Act), or in place of "house" (as used in Section 23 of the IT Act), has been used in Section 10(19A). It is argued that the Revenue is not seeking to charge to income tax the other buildings or portions of the same palace, which remain vacant, which otherwise is chargeable to tax under Section 23 of the IT Act. However, it is seeking to charge to tax the other buildings or portions of the same palace, which have been let out actually. Had it been the intention of the legislature, there was no need to insert Section 10(19A) of the Act, inasmuch as the same is covered by Section 23 itself. Section 10(19A), being a special provision, has been inserted to grant exemption which otherwise is not covered by general provisions contained in Section 23. Interpretation of the Revenue if accepted, would lead to an absurdity and inconsistency, as in that situation, part of the provisions of Section 23 would come to play to charge the let out portions or buildings of the same palace and part would not by le....
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....whether such phrase is fit with the scheme of taxation under income-tax law particularly in reference to the words "annual value". The judgment of the Supreme Court can be relied on for the proposition of law, which it actually decides and not, which can be logically deduced therefrom. When a particular point was neither argued nor considered by the Court, the decision of such court is not authority on such point and such point is said to pass sub-silentio. Reliance, in support of this argument is placed on the judgments of the Supreme Court in Municipal Corporation of Delhi Vs. Gurnam Kaur - AIR 1989 SC 38, M/s. A-One Granites Vs. State of U.P. and Others - AIR 2001 SC 1203 and Deepak Bajaj Vs. State of Maharashtra and Another - AIR 2009 SC 628. We have given our anxious consideration to rival submissions, perused the material on record and respectfully studied the cited case law. Before embarking upon examination of merits of the case, we would at the outset deal with the objection by the assessee that the Revenue cannot take a different interpretation of Section 10(19A) of the IT Act in respect of assessment year 1978-79, contrary to interpretation which has attained finality ....
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....he State Government may not choose to file appeals against certain judgments of the High Court rendered in writ petitions. They are considered as stray cases and not worthwhile invoking the discretionary jurisdiction of the Supreme Court under Article 136 of the Constitution. At other times, it is also possible for the State not to file appeals in some matters on account of improper advice or in negligence or improper conduct of the officers concerned. It is further possible that even where SLPs are filed by the State, they may not be entertained by the Supreme Court either because they are considered as individual cases or because they are considered as cases not involving stakes, which may adversely affect the interest of the State. This therefore cannot be taken as a consideration against State filing SLP or SLPs in other similar matters. In Col. B.J. Akkara (Retd.) Vs. Government of India and Others - (2006) 11 SCC 709, the Supreme Court followed the ratio of the judgment in State of Maharashtra Vs. Digambar, supra, and held that the every judgment of the High Court may not be challenged by the State where the financial repercussions are negligible or where the appeal is barre....
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.... annual value whereof was exempt from Income tax before the Commencement of the Constitution (Twenty Sixty Amendment) Act 1971, by virtue of the provisions of the Merged State (Taxation Concessions) Order 1Rs. 949 or the Part "B" States (Taxation Concession) Orders, 1950 or as the case may be, the Jammu and Kashmir (Taxation Concessions) Order 1958. Provided that for the assessment year commencing on 1st day of April, 1972, the annual value of every such palace in the occupation of such Ruler during the relevant previous year shall be exempt from Income Tax." Even though the learned counsel for the Revenue has argued that latter Division Bench judgment, having been rendered in ignorance of the earlier decision of the Division Bench judgment of this court, should be held to be per incurium, we are not inclined to hold so because there are even otherwise ample number of judgments of other High Courts, taking the contrary view than the one expressed in the Maharawal Laxman Singh, supra. We therefore deem it appropriate to consider the matter on all the aspects of law and decide as to what should be correct interpretation of the afore-quoted phraseology in Section 10(19A) of the Act.....
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....t has been often held that the intention of the Legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said, as also to what has not been said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as meaningless, has to be avoided. Obviously, the aforesaid rules of construction are subject to exceptions. Just as it is not permissible to add words or to fill in a gap or lacuna, similarly it is of universal application that effort should be made to give meaning to each and every word used by the Legislature. In J.K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. State of U.P. AIR 1961 SC 1170, it was observed by the Supreme Court that "the courts always presume that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect." The Supreme Court in Commissioner of Income Tax, New Delhi Vs. Federation of Indian Chambers of Commerce and Industries, New Delhi - (1981) 3 SCC 156, while interpreting a case arising out of income tax held that words used by Par....
