1. - At the instance of the assessee the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur ("the Tribunal" herein), has referred the following question of law arising out of its order dated July 21, 1978 :

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the rental income of part of Udaivilas Palace of the appellant, claimed as exempt under clause (19A) of section 10 of the Income-tax Act, 1961, is taxable under the Income-tax Act, 1961 ?

2. The assessee is an individual. The assessment year involved is 1975-76. The previous year relevant to the assessment year 1975-76 ended on September 30, 1974. The return for the previous year in question was filed on August 16, 1975, declaring a total income of Rs. 17,328. During the assessment proceedings, it was noticed by the Income-tax Officer that the assessee has rented out quarters, garage and godowns on rent at the rate of Rs. 9,322 per annum. The assessee disclosed this income. In view of section 10(19A) of the Income-tax Act, 1961 (No. XLIII of 1961) (for short "the Act"), the annual value of any one palace of the Ruler was exempt. The Income-tax O