It is a settled rule of interpretation that if two
Statutes dealing with the same subject use different
language then it is not permissible to apply the
language of one Statute to other while interpretingsuch Statutes. Similarly, once the assessee is able to
fulfill the conditions specified in section for claiming
exemption under the Act then provisions dealing with
grant of exemption should be construed liberally
because the exemptions are for the benefit of the
Print Page
Statutes dealing with the same subject use different
language then it is not permissible to apply the
language of one Statute to other while interpretingsuch Statutes. Similarly, once the assessee is able to
fulfill the conditions specified in section for claiming
exemption under the Act then provisions dealing with
grant of exemption should be construed liberally
because the exemptions are for the benefit of the
assessee.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 2812 OF 2015
Maharao Bhim Singh of Kota
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 2812 OF 2015
Maharao Bhim Singh of Kota
V
Commissioner of Income-tax,
Rajasthan-II, Jaipur
Dated:December 05, 2016.
Citation:(2017) 1 SCC 554
Commissioner of Income-tax,
Rajasthan-II, Jaipur
Dated:December 05, 2016.
Citation:(2017) 1 SCC 554
1. This appeal is filed against the final order dated
26.03.2014 passed by the High Court of Rajasthan at
Jaipur in D.B. Income Tax Reference No. 64 of 1986
relating to the Assessment Year 1978-79 whereby the
Full Bench of the High Court answered the question of
law referred to it against the appellant herein.
2. In order to appreciate the issue involved in the
26.03.2014 passed by the High Court of Rajasthan at
Jaipur in D.B. Income Tax Reference No. 64 of 1986
relating to the Assessment Year 1978-79 whereby the
Full Bench of the High Court answered the question of
law referred to it against the appellant herein.
2. In order to appreciate the issue involved in the
appeal, it is necessary to state the relevant facts in
brief infra.
3. The appellant was the Ruler of the princely State
of Kota, now a part of State of Rajasthan. He owned
extensive properties which, inter alia, included his two
residential palaces known as "Umed Bhawan Palace"
and "City Palace“. The appellant is using Umed
Bhawan Palace for his residence. So far as this
appeal is concerned, the issue involved 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
brief infra.
3. The appellant was the Ruler of the princely State
of Kota, now a part of State of Rajasthan. He owned
extensive properties which, inter alia, included his two
residential palaces known as "Umed Bhawan Palace"
and "City Palace“. The appellant is using Umed
Bhawan Palace for his residence. So far as this
appeal is concerned, the issue involved 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
14.05.1954 declaring the appellant's aforementioned
two palaces, viz., Umed Bhawan and City Palace as his
official residences (Serial no. 21 of the Table).
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
14.05.1954 declaring the appellant's aforementioned
two palaces, viz., Umed Bhawan and City Palace as his
official residences (Serial no. 21 of the Table).
7. On 20.09.1976, the Ministry of Defence
requisitioned portion of the Umed Bhawan Palace
(918.26 Acres of the land including houses and other
construction standing on the land) for their own use
and realized Rs.80,000/- as rent by invoking the
provisions of Requisition and Exhibition of Immovable
Property Act, 1952. According to the appellant, the
period for which the land was requisitioned expired in
1993 though the land still continues to remain in the
occupation of the Ministry of Defence.
8. With the aforementioned factual background, the
question arose in the appellant's income-tax
assessment proceedings regarding taxability of the
income derived by the appellant (assesse) from the part
of the property requisitioned by the Defence Ministry,
which was a portion of the appellant's official residence
(Umed Bhawan Palace). The question was whether the
rental income received by the appellant from the
4Page 5
requisitioned property by way of rent is taxable in his
hands. In other words, the question was as to whether
the appellant is entitled to get full benefit of the
exemption granted to him under Section 10 (19A) of
the Income Tax Act 1961 (for short, "the I.T. Act") from
payment of income-tax or it is confined only to that
portion of palace which is in his actual occupation as
residence and the rest which is in occupation of the
tenant would be subjected to payment of tax.
9. The Commissioner of Income Tax(Appeals)
Rajasthan-II by order dated 23.02.1984 in Appeal No.
