Oza, C.J.

1. This is a reference made by the Income Tax Appellate Tribunal at the instance of the Revenue for answering the following question :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the entire income from the palace of the assessee, who is the former Ruler of Bastar, is exempt from Income Tax ?"

2. The facts stated by the Tribunal in the statement of the case are that this assessment pertains to an ex-Ruler of Bastar, a State which merged in the province of Central Provinces and Berar under the States Merger (Governor's Provinces) Order, 1949, and, according to Notification No. SRO 1620, dated May 14, 1954, in pursuance of para. 13 of the above Order of 1979 at item 39, the palace at Jagdalpur of the Ruler of Bastar had been declared as the official residence of the Ruler. It is stated that in the return of income, the income from house property was originally shown as Rs. 50,055 and Rs. 57,088 which was subsequently revised to Rs. 13,473 and Rs. 14,135 for the assessment years 1975-76 and 1976-77, respectively. In the course of the assessment proceedings, it was claimed that the palace at Jagdalpur is r