REGENT COMPUTRONICS PVT. LTD.

COMMISSIONER OF INCOME TAX Appellant

V/S

Maharao Bhim Singh Respondents

Referred Judgements :-

JUDGEMENT

(1.) This reference has been made by the Division Bench vide order dated 25.05.1988 to the Larger Bench on account of conflict opinion expressed by two Division Benches of this court on the question whether the rental income received by the Ruler from part of the palace, which was declared as his official residence under the Merged States (Taxation Concessions) Order, 1949 or Part B States (Taxation Concessions) Order, 1950, would be exempt from income tax or the same would be included in the total income of the Ruler as an assessee for the purpose of taxation?

(2.) Earlier Division Bench judgment was rendered in Maharawal Laxman Singh Vs. C.I.T., 1986 160 ITR 103 , in which it was held that under Section 10(19A) of the Income Tax Act, 1961, the annual value of any one palace in the occupation of a Ruler is exempt from tax in computing his total income. The Division Bench, while interpreting the phraseology "the annual value of any one of the palace in the occupation of Ruler", relied on judgment of the Supreme Court in Industrial Supplies (P.) Ltd. Vs. Union of India, 1980 AIR(SC) 1858 for distinction between 'owner' and 'occupier', wherein meaning of these words was considered and it was held that in legal sense the 'occupier' is a person in actual occupation. The Division Bench also relied on the Delhi High Court judgment in Mohammad Ali Khan Vs. C.W.T.,1983 14 ITR 948. The word "occupation" means that the Ruler (occupier) continues to occupy the palace, i.e., it should be in his actual use or actual possession and he should exercise actual physical control over the palace. When a portion of the palace has been let out to tenants on rent, the Ruler is not in occupation of the entire palace and cannot be said to be in actual possession or in actual use of the portion of the palace occupied by the tenants. Therefore, the annual value of the portion of the palace which was rented out to the tenants, is not exempt from tax and is to be added to the total income of the Ruler.

(3.) In subsequent Division Bench judgment in C.I.T. Vs. H.H. Maharao Bhim Singhji, 1988 173 ITR 79 (Raj.), it was held that exemption would be available in respect of entire palace where the palace of the Ruler of Indian State is declared to be his official residence, even if part of the palace is given on rent. It is not possible to split up one palace into parts for granting exemption only to that part, which is in self-occupation of a Ruler as his official residence and to deny the benefit of exemption to the other portion of the palace rented out by him, since the entire palace is declared as his official residence.

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COMMISSIONER OF INCOME TAX Vs. MAHARAO BHIM SINGH

Referred Judgements :-

JUDGEMENT

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