CIT(A)/JPR/8/81-82 answered the question in
appellant's favour and held that since the appellant
was in occupation of part of his official residence
during the assessment year in question, he was
entitled to claim full benefit of the exemption for his
official residence as provided under Section 10 (19A) of
the I.T. Act notwithstanding the fact that portion of the
5Page 6
residence is let out to the Defence Ministry. The
Revenue, felt aggrieved, carried the matter in appeal
before the Income Tax Appellate Tribunal. By order
dated 11.07.1985, the Tribunal affirmed the order of
the Commissioner of Income Tax and dismissed the
Revenue's appeal. The Tribunal, however, on an
application made by the Revenue under Section 256(1)
of the 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
6Page 7
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 the question
against the Revenue and in favour of the assesse
holding therein that in such a situation, the assessee
is entitled to claim full exemption in relation to his
palace under Section 10(19A) of the I.T. Act
notwithstanding the fact that portion of the palace is
let out to a tenant. It was held that any rental income
7Page 8
derived from the part of his rental property is,
therefore, not liable to tax. The Division Bench,
therefore, referred the matter to the Full Bench to
resolve the conflict arising between the two decisions
and answer the referred question on merits.
11. By impugned order dated 26.03.2014, the High
Court answered the question against the appellant
(assessee) and in favour of the Revenue. While
referring to various authorities of this Court and the
High Courts, it was held that the law laid down in
C.I.T. vs. H.H. Maharao Bhim Singhji, (supra) does
not lay down correct principle of law whereas the law
laid down in Maharawal Laxman Singh vs. C.I.T.
(supra) lays down the correct principle of law. It was
held that so long as the assessee continues to remain
in occupation of his official residential palace for his
own use, he would be entitled to claim exemption
available under Section 10(19A) of the I.T. Act but
8Page 9
when he is found to have let out any part of his official
residence and at the same time is found to have
retained its remaining portion for his own use, he
becomes disentitle to claim benefit of exemption
available under Section 10(19A) for the entire palace.
It was held that in such circumstances, he is required
to pay income-tax on the income derived by him from
the portion let out in accordance with the provisions of
the I.T. Act and the benefit of exemption remains
available only to the extent of portion which is in his
occupation as residence. It is against this order, the
assessee has filed this appeal.
12. Heard Mr. Gopal Subramaniam, learned senior
counsel, for the appellant (assessee) and Mr. Y.P.
Adhyaru, learned senior counsel, for the respondent
(Revenue).
13. Mr. Gopal Subramaniam while assailing the
legality and correctness of the impugned order
9Page 10
contended that the reasoning and conclusion arrived
at by the High Court is not legally sustainable for
various reasons.
14. In the first place, learned senior counsel urged
that when the question involved in this appeal, was
already decided in favour of the appellant 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,
10Page 11
(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 charging provisions,
which are interpreted strictly. Reliance was placed on
the decision of this Court in the case of Union of
India & Ors. vs. Wood Papers Ltd. & Anr., (1990) 4
SCC 256 and other decisions.
16. In the third place, learned counsel contended
that the High Court was not justified in placing
11Page 12
reliance on Section 5(iii) of the Wealth Tax Act,1957
while interpreting Sections 10(19A), 22 and 23 of the
I.T. Act and Paragraph 15 of the Order. Learned
counsel pointed out that Section 5(iii) of the Wealth
Tax Act and Section 23 of the I.T. Act are neither in
pari materia with each other and nor identically
worded. Learned counsel pointed out the difference in
the language employed in both the aforementioned
sections in support of his submission.
17. In the fourth place, learned counsel contended
that the question involved in this appeal has already
been answered by the M.P. High Court in the case of
Commissioner of Income-tax vs. Bharatchandra
Banjdeo, (1985) 154 ITR 236(MP) = 1986 (27) Taxman
456 (M.P.) in favour of the assessee. It was urged that
there was no justifiable reason for the High Court to
have departed from the view taken by the M.P. High
Court. Learned counsel urged that the reason given for
12Page 13
distinguishing the view taken by the M.P. High Court
is not well founded and more so when it has already
been relied on by the Rajasthan High Court in H.H.
Maharao Bhim Singhji (supra) in appellant’s own
case.
18. In the fifth place, learned counsel contended that
there is a significant departure in the wordings of
Section 10(19A) and Section 23 of the I.T. Act.
Learned counsel pointed out that Section 10(19A) does
not use the same expression which occurs in Section
23(2), namely, "annual value of such house or part of
the house". According to learned counsel, absence of
these words in Section 10(19A) of the I.T. Act goes to
show that the appellant is entitled to claim exemption
applicable to the entire palace even though the part of
palace is in occupation of tenant. It was urged that
splitting of palace is not permissible under Section 10
(19A) of the I.T. Act though it is permissible in ‘house”.
