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2016 (12) TMI 418 - SC - Income TaxClaim of exemption on Rental income from Umed Bhawan Palace u/s 10(19A) - whether 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 - Held that - 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. 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). 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. 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. 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 (1985 (1) TMI 38 - MADHYA PRADESH High Court ) and the Rajasthan High Court in H.H. Maharao Bhim Singhji s case (1987 (8) TMI 12 - RAJASTHAN High Court ) is a correct view. 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. 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.
Issues Involved:
1. Taxability of rental income derived from a portion of the residential palace requisitioned by the Defence Ministry. 2. Applicability of Section 10(19A) of the Income Tax Act, 1961, and Paragraph 15(iii) of the Part B States (Taxation Concessions) Order, 1950. 3. Interpretation of exemptions under Section 10(19A) of the I.T. Act. 4. Relevance of previous judicial decisions and consistency in tax assessments. 5. Comparison with Section 5(iii) of the Wealth Tax Act, 1957. Detailed Analysis: 1. Taxability of Rental Income: The primary issue was whether the rental income received by the appellant from the portion of Umed Bhawan Palace requisitioned by the Defence Ministry was taxable. The appellant claimed that the entire palace, including the portion let out, should be exempt from income tax under Section 10(19A) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal had previously ruled in favor of the appellant, granting full exemption. However, the High Court of Rajasthan later ruled against the appellant, stating that the exemption applies only to the portion of the palace in actual occupation by the appellant. 2. Applicability of Section 10(19A) and Paragraph 15(iii): Section 10(19A) of the I.T. Act exempts the annual value of any one palace in the occupation of a Ruler from income tax, provided it was exempt before the Constitution (Twenty-sixth Amendment) Act, 1971. Paragraph 15(iii) of the Part B States (Taxation Concessions) Order, 1950, similarly exempts the bona fide annual value of the residential palace of a Ruler declared as inalienable ancestral property. The appellant argued that these provisions should exempt the entire palace, including the portion let out. 3. Interpretation of Exemptions: The Supreme Court found merit in the appellant's argument that the exemption should apply to the entire palace. The Court noted that the language of Section 10(19A) does not indicate a requirement to split the palace into portions for tax purposes. The Court emphasized that exemptions should be construed liberally in favor of the assessee, distinguishing the language used in Section 10(19A) from other provisions like Section 23(2) and (3) of the I.T. Act, which specifically mention "house or part of a house." 4. Relevance of Previous Judicial Decisions: The Supreme Court relied on previous decisions, particularly the Madhya Pradesh High Court's ruling in Commissioner of Income-tax vs. Bharatchandra Banjdeo and the Rajasthan High Court's ruling in the appellant's own case, Commissioner of Income-Tax vs. H.H. Maharao Bhim Singhji. These decisions had consistently ruled in favor of the appellant, granting full exemption for the entire palace. The Court criticized the Revenue for pursuing the same issue despite consistent losses in previous assessment years and emphasized the need for finality in judicial decisions. 5. Comparison with Section 5(iii) of the Wealth Tax Act: The Court rejected the High Court's reliance on Section 5(iii) of the Wealth Tax Act, which exempts "any one building" in the occupation of a Ruler. The Court noted that the language of Section 10(19A) of the I.T. Act, which uses the term "palace," is significantly different and should not be interpreted in the same manner as Section 5(iii). Conclusion: The Supreme Court set aside the High Court's order and ruled in favor of the appellant, holding that the entire Umed Bhawan Palace, including the portion let out, is exempt from income tax under Section 10(19A) of the I.T. Act. The Court emphasized the need for a liberal interpretation of exemption provisions and criticized the Revenue for repeatedly contesting the same issue despite consistent judicial rulings in favor of the appellant. The appeal was allowed, and the question was answered in favor of the appellant (assessee) and against the Revenue.
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