2016 Supreme(SC) 958

SUPREME COURT OF INDIA
RANJAN GOGOI, ABHAY MANOHAR SAPRE, JJ.
Maharao Bhim Singh of Kota Thr. Maharao Brij Raj Singh, Kota – Appellants
VERSUS
Commissioner of Income-tax, Rajasthan-II, Jaipur – Respondents
CIVIL APPEAL No. 2812 OF 2015
Decided On : 05-12-2016

IMPORTANT POINTS
When the entire residential palace is exempted from income tax, rental inc. ome from part of it will also be exempt
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.
Once the assessee fulfills conditions for claiming exemption, then provisions dealing with grant of exemption should be construed liberally.
When an issue is decided against the State, there is no justifiable reason for the State to pursue the issue anymore.
Legality of requisition proceedings, held, cannot be questioned in appeal arising out of income tax proceedings.

Headnote:(a) Income Tax Act, 1961 – Section 10(19A) and Paragraph 15(iii), The Part B States (Taxation Concessions) Order, 1950 – Exemption from payment of income-tax on the residential palace of the Ruler u/s 10(19A) – The Ruler must own the palace as his ancestral property; second, such palace should be in his occupation as his residence; and third, the palace should be declared exempt from payment of income-tax under Paragraph 15 (iii) – Instantly, declared official residence of appellant exempted from income tax – Part of the residential palace requisitioned by Defence Ministry – Held (1985) 154 ITR 236(MP) : 1986 (27) Taxman 456 (M.P.) lays down correct law. (Para 25, 32, 38)

       (1985) 154 ITR 236(MP) : 1986 (27) Taxman 456 (M.P.); (1988) 173 ITR 79(Raj.) – Cited with approval

       (1986) 160 ITR 103(Raj.) – Not correct law

       (1977) 1 SCC 408; (2014) 13 SCC 459; (1990) 4 SCC 256 – Referred

       (b) Interpretation of statute – Section 5(iii) of the Wealth Tax Act and Section 10(19A) of the I.T. Act – Language employed in the two Acts markedly different – Section 5(iii) cannot be relied upon for interpreting section Section 10(19A) – 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. (Para 33, 37)

       (c) Interpretation of Taxing statute – Exemption – Exemptions are for the benefit of the assessee – Therefore, once the assessee fulfills conditions for claiming exemption, then provisions dealing with grant of exemption should be construed liberally. (Para 37)

       (d) Administration of justice – Judicial propriety – Question arising instantly already arising in previous years and answered against Revenue – Revenue constantly loosing on the question – No justifiable reason for Revenue to pursue the same issue anymore. (Para 39, 40, 41)

       (1992) 1 SCC 659 – Relied upon

       (e) Administration of Justice – Judicial propriety – Defence Ministry requisitioned a portion of land in question – Occupying the same even after expiry of requisition – Legality of requisition proceedings, held, cannot be questioned in appeal arising out of income tax proceedings. (Para 44)

       Facts of the case:

       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".

       In pursuance of the powers conferred under item (iii) of Paragraph 15 of The Part B States (Taxation Concessions) Order, 1950, the Central Government, Ministry of Finance(Revenue Division) issued a notification declaring the appellant's aforementioned two palaces, viz., Umed Bhawan and City Palace as his official residences.

       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.

       The question arose 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 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 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.

       The Commissioner of Income Tax(Appeals) Rajasthan-II answered the question in appellant's favour.

       The Tribunal, however, on an application made by the Revenue referred the question of law to the High Court of Rajasthan.

       The Division Bench of the High Court noticing cleavage of opinion on the question referred in this case in two earlier decisions of the High Court of Rajasthan, referred the matter to the Full Bench to resolve the conflict arising between the two decisions and answer the referred question on merits.

       By impugned order the High Court answered the question against the appellant (assessee) and in favour of the Revenue. It was held that in such circumstances, the assessee 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.

       Finding of the Court:

       (1985) 154 ITR 236(MP) : 1986 (27) Taxman 456 (M.P.); (1988) 173 ITR 79(Raj.) lay down correct law.

       Result: Appeal allowed.