13Page 14
19. It is these submissions, which were elaborated
by the learned counsel with reference to case law and
interpretative process of the relevant provisions of the
I.T. Act and Order.
20. In reply, learned counsel for the respondent
(Revenue) supported 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,
14Page 15
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:
Provided that for the assessment
year commencing on the 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;]”
Paragraph 15 of the Order
15. Exemptions-Any income falling within
the following classes shall be exempt from
income-tax and super-tax and shall not be
included in the total income or total world
income of the person receiving them:
(i)………………………………………………..
(ii)……………………………………………….
(iii) 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.”
23. Section 10 provides that in computing the total
income of a previous year of any person, any income
15Page 16
falling within any of the sub-clauses of Section 10
shall not be included. Sub-clause (19A) says that the
annual value of any one palace which is in occupation
of a Ruler and whose annual value was exempt from
income-tax before the commencement of the
Constitution (Twenty-sixth Amendment) by virtue of
the provisions of the Merged States (Taxation
concessions) Order, 1949 or the Part B States
(Taxation Concessions), Order 1950 would be exempt
from payment of income-tax.
24. As mentioned above, Paragraph 15 (iii) grants
exemption to the bona fide annual value of the
residential palace of the Ruler of a State, which is
declared by the Central Government to be Rulers
ancestral property from payment of income-tax.
25. In order to claim exemption from payment of
income-tax on the residential palace of the Ruler under
Section 10(19A), it is necessary for the Ruler to satisfy
16Page 17
that first, he owns the palace as his ancestral property;
second, such palace is in his occupation as his
residence; and third, the palace is declared exempt
from payment of income-tax under Paragraph 15 (iii) of
the Order, 1950 by the Central Government.
26. Now, the question arises that where part of the
residential palace is found to be in occupation of the
tenant and remaining is in occupation of the Ruler for
his residence, whether in such circumstances, the
Ruler is entitled to claim exemption for the whole of his
residential palace under Section 10(19A) or such
exemption 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.
17Page 18
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), speaking for the Bench held as
under:
“8. It is, therefore, clear that under this
18Page 19
order the income from all the palaces of a
Ruler which are declared to be the official
residence were exempt. Under clause (19A)
of Section 10, only one palace in
occupation has been exempted and it
appears that similarly in the W.T. Act
instead of using the word "palace" they
have used the words "one building in
occupation of a Ruler" which has been
exempted from tax.
9. It is not in dispute that in this reference
the property in question is a palace. It is
also not in dispute that a portion of it is in
occupation. The only question which has
been raised by learned counsel for the
Revenue is that if only a portion of the
palace is in occupation, the exemption
under clause (19A) of Section 10 would be
available only for that part and not for the
whole. The change brought about by the
insertion under the Merged States
(Taxation Concessions) Order is clearly
illustrated by the two provisions quoted
above. By clause (19A), the exemption has
been limited only to one palace in
occupation. If the Legislature intended a
further splitting up, it would have been
provided in clause (19A) that such portion
of the palace in occupation is only
exempted, but it appears that the language
used by the Legislature did not
contemplate a further splitting up. In
Mohd. Ali Khan's case: [1983] 140 ITR
948(Delhi) which is a case under the W.T.
Act, the only question considered was that
if the palace which was declared to be an
official residence had a number of
buildings, as the exemption under the W.T.
Act is available only in respect of one
building which is in occupation and,
therefore, the assessee's contention, that
the other buildings which may not be in
requisitioned portion of the Umed Bhawan Palace
(918.26 Acres of the land including houses and other
construction standing on the land) for their own use
and realized Rs.80,000/- as rent by invoking the
provisions of Requisition and Exhibition of Immovable
Property Act, 1952. According to the appellant, the
period for which the land was requisitioned expired in
1993 though the land still continues to remain in the
occupation of the Ministry of Defence.
8. With the aforementioned factual background, the
question arose in the appellant's income-tax
assessment proceedings regarding taxability of the
income derived by the appellant (assesse) from the part
of the property requisitioned by the Defence Ministry,
which was a portion of the appellant's official residence
(Umed Bhawan Palace). The question was whether the
rental income received by the appellant from the
4Page 5
requisitioned property by way of rent is taxable in his
hands. In other words, the question was as to whether
the appellant is entitled to get full benefit of the
exemption granted to him under Section 10 (19A) of
the Income Tax Act 1961 (for short, "the I.T. Act") from
payment of income-tax or it is confined only to that
portion of palace which is in his actual occupation as
residence and the rest which is in occupation of the
tenant would be subjected to payment of tax.
