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2016 (12) TMI 418
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....lved herein centers around "Umed Bhawan Palace". 4. In exercise of the powers conferred by Section 60A of the Indian Income Tax Act, 1922 (XI of 1922), the Central Government issued an order called "The Part B States (Taxation Concessions) Order, 1950" (hereinafter referred to as "The Order"). It was issued essentially to grant exemptions, reductions in rate of tax and the modifications in relation to specified kinds of income earned by the persons (Ruler and his family members) from various sources as specified therein. The Order was published in the Gazette of India, extraordinary, on 02.12.1950. 5. Paragraph 15 of the Order deals with various kinds of exemptions. Item (iii) of Paragraph 15, which is relevant for this appeal, provides that the bona fide annual value of the residential palace of the Ruler of a State which is situate within the State and is declared by the Central Government as his inalienable ancestral property would be exempt from payment of Income-tax. 6. In pursuance of the powers conferred under item (iii) of Paragraph 15 of the Order, the Central Government, Ministry of Finance(Revenue Division) issued a notification bearing No. S.R.O.1619 dated 14.0....
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.... I.T. Act referred the following question of law to the High Court of Rajasthan for answer. "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rental income from Umed Bhawan Palace was exempt under Section 10(19A) of the IT Act,1961." 10. The Division Bench of the High Court while hearing the reference noticed cleavage of opinion on the question referred in this case in two earlier decisions of the High Court of Rajasthan. One was in the case of Maharawal Laxman Singh vs. C.I.T., (1986) 160 ITR 103(Raj.) and another was in appellant's own case, C.I.T. vs. H.H. Maharao Bhim Singhji, (1988)173 ITR 79(Raj.). So far as the case of Maharwal Laxman Singh (supra) is concerned, the High Court had answered the question in favour of the Revenue and against the assesse, wherein it was held that in such factual situation arising in the case, annual value of the portion which was in the occupation of the tenant is not exempt from payment of Income-tax and, therefore, income derived therefrom is required to be added to the total income of the assessee, whereas in case of H.H. Maharao Bhim Singhji (supra), the High Court answered....
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....ant in all previous assessment years (1973-74 to 1977-78), by this Court, there was no justifiable reason for the Revenue to have pursued the same question again only for the assessment year in question (1978-79) to the High Court. Learned counsel urged that in any event, the High Court should have taken note of this fact and answered the reference in appellant's favour by placing reliance on the earlier decision in the case of H.H. Maharao Bhim Singhji (supra). In support of this submission, learned counsel placed reliance on the decisions of this Court in M/s Radhasoami Satsang, Saomi Bagh, Agra vs. Commissioner of Income Tax, (1992) 1 SCC 659, The Parashuram Pottery Works Co. Ltd. vs. The Income Tax Officer, Circle-I, Ward 'A' Rajkot, Gujarat, (1977) 1 SCC 408 and Commissioner of Income Tax vs. Excel Industries Ltd., (2014) 13 SCC 459. 15. In the second place, learned counsel contended that since the issue involved herein pertains to grant of exemption to the assessee from payment of income-tax under Section 10(19A) of the I.T. Act read with paragraph 15 of the Order, such provisions should be regarded as exception and construed liberally in appellant's favour unlike the ....
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....pported the reasoning and the conclusion arrived at by the High Court and prayed for its upholding. 21. Having heard learned counsel for the parties and upon perusal of the record of the case and the written submissions, we find force in the submissions urged by the learned counsel for the appellant (assessee). 22. Section 10(19A) of the I.T. Act and Paragraph 15(iii) of the Order, which are relevant for this case, read as under: Section 10(19A) of the I.T. Act "Section 10. Incomes not included in total income.-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- 1 to 19...................................................... (19A) The annual value of any one palace in the occupation of a Ruler, being a palace, the annual value whereof was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958: ....
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....ion would confine only to that portion of the palace which is in his actual occupation. In other words, whether the exemption would cease to apply to let out portion thereby subjecting the income derived from let out portion to payment of income-tax in the hands of the Ruler. 27. This very question was examined by the M.P. High Court in the case of Bharatchandra Banjdeo (supra) in detail. It was held that no reliance could be placed on Section 5(iii) of the Wealth Tax Act while construing Section 10(19A) for the reason that the language employed in Section 5(iii) is not identical with the language of Section 10(19A) of the I.T. Act. Their Lordships distinguished the decision of Delhi High Court rendered in the case of Mohd Ali Khan vs. CIT, (1983)140 ITR 948(Delhi), which arose under the Wealth Tax Act. It was held that even if the Ruler had let out the portion of his residential palace, yet he would continue to enjoy the exemption in respect of entire palace because it is not possible to split the exemption in two parts, i.e., the one in his occupation and the other in possession of the tenant. 28. Justice G.L. Oza, the learned Chief Justice (as His Lordship then was), speak....
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....onstrued but even if this principle is not considered, there are no words in clause (19A) of Section 10 from which an intention for splitting up of the palace into portions could be gathered. In this view of the matter, therefore, the contention advanced by the learned counsel for the Revenue cannot be accepted." 29. Relying upon the aforesaid decision, Rajasthan High Court in the case of the appellant herein in Commissioner of Income-Tax vs. H.H. Maharao Bhim Singhji, (supra) answered the question in favour of the appellant for the assessment years (1973-74 to 1977-78). 30. Justice J.S. Verma, the learned Chief Justice (as His Lordship then was) speaking for the Bench held as under: "So far as the first question relating to exemption claimed under section 10(19A) is concerned, there is a direct decision in CIT v. Bharatchandra Banjdeo, [1985]154ITR236(MP) . It was held therein that it is not possible to split up one palace into parts for granting exemption only to that part in self-occupation of the ex-Ruler as his official residence and to deny the benefit of exemption to the other portion of the palace rented out by the Ruler, since the entire palace is declared a....
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....such assets shall not be included in the net wealth of the assessee- (i).................................................................... (ii)................................................................... (iii) any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of a declaration by the Central Government under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order, 1950;" 34. We find that in Section 10(19A) of the I.T. Act, the Legislature has used the expression "palace" for considering the grant of exemption to the Ruler whereas on the same subject, the Legislature has used different expression namely "any one building" in Section 5 (iii) of the Wealth Tax Act. We cannot ignore this distinction while interpreting Section 10(19A) which, in our view, is significant. 35. In our considered opinion, if the Legislature intended to spilt the Palace in part(s), alike houses for taxing the subject, it would have said so by e....