Exemption on ‘palace’ under Section 10(19A), Income Tax Act cannot be split in two parts, i.e., the one in occupation and the other in possession of the tenant

Supreme Court: Deciding the question as to whether a former ‘ruler’ 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 Court held that the Legislature did not intend to tax portion of the “palace” by splitting it in parts. Even if the Ruler had let out the portion of his residential palace, yet he would continue to enjoy the exemption in respect of entire palace because it is not possible to split the exemption in two parts, i.e., the one in his occupation and the other in possession of the tenant.

Interpreting the related provisions, the Court said 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. No reliance could be placed on Section 5(iii) of the Wealth Tax Act while construing Section 10(19A) for the reason that the language employed in Section 5(iii) is not identical with the language of Section 10(19A) of the I.T. Act. If the Legislature intended to split 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. Also, 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, there is no such expression in Section 23, specifically dealing with the cases relating to “palace”.

In the present case which related to the ‘Umed Bhawan Palace’ used by the ‘ruler’ as his official residence and some part of which had been requisitioned to the Defence Ministry, the bench of Ranjan Gogoi and Abhay Manoher Sapre, JJ further said 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. [Maharao Bhim Singh of Kota v. Commissioner of Income Tax, 2016 SCC OnLine SC 1428, decided on 05.12.2016]

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