9. The Commissioner of Income Tax(Appeals)
Rajasthan-II by order dated 23.02.1984 in Appeal No.
CIT(A)/JPR/8/81-82 answered the question in
appellant's favour and held that since the appellant
was in occupation of part of his official residence
during the assessment year in question, he was
entitled to claim full benefit of the exemption for his
official residence as provided under Section 10 (19A) of
the I.T. Act notwithstanding the fact that portion of the
5Page 6
residence is let out to the Defence Ministry. The
Revenue, felt aggrieved, carried the matter in appeal
before the Income Tax Appellate Tribunal. By order
dated 11.07.1985, the Tribunal affirmed the order of
the Commissioner of Income Tax and dismissed the
Revenue's appeal. The Tribunal, however, on an
application made by the Revenue under Section 256(1)
of the 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
6Page 7
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 the question
against the Revenue and in favour of the assesse
holding therein that in such a situation, the assessee
is entitled to claim full exemption in relation to his
palace under Section 10(19A) of the I.T. Act
notwithstanding the fact that portion of the palace is
let out to a tenant. It was held that any rental income
7Page 8
derived from the part of his rental property is,
therefore, not liable to tax. The Division Bench,
therefore, referred the matter to the Full Bench to
resolve the conflict arising between the two decisions
and answer the referred question on merits.
11. By impugned order dated 26.03.2014, the High
Court answered the question against the appellant
(assessee) and in favour of the Revenue. While
referring to various authorities of this Court and the
High Courts, it was held that the law laid down in
C.I.T. vs. H.H. Maharao Bhim Singhji, (supra) does
not lay down correct principle of law whereas the law
laid down in Maharawal Laxman Singh vs. C.I.T.
(supra) lays down the correct principle of law. It was
held that so long as the assessee continues to remain
in occupation of his official residential palace for his
own use, he would be entitled to claim exemption
available under Section 10(19A) of the I.T. Act but
8Page 9
when he is found to have let out any part of his official
residence and at the same time is found to have
retained its remaining portion for his own use, he
becomes disentitle to claim benefit of exemption
available under Section 10(19A) for the entire palace.
It was held that in such circumstances, he is required
to pay income-tax on the income derived by him from
the portion let out in accordance with the provisions of
the I.T. Act and the benefit of exemption remains
available only to the extent of portion which is in his
occupation as residence. It is against this order, the
assessee has filed this appeal.
12. Heard Mr. Gopal Subramaniam, learned senior
counsel, for the appellant (assessee) and Mr. Y.P.
Adhyaru, learned senior counsel, for the respondent
(Revenue).
13. Mr. Gopal Subramaniam while assailing the
legality and correctness of the impugned order
9Page 10
contended that the reasoning and conclusion arrived
at by the High Court is not legally sustainable for
various reasons.
14. In the first place, learned senior counsel urged
that when the question involved in this appeal, was
already decided in favour of the appellant 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,
10Page 11
(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 charging provisions,
which are interpreted strictly. Reliance was placed on
the decision of this Court in the case of Union of
India & Ors. vs. Wood Papers Ltd. & Anr., (1990) 4
SCC 256 and other decisions.
16. In the third place, learned counsel contended
that the High Court was not justified in placing
11Page 12
reliance on Section 5(iii) of the Wealth Tax Act,1957
while interpreting Sections 10(19A), 22 and 23 of the
I.T. Act and Paragraph 15 of the Order. Learned
counsel pointed out that Section 5(iii) of the Wealth
Tax Act and Section 23 of the I.T. Act are neither in
pari materia with each other and nor identically
worded. Learned counsel pointed out the difference in
the language employed in both the aforementioned
sections in support of his submission.
17. In the fourth place, learned counsel contended
that the question involved in this appeal has already
been answered by the M.P. High Court in the case of
Commissioner of Income-tax vs. Bharatchandra
Banjdeo, (1985) 154 ITR 236(MP) = 1986 (27) Taxman
456 (M.P.) in favour of the assessee. It was urged that
there was no justifiable reason for the High Court to
have departed from the view taken by the M.P. High
Court. Learned counsel urged that the reason given for
12Page 13
distinguishing the view taken by the M.P. High Court
is not well founded and more so when it has already
been relied on by the Rajasthan High Court in H.H.
