Reportable IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 2812 OF 2015 Maharao Bhim Singh of Kota Thr. Maharao Brij Raj Singh, Kota .Appellant(s) VERSUS Commissioner of Income-tax, Rajasthan-II, Jaipur Respondent(s) JUDGMENT Abhay Manohar Sapre, J. 1. This appeal is filed against final order dated 26.03.2014 passed by High Court of Rajasthan at Jaipur in D.B. Income Tax Reference No. 64 of 1986 relating to Assessment Year 1978-79 whereby Full Bench of High Court answered question of Signature Not Verified Digitally signed by law referred to it against appellant herein. NIDHI AHUJA Date: 2016.12.05 16:44:24 IST Reason: 2. In order to appreciate issue involved in 1 appeal, it is necessary to state relevant facts in brief infra. 3. appellant was Ruler of princely State of Kota, now part of State of Rajasthan. He owned extensive properties which, inter alia, included his two residential palaces known as "Umed Bhawan Palace" and "City Palace . appellant is using Umed Bhawan Palace for his residence. So far as this appeal is concerned, issue involved herein centers around "Umed Bhawan Palace". 4. In exercise of powers conferred by Section 60A of Indian Income Tax Act, 1922 (XI of 1922), Central Government issued order called "The Part B States (Taxation Concessions) Order, 1950" (hereinafter referred to as "The Order"). It was issued essentially to grant exemptions, reductions in rate of tax and modifications in relation to specified kinds of income earned by persons (Ruler and his family 2 members) from various sources as specified therein. Order was published in Gazette of India, extraordinary, on 02.12.1950. 5. Paragraph 15 of Order deals with various kinds of exemptions. Item (iii) of Paragraph 15, which is relevant for this appeal, provides that bona fide annual value of residential palace of Ruler of State which is situate within State and is declared by Central Government as his inalienable ancestral property would be exempt from payment of Income-tax. 6. In pursuance of powers conferred under item (iii) of Paragraph 15 of Order, Central Government, Ministry of Finance(Revenue Division) issued notification bearing No. S.R.O.1619 dated 14.05.1954 declaring appellant's aforementioned two palaces, viz., Umed Bhawan and City Palace as his official residences (Serial no. 21 of Table). 3 7. On 20.09.1976, Ministry of Defence requisitioned portion of Umed Bhawan Palace (918.26 Acres of land including houses and other construction standing on land) for their own use and realized Rs.80,000/- as rent by invoking provisions of Requisition and Exhibition of Immovable Property Act, 1952. According to appellant, period for which land was requisitioned expired in 1993 though land still continues to remain in occupation of Ministry of Defence. 8. With aforementioned factual background, question arose in appellant's income-tax assessment proceedings regarding taxability of income derived by appellant (assesse) from part of property requisitioned by Defence Ministry, which was portion of appellant's official residence (Umed Bhawan Palace). question was whether rental income received by appellant from 4 requisitioned property by way of rent is taxable in his hands. In other words, question was as to whether appellant is entitled to get full benefit of exemption granted to him under Section 10 (19A) of Income Tax Act 1961 (for short, "the I.T. Act") from payment of income-tax or it is confined only to that portion of palace which is in his actual occupation as residence and rest which is in occupation of tenant would be subjected to payment of tax. 9. Commissioner of Income Tax(Appeals) Rajasthan-II by order dated 23.02.1984 in Appeal No. CIT(A)/JPR/8/81-82 answered question in appellant's favour and held that since appellant was in occupation of part of his official residence during assessment year in question, he was entitled to claim full benefit of exemption for his official residence as provided under Section 10 (19A) of I.T. Act notwithstanding fact that portion of 5 residence is let out to Defence Ministry. Revenue, felt aggrieved, carried matter in appeal before Income Tax Appellate Tribunal. By order dated 11.07.1985, Tribunal affirmed order of Commissioner of Income Tax and dismissed Revenue's appeal. Tribunal, however, on application made by Revenue under Section 256(1) of I.T. Act referred following question of law to High Court of Rajasthan for answer. "Whether on facts and in circumstances of case, Tribunal was justified in holding that rental income from Umed Bhawan Palace was exempt under Section 10(19A) of IT Act,1961." 10. Division Bench of High Court while hearing reference noticed cleavage of opinion on question referred in this case in two earlier decisions of High Court of Rajasthan. One was in case of Maharawal Laxman Singh vs. C.I.T., (1986) 160 ITR 103(Raj.) and another was in 6 appellant s own case, C.I.T. vs. H.H. Maharao Bhim Singhji, (1988)173 ITR 79(Raj.). So far as case of Maharwal Laxman Singh (supra) is concerned, High Court had answered question in favour of Revenue and against assesse, wherein it was held that in such factual situation arising in case, annual value of portion which was in occupation of tenant is not exempt from payment of Income-tax and, therefore, income derived therefrom is required to be added to total income of assessee, whereas in case of H.H. Maharao Bhim Singhji (supra), High Court answered question against Revenue and in favour of assesse holding therein that in such situation, assessee is entitled to claim full exemption in relation to his palace under Section 10(19A) of I.T. Act notwithstanding fact that portion of palace is let out to tenant. It was held that any rental income 7 derived from part of his rental property is, therefore, not liable to tax. Division Bench, therefore, referred matter to Full Bench to resolve conflict arising between two decisions and answer referred question on merits. 