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....me is ambiguous. It is well known that in a given case the Court can iron out the fabric but it cannot change the texture of the fabric. It cannot enlarge the scope of legislation or intention when the language of provision is plain and unambiguous. It cannot add or subtract words to a statute or read something into it which is not there. It cannot re-write or recast legislation. It is also necessary to determine that there exists a presumption that the legislature has not used any superfluous words. It is well- settled that the real intention of the legislation must be gathered from the language used. It may be true that use of the expression 'shall or may' is not decisive for arriving at a finding as to whether statute is directory or mandatory. But the intention of the legislature must be found out from the scheme of the Act. It is also equally well-settled that when negative words are used the courts will presume that the intention of the legislature was that the provisions are mandatory in character." In Dadi Jagganadhan Vs. Jammulu Ramulu and Others - AIR 2001 SC 2699, a Constitution Bench of the Supreme Court observed as under:- "13. ...The settled principles of in....
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....ined to what is necessary for deciding the particular case. This principle is too well settled and reference to few decisions of this Court would suffice. [See; Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. Vs. Custodian of vested Forests, Palghat and Another - AIR 1990 SC 1747, Union of India and Another Vs. Deoki Nandan Aggarwal - AIR 1992 SC 96, Institution of Chartered Accountants of India Vs. Price Waterhouse and Another - (1997) 6 SCC 312, and Harbhajan Singh Vs. Press Council of India and Others - JT 2002 (3) SC 21]." It is well settled law that the words have to be interpreted in the perspective in which the Legislature has enacted the particular provision of law and the words take colour from the context in which they occur. The Supreme Court has pointed out in Union of India Vs. Raman Iron Foundry - (1974) 3 SCR 556, in para 6 at page 1270, that while interpreting the words, the context and collocation of particular expression have to be considered and the context in which the words occur have an important role in the meaning to be attributed to the particular words occurring in a particular statute. It is thus trite that words in a statute should be so construed so as not t....
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.... the exemption to only such part of it which is in his actual possession, cannot be countenanced for the simple reason that a 'palace' cannot be taken as synonymous of the 'house'. A house is house and palace is palace. A house is a compact building whereas a palace may consist of number of buildings. In order to interpret a provision introduced by the legislature by way of amendment, it has to be seen what was the mischief, it wanted to remedy. Since prior to insertion of aforesaid sub-section (19A) of Section 10 of the IT Act, even multiple number of palaces were entitled to exemption. At the time when privileges were withdrawn, privy purses discontinued and titles derecognized, Articles 291 and 362 were omitted and Article 363-A was newly inserted. While, the Parliament restricted the exemption in respect of annual value of only one palace, yet in recognition of the status of the Rulers, the palace occupied by such Ruler was treated as his official residence, which can not be compared with exemption granted to annual letting value of an ordinary tax payer. This argument is therefore liable to be rejected. There has been much ranker at the bar as to the meaning o....
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...., 1972, which provided that the building must have been in occupation of the landlord for residential purposes which alone would be a conclusive proof of personal necessity. It was contended that the landlord was not in actual occupation of the premises, therefore, explanation (iv) to Section 21(1)(b) of the said Act would not be attracted. Explanation (iv) provided the fact that the building under tenancy is a part of a building, the remaining part thereof is in the occupation of the landlord for residential purposes, shall be conclusive to prove that the building is bona-fidely required by the landlord. In that context, the Supreme Court held that word 'possession' or 'occupation' may take various forms. A landlord may be serving outside while retaining his possession over a property or a part of the property by either leaving it in-charge of a servant or by putting his household effects or things locked up in the premises. Such an occupation also would be full and complete possession in the eye of law. Even if a house is not let out to anybody but is locked up, it cannot be said that the owner, who is not living there but has kept his household effects, would not....
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.... construed in favour of assess. If however, there be any doubt about interpretation of any provision or notification granting exemption/ incentive, the benefit thereof has to go to the Revenue. A constitution bench of the Supreme Court in Commissioner of Central Excise Vs. Hari Chand Shri Gopal - (2011) 1 SCC 236, while revisiting previous judgments on the subject, held that a provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the setting on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. That decision has been followed in a recent judgment of the Supreme Court in Indian Oil Corporation Limited Vs. Commissioner of Central Excise, Vadodara - (2012) 5 SCC 574, holding that exemption notification relied therein, required that for availing such exemptions two conditions must be satisfied. Unless both the conditions stipulated in the notification are complied with, the appellant was not entitled to exemption. In Novopan India Limited, Hyd....