Maharao Bhim Singhji (supra) in appellant’s own
case.
18. In the fifth place, learned counsel contended that
there is a significant departure in the wordings of
Section 10(19A) and Section 23 of the I.T. Act.
Learned counsel pointed out that Section 10(19A) does
not use the same expression which occurs in Section
23(2), namely, "annual value of such house or part of
the house". According to learned counsel, absence of
these words in Section 10(19A) of the I.T. Act goes to
show that the appellant is entitled to claim exemption
applicable to the entire palace even though the part of
palace is in occupation of tenant. It was urged that
splitting of palace is not permissible under Section 10
(19A) of the I.T. Act though it is permissible in ‘house”.
13Page 14
19. It is these submissions, which were elaborated
by the learned counsel with reference to case law and
interpretative process of the relevant provisions of the
I.T. Act and Order.
20. In reply, learned counsel for the respondent
(Revenue) supported 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,
14Page 15
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:
Provided that for the assessment
year commencing on the 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;]”
Paragraph 15 of the Order
15. Exemptions-Any income falling within
the following classes shall be exempt from
income-tax and super-tax and shall not be
included in the total income or total world
income of the person receiving them:
(i)………………………………………………..
(ii)……………………………………………….
(iii) 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.”
23. Section 10 provides that in computing the total
income of a previous year of any person, any income
15Page 16
falling within any of the sub-clauses of Section 10
shall not be included. Sub-clause (19A) says that the
annual value of any one palace which is in occupation
of a Ruler and whose annual value was exempt from
income-tax before the commencement of the
Constitution (Twenty-sixth Amendment) by virtue of
the provisions of the Merged States (Taxation
concessions) Order, 1949 or the Part B States
(Taxation Concessions), Order 1950 would be exempt
from payment of income-tax.
24. As mentioned above, Paragraph 15 (iii) grants
exemption to the bona fide annual value of the
residential palace of the Ruler of a State, which is
declared by the Central Government to be Rulers
ancestral property from payment of income-tax.
25. In order to claim exemption from payment of
income-tax on the residential palace of the Ruler under
Section 10(19A), it is necessary for the Ruler to satisfy
16Page 17
that first, he owns the palace as his ancestral property;
second, such palace is in his occupation as his
residence; and third, the palace is declared exempt
from payment of income-tax under Paragraph 15 (iii) of
the Order, 1950 by the Central Government.
26. Now, the question arises that where part of the
residential palace is found to be in occupation of the
tenant and remaining is in occupation of the Ruler for
his residence, whether in such circumstances, the
Ruler is entitled to claim exemption for the whole of his
residential palace under Section 10(19A) or such
exemption 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.
17Page 18
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), speaking for the Bench held as
under:
“8. It is, therefore, clear that under this
18Page 19
order the income from all the palaces of a
Ruler which are declared to be the official
residence were exempt. Under clause (19A)
of Section 10, only one palace in
occupation has been exempted and it
appears that similarly in the W.T. Act
instead of using the word "palace" they
have used the words "one building in
occupation of a Ruler" which has been
exempted from tax.
9. It is not in dispute that in this reference
the property in question is a palace. It is
also not in dispute that a portion of it is in
occupation. The only question which has
been raised by learned counsel for the
Revenue is that if only a portion of the
palace is in occupation, the exemption
under clause (19A) of Section 10 would be
available only for that part and not for the
whole. The change brought about by the
insertion under the Merged States
(Taxation Concessions) Order is clearly
illustrated by the two provisions quoted
above. By clause (19A), the exemption has
been limited only to one palace in
occupation. If the Legislature intended a
further splitting up, it would have been
provided in clause (19A) that such portion
of the palace in occupation is only
exempted, but it appears that the language
used by the Legislature did not
contemplate a further splitting up. In
Mohd. Ali Khan's case: [1983] 140 ITR
948(Delhi) which is a case under the W.T.
Act, the only question considered was that
if the palace which was declared to be an
official residence had a number of
buildings, as the exemption under the W.T.
