Landmark Judgements of Supreme Court on Section Section 10(19A) [Annual value of any one palace]
As long as an assessee continues to remain in occupation of his official residential palace for his own use, he would be entitled to claim exemption under section 10(19A) for entire palace notwithstanding fact that a part of his official residence has been let out
The assessee was the ruler of the princely State of Kota. He was using Umed Bahwan Palace for his residence. In exercise of the powers conferred by section 60A of the Indian Income-tax Act, 1922 (XI of 1922), the Central Government issued an order called 'The Part B States (Taxation Concessions) Order, 1950' to grant exemptions, reductions in rate of tax and the modifications in relation to specified kinds of income earned by the persons (Ruler and his family members) from various sources as specified therein.
The question was whether the rental income received by the assessee from the requisitioned property by way of rent was taxable in his hands. In other words, the question was as to whether the assessee was entitled to get full benefit of the exemption granted to him under section 10(19A) or it was confined only to that portion of palace which was in his actual occupation as residence and the rest which was in occupation of the tenant would be subjected to payment of tax.
The Commissioner (Appeals) held that since the assessee 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 as provided under section 10(19A) notwithstanding the fact that portion of the residence was let out to the Defence Ministry. The Tribunal affirmed the order of the Commissioner (Appeals).
The High Court held that so long as the assessee continued 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) but when he was found to have let out any part of his official residence and at the same time was found to have retained its remaining portion for his own use, he would become disentitle to claim benefit of exemption available under section 10(19A) for the entire palace. It was held that in such circumstances, he was required to pay tax on the income derived by him from the portion let out in accordance with the provisions of the Act and the benefit of exemption remained available only to the extent of portion which was in his occupation as residence. On appeal to the Supreme Court:
Rulers, annualvalue of any one palace occupied by ex-ruler (Rental income) - As long as an assessee continues to remain in occupation of his official residential palace for his own use, he would be entitled to claim exemption under section 10(19A) for entire palace notwithstanding fact that a part of his official residence has been let out. [In favour of assessee] - [Maharao Bhim Singh of Kota v. CIT, Jaipur (2017) 244 Taxman 139 (2016) 76 taxmann.com 274 (SC)]
Palace - Annual value - Occupation of a Ruler- Rental income was held to be exempt - Though principles of res judicata do not apply, the Department should not endlessly pursue matters which have attained finality in earlier years
Allowing the appeal the Court held that ;(i) No reliance could be placed on Section 5(iii) of the Wealth Tax Act while construing Section 10(19A) of the I.T. Act. It is due to marked difference in the language employed in both sections. 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. (ii) 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). 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 24 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. (iii) 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. (iv) The question involved in this case had also arisen in previous Assessment Years’ (1973-74 till 1977-78) and was decided in appellant’s favour when Special Leave Petition(c) No. 3764 of 2007 filed by the Revenue was dismissed by this Court on 25.08.2010 by affirming the order of the Rajasthan High Court referred supra. In such a factual situation where the Revenue consistently lost the matter on the issue then, in our view, there was no reason much less justifiable reason for the Revenue to have pursued the same issue any more in higher courts. (v) Though principle of res judicata does not apply to income-tax proceedings and each assessment year is an independent year in itself, yet, in our view, in the absence of any valid and convincing reason, there was no justification on the part of the Revenue to have pursued the same issue again to higher Courts. There should be a finality attached to the issue once it stands decided by the higher Courts on merits. This principle, in our view, applies to this case on all force against the Revenue. (Related Assessment year : 1978-79) – [Maharao Bhim Singh of Kota v. CIT ( 2016) 390 ITR 532 : 290 CTR 601 : 244 Taxman 139 : 144 DTR 249 (SC)]