In a recent decision, the two-judge bench of the Supreme Court held that a Ruler is not liable to income tax in respect of rent received from the requisition of the exempted palace.The Court emphasized that, in such a case, he is entitled to get full benefit of the exemption granted to him under Section 10 (19A) of the Income Tax Act 1961.
In the instant case, the appellant was the Ruler of the princely State of Kota. The Central Government, by Notification, exempted two residential palaces of the appellant by treating it as his official residences. Subsequently, a portion of one of the palace was let out to the Ministry of Defence for their own use for rent. The appellant claims that 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 raised before the Court was that whether the rental income received by the appellant from the requisitioned property by way of rent is taxable in his hands. The appellants submitted that he is entitled to get full benefit of the exemption granted to him under Section 10 (19A) of the Income Tax Act 1961.
Earlier, the first appellate authority and the appellate Tribunal held in favour of the appellant 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.
The Rajastan High Court, placing reliance on the decision in Maharawal Laxman Singh vs. C.I.T., held in favor of the Revenue. The Court observed 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 butwhen 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.The Full bench of the High Court observed thatthe benefit of exemption remains available only to the extent of portion which is in his occupation as residence. Aggrieved with the order of the High Court, the appellant approached the Supreme Court.
The two judge bench comprising of Justice Ranjan Gogoi and Justice A.M Sapre observed that 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. According to the Court, such a distinction 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).”
The Court accepted the contention of the Appellant that the expression “house or part of a house” used in Section 23(2) and (3), does not find place in Section 10(19A) of the I.T. Act. In Section 23, which specifically dealing with thecases relating to “palace” also do not contain such an expression.
“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.” The Court added.
“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.” Accordingly, the appeal was allowed.
Read the full text of the Judgment below.