Act is available only in respect of one
building which is in occupation and,
therefore, the assessee's contention, that
the other buildings which may not be in
occupation but declared to be an official
residence should be exempted, was not
accepted. In clause (19A) of Section 10, in
the place of "building", the phrase
employed is "one palace" and so far as the
case in hand is concerned, it is not
disputed that this official residence is only
one palace and not more than one. Under
these circumstances, in our opinion,
clause (19A) could not be interpreted to
mean that it contemplates further
splitting up of portions of a palace. The
language of clause (19A) of Section 10 does
not justify it. It is settled that in cases of
exemption, the language of the statute has
to be liberally construed 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
20Page 21
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 as his official
residence. Accordingly, it was held that
even if only a part of the palace is in the
self-occupation of the former Ruler and
the rest has been let out, the exemption
available under section 10(19A) will be
available to the entire palace. No decision
taking a contrary view has been cited
before us. We do not find any good ground
to depart from that view, when the view
taken in that decision is undoubtedly a
plausible view. In the case of a taxing
statute, a plausible view in favour of the
assessee should be preferred in these
circumstances. Following that decision,
the first question has to be answered
against the Revenue and in favour of the
assessee.”
31. Following the aforesaid view, the High Court of
Rajasthan declined to make reference to the High
Court under Section 256(1) of the I.T. Act in later
21Page 22
Assessment Years and dismissed the application made
by the Revenue under Section 256(2) of the I.T. Act
(see- (Commissioner of Income-Tax vs. H.H.
Maharao Bhim Singh (2002)124 Taxman 26) with the
following observations.
“ 5. In coming to this conclusion, this Court
has followed another decision of the Madhya
Pradesh High Court in CIT vs. Bharatchanda
Banjdeo (1985) 154 ITR 236 (M.P.). The
decision of this Court in CIT vs. H.H.
Maharao Bhim Singhji (1988) 173 ITR 79, we
are informed by the learned counsel, has not
been appealed against.
6. In that view of the matter, we are of the
opinion that the application under Section
256(1) has rightly been rejected by the
Tribunal and do not deserve further
consideration.”
32. In our considered opinion, the view taken by the
Madhya Pradesh High Court in the case of
Bharatchandra Banjdeo (supra) and the one taken in
the case of the appellant in Maharao Bhim Singhji’s
case (supra) by rightly placing reliance on
Bharatchandra Banjdeo’s case (supra) is the correct
view and we find no good ground to take any other
22Page 23
view.
33. As rightly held in the case of Bharatchandra
Banjdeo (supra), no reliance could be placed on
Section 5(iii) of the Wealth Tax Act while construing
Section 10(19A) of the I.T. Act. It is due to marked
difference in the language employed in both sections. It
is apposite to reproduce Section 5 (iii) of the Wealth
Tax Act as under:
“5. Exemptions in respect of certain
assets-Wealth-tax shall not be payable by an
assessee in respect of the following assets
and 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 employing
appropriate language in Section 10(19A) of the I.T. Act.
We, however, do not find such language employed in
Section 10(19A).
36. As rightly pointed out by the learned senior
counsel for the appellant, Section 23(2) and (3), uses
the expression “house or part of a house”. Such
expression does not find place in Section 10(19A) of
the I.T. Act. Likewise, we do not find any such
expression in Section 23, specifically dealing with the
cases relating to “palace”. This significant departure
of the words in Section 10(19A) of the I.T. Act and
Section 23 also suggest that the Legislature did not
intend to tax portion of the “palace” by splitting it in
parts.
37. It is a settled rule of interpretation that if two
Statutes dealing with the same subject use different
language then it is not permissible to apply the
language of one Statute to other while interpreting
such Statutes. Similarly, once the assessee is able to
fulfill the conditions specified in section for claiming
exemption under the Act then provisions dealing with
grant of exemption should be construed liberally
because the exemptions are for the benefit of the
assessee.
38. In the light of these reasonings, we are of the
considered opinion that the view taken by the M.P.
High Court in Bharatchandra Banjdeo’s case (supra)
and the Rajasthan High Court in H.H. Maharao Bhim
Singhji’s case (supra) is a correct view.
39. We also notice that the question involved in this
case had also arisen in previous Assessment Years’
(1973-74 till 1977-78) and was decided in appellant's
favour when Special Leave Petition(c) No. 3764 of 2007
filed by the Revenue was dismissed by this Court on
25.08.2010 by affirming the order of the Rajasthan
High Court referred supra.
40. In such a factual situation where the Revenue
consistently lost the matter on the issue then, in our
view, there was no reason much less justifiable reason
for the Revenue to have pursued the same issue any
more in higher courts.
