1985 (1) TMI 20

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....cumstances of the case, the Tribunal was right in law in holding that the A.L.V. of the Manik Bagh Palace was exempt from income-tax under the Part B States (Taxation Concessions) Order, 1950 ? " Facts giving rise to this reference, as per the statement of case received, may be stated, in brief, thus : It relates to the assessment of the Princess Usha Trust, Indore, which is the assessee herein. The assessment year is 1974-75 for the previous year ended March 31, 1974. In its return of income for this year, the assessee had claimed exemption in respect of income from Manik Bagh Palace, Indore. The Income-tax Officer, however, referred to the fact that his predecessor, in the earlier years, had discussed this issue at length and had held ....

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....produced below, the assessee-trust was not entitled to the exemption as no such exemption was granted to the trust as such. He, therefore, submitted that the trust not being the Ruler, the Tribunal has committed an error in holding on this point against the Department and in favour of the assessee " 10. Incomes not included in total income.-... (19A) the annual value of any one palace in the occupation of 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 K....

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....to as the official residences of the Rulers of the former Indian States (now included in Part B States) specified in the corresponding entry of column 3 of the said table. Accordingly, three palaces including (1) Manik Bagh Palace at Indore, (2) Old Palace, Indore, and (3) Yashwant Niwas Palace, Indore, were exempted, being the official residences of the Ruler of Indore. However, the learned counsel for the Revenue submitted that as the assessee, namely, the Princess Usha Trust, has claimed the exemption even under sections 160 and 161 of the Income-tax Act as a representative assessee, the trustees are liable to pay the tax and in support of this submission he placed reliance on the decisions in [1973] 88 ITR 47 (SC) (Trustees of Gordha....

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...., submitted that the Revenue cannot challenge the validity of the exemption order in these proceedings because if they wanted to challenge the same, they ought to have come up in a writ petition. But that remedy having not been resorted to, the Revenue is not entitled to challenge the same in this manner. The learned counsel further submitted that the exemption order relates to the palaces of the Ruler which are belonging to and in possession of the Ruler. He further submitted that the words " of " and " belonging to " have been interpreted in Controller of Estate Ditty v. Estate of Late Sanka Simhachalam [1975] 99 ITR 370 (SC) and Commissioner of Wealthtax v. Trustees of H.E.H. Nizam's family (Remainder Wealth) Trust [1977] 108 ITR 555 ....