41. Though principle of res judicata does not apply to
income-tax proceedings and each assessment year is
an independent year in itself, yet, in our view, in the
absence of any valid and convincing reason, there was
residence should be exempted, was not
accepted. In clause (19A) of Section 10, in
the place of "building", the phrase
employed is "one palace" and so far as the
case in hand is concerned, it is not
disputed that this official residence is only
one palace and not more than one. Under
these circumstances, in our opinion,
clause (19A) could not be interpreted to
mean that it contemplates further
splitting up of portions of a palace. The
language of clause (19A) of Section 10 does
not justify it. It is settled that in cases of
exemption, the language of the statute has
to be liberally construed 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
20Page 21
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 as his official
residence. Accordingly, it was held that
even if only a part of the palace is in the
self-occupation of the former Ruler and
the rest has been let out, the exemption
available under section 10(19A) will be
available to the entire palace. No decision
taking a contrary view has been cited
before us. We do not find any good ground
to depart from that view, when the view
taken in that decision is undoubtedly a
plausible view. In the case of a taxing
statute, a plausible view in favour of the
assessee should be preferred in these
circumstances. Following that decision,
the first question has to be answered
against the Revenue and in favour of the
assessee.”
31. Following the aforesaid view, the High Court of
Rajasthan declined to make reference to the High
Court under Section 256(1) of the I.T. Act in later
21Page 22
Assessment Years and dismissed the application made
by the Revenue under Section 256(2) of the I.T. Act
(see- (Commissioner of Income-Tax vs. H.H.
Maharao Bhim Singh (2002)124 Taxman 26) with the
following observations.
“ 5. In coming to this conclusion, this Court
has followed another decision of the Madhya
Pradesh High Court in CIT vs. Bharatchanda
Banjdeo (1985) 154 ITR 236 (M.P.). The
decision of this Court in CIT vs. H.H.
Maharao Bhim Singhji (1988) 173 ITR 79, we
are informed by the learned counsel, has not
been appealed against.
6. In that view of the matter, we are of the
opinion that the application under Section
256(1) has rightly been rejected by the
Tribunal and do not deserve further
consideration.”
32. In our considered opinion, the view taken by the
Madhya Pradesh High Court in the case of
Bharatchandra Banjdeo (supra) and the one taken in
the case of the appellant in Maharao Bhim Singhji’s
case (supra) by rightly placing reliance on
Bharatchandra Banjdeo’s case (supra) is the correct
view and we find no good ground to take any other
22Page 23
view.
33. As rightly held in the case of Bharatchandra
Banjdeo (supra), no reliance could be placed on
Section 5(iii) of the Wealth Tax Act while construing
Section 10(19A) of the I.T. Act. It is due to marked
difference in the language employed in both sections. It
is apposite to reproduce Section 5 (iii) of the Wealth
Tax Act as under:
“5. Exemptions in respect of certain
assets-Wealth-tax shall not be payable by an
assessee in respect of the following assets
and 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 employing
appropriate language in Section 10(19A) of the I.T. Act.
We, however, do not find such language employed in
Section 10(19A).
36. As rightly pointed out by the learned senior
counsel for the appellant, Section 23(2) and (3), uses
the expression “house or part of a house”. Such
expression does not find place in Section 10(19A) of
the I.T. Act. Likewise, we do not find any such
expression in Section 23, specifically dealing with the
cases relating to “palace”. This significant departure
of the words in Section 10(19A) of the I.T. Act and
Section 23 also suggest that the Legislature did not
intend to tax portion of the “palace” by splitting it in
parts.
37. It is a settled rule of interpretation that if two
Statutes dealing with the same subject use different
language then it is not permissible to apply the
language of one Statute to other while interpreting
such Statutes. Similarly, once the assessee is able to
fulfill the conditions specified in section for claiming
exemption under the Act then provisions dealing with
grant of exemption should be construed liberally
because the exemptions are for the benefit of the
assessee.
38. In the light of these reasonings, we are of the
considered opinion that the view taken by the M.P.
High Court in Bharatchandra Banjdeo’s case (supra)
and the Rajasthan High Court in H.H. Maharao Bhim
Singhji’s case (supra) is a correct view.
39. We also notice that the question involved in this
case had also arisen in previous Assessment Years’
(1973-74 till 1977-78) and was decided in appellant's
favour when Special Leave Petition(c) No. 3764 of 2007
filed by the Revenue was dismissed by this Court on
25.08.2010 by affirming the order of the Rajasthan
High Court referred supra.
40. In such a factual situation where the Revenue
consistently lost the matter on the issue then, in our
view, there was no reason much less justifiable reason
for the Revenue to have pursued the same issue any
more in higher courts.
41. Though principle of res judicata does not apply to
income-tax proceedings and each assessment year is
an independent year in itself, yet, in our view, in the
absence of any valid and convincing reason, there was
no justification on the part of the Revenue to have
pursued the same issue again to higher Courts. There
should be a finality attached to the issue once it
stands decided by the higher Courts on merits. This
principle, in our view, applies to this case on all force
against the Revenue. [see M/s Radhasoami Satsang,
Saomi Bagh, Agra’s case (supra)].
42. Learned Counsel for the respondent (Revenue)
though made sincere attempt to persuade us to uphold
the view taken by the High Court but in the light of
what we have held above, we are unable to accept his
submissions.
43. In the light of foregoing discussion, in our
considered opinion, the reasoning and the conclusion
arrived at by the High Court in the impugned order
including the view taken by the Rajasthan High Court
in Maharaval Lakshmansingh’s case (supra) does not
lay down correct principle of law whereas the view
pursued the same issue again to higher Courts. There
should be a finality attached to the issue once it
stands decided by the higher Courts on merits. This
principle, in our view, applies to this case on all force
against the Revenue. [see M/s Radhasoami Satsang,
Saomi Bagh, Agra’s case (supra)].
42. Learned Counsel for the respondent (Revenue)
though made sincere attempt to persuade us to uphold
the view taken by the High Court but in the light of
what we have held above, we are unable to accept his
submissions.
43. In the light of foregoing discussion, in our
considered opinion, the reasoning and the conclusion
arrived at by the High Court in the impugned order
including the view taken by the Rajasthan High Court
in Maharaval Lakshmansingh’s case (supra) does not
lay down correct principle of law whereas the view
taken by the M.P. High Court in cases of
Bharatchandra Bhanjdeo (supra), Commissioner of
Income-Tax vs. Bharatchandra Bhanjdev (1989)176
ITR 380 (MP) and H.H. Maharao Bhim Singhji
(supra) lays down correct principle of law.
44. This takes us to the last submission of learned
counsel for the appellant who made a feeble attempt to
question the legality and propriety of the requisition
proceedings initiated by the Central Government
(Ministry of Defence) in relation to portion of land. It
was urged that even after expiry of the period of
requisition, the Defence Ministry, continues to remain
in possession of the land to the detriment of the
interest of appellant. To say the least, in our view, this
submission is wholly misplaced in this appeal. The
appellant, in our view, has to raise this issue in
appropriate proceedings before competent Fora for
their adjudication and not in this appeal which arises
Bharatchandra Bhanjdeo (supra), Commissioner of
Income-Tax vs. Bharatchandra Bhanjdev (1989)176
ITR 380 (MP) and H.H. Maharao Bhim Singhji
(supra) lays down correct principle of law.
44. This takes us to the last submission of learned
counsel for the appellant who made a feeble attempt to
question the legality and propriety of the requisition
proceedings initiated by the Central Government
(Ministry of Defence) in relation to portion of land. It
was urged that even after expiry of the period of
requisition, the Defence Ministry, continues to remain
in possession of the land to the detriment of the
interest of appellant. To say the least, in our view, this
submission is wholly misplaced in this appeal. The
appellant, in our view, has to raise this issue in
appropriate proceedings before competent Fora for
their adjudication and not in this appeal which arises
out of income-tax proceedings and has nothing to do
with requisition proceedings of the land.
45. In view of foregoing discussion, the appeal
succeeds and is accordingly allowed. The impugned
order is set aside. As a consequence, the question
referred to the High Court in the reference proceedings
out of which this appeal arises is answered in favour of
the appellant (assessee) and against the Revenue.
….……...................................J.
[RANJAN GOGOI]
………..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
December 05, 2016.
with requisition proceedings of the land.
45. In view of foregoing discussion, the appeal
succeeds and is accordingly allowed. The impugned
order is set aside. As a consequence, the question
referred to the High Court in the reference proceedings
out of which this appeal arises is answered in favour of
the appellant (assessee) and against the Revenue.
….……...................................J.
[RANJAN GOGOI]
………..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
December 05, 2016.
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