11. By impugned order dated 26.03.2014, High Court answered question against appellant (assessee) and in favour of Revenue. While referring to various authorities of this Court and High Courts, it was held that law laid down in C.I.T. vs. H.H. Maharao Bhim Singhji, (supra) does not lay down correct principle of law whereas law laid down in Maharawal Laxman Singh vs. C.I.T. (supra) lays down correct principle of law. It was held that so long as 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 I.T. Act but 8 when he is found to have let out any part of his official residence and at 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 entire palace. It was held that in such circumstances, he is required to pay income-tax on income derived by him from portion let out in accordance with provisions of I.T. Act and benefit of exemption remains available only to extent of portion which is in his occupation as residence. It is against this order, assessee has filed this appeal. 12. Heard Mr. Gopal Subramaniam, learned senior counsel, for appellant (assessee) and Mr. Y.P. Adhyaru, learned senior counsel, for respondent (Revenue). 13. Mr. Gopal Subramaniam while assailing legality and correctness of impugned order 9 contended that reasoning and conclusion arrived at by High Court is not legally sustainable for various reasons. 14. In first place, learned senior counsel urged that when question involved in this appeal, was already decided in favour of appellant in all previous assessment years (1973-74 to 1977-78), by this Court, there was no justifiable reason for Revenue to have pursued same question again only for assessment year in question (1978-79) to High Court. Learned counsel urged that in any event, High Court should have taken note of this fact and answered reference in appellant's favour by placing reliance on earlier decision in case of H.H. Maharao Bhim Singhji (supra). In support of this submission, learned counsel placed reliance on decisions of this Court in M/s Radhasoami Satsang, Saomi Bagh, Agra vs. Commissioner of Income Tax, 10 (1992) 1 SCC 659, Parashuram Pottery Works Co. Ltd. vs. Income Tax Officer, Circle-I, Ward Rajkot, Gujarat, (1977) 1 SCC 408 and Commissioner of Income Tax vs. Excel Industries Ltd., (2014) 13 SCC 459. 15. In second place, learned counsel contended that since issue involved herein pertains to grant of exemption to assessee from payment of income-tax under Section 10(19A) of I.T. Act read with paragraph 15 of Order, such provisions should be regarded as exception and construed liberally in appellant s favour unlike charging provisions, which are interpreted strictly. Reliance was placed on decision of this Court in case of Union of India & Ors. vs. Wood Papers Ltd. & Anr., (1990) 4 SCC 256 and other decisions. 16. In third place, learned counsel contended that High Court was not justified in placing 11 reliance on Section 5(iii) of Wealth Tax Act,1957 while interpreting Sections 10(19A), 22 and 23 of I.T. Act and Paragraph 15 of Order. Learned counsel pointed out that Section 5(iii) of Wealth Tax Act and Section 23 of I.T. Act are neither in pari materia with each other and nor identically worded. Learned counsel pointed out difference in language employed in both aforementioned sections in support of his submission. 17. In fourth place, learned counsel contended that question involved in this appeal has already been answered by M.P. High Court in case of Commissioner of Income-tax vs. Bharatchandra Banjdeo, (1985) 154 ITR 236(MP) = 1986 (27) Taxman 456 (M.P.) in favour of assessee. It was urged that there was no justifiable reason for High Court to have departed from view taken by M.P. High Court. Learned counsel urged that reason given for 12 distinguishing view taken by M.P. High Court is not well founded and more so when it has already been relied on by Rajasthan High Court in H.H. Maharao Bhim Singhji (supra) in appellant s own case. 18. In fifth place, learned counsel contended that there is significant departure in wordings of Section 10(19A) and Section 23 of I.T. Act. Learned counsel pointed out that Section 10(19A) does not use same expression which occurs in Section 23(2), namely, "annual value of such house or part of house". According to learned counsel, absence of these words in Section 10(19A) of I.T. Act goes to show that appellant is entitled to claim exemption applicable to entire palace even though part of palace is in occupation of tenant. It was urged that splitting of palace is not permissible under Section 10 (19A) of I.T. Act though it is permissible in house . 13 19. It is these submissions, which were elaborated by learned counsel with reference to case law and interpretative process of relevant provisions of I.T. Act and Order. 20. In reply, learned counsel for respondent (Revenue) supported reasoning and conclusion arrived at by High Court and prayed for its upholding. 21. Having heard learned counsel for parties and upon perusal of record of case and written submissions, we find force in submissions urged by learned counsel for appellant (assessee). 22. Section 10(19A) of I.T. Act and Paragraph 15(iii) of Order, which are relevant for this case, read as under: Section 10(19A) of I.T. Act Section 10. Incomes not included in total income.-In computing total income of previous year of any person, 14 any income falling within any of following clauses shall not be included- 1 to 19 (19A) annual value of any one palace in occupation of Ruler, being palace, annual value whereof was exempt from income-tax before commencement of Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of provisions of Merged States (Taxation Concessions) Order, 1949, or Part B States (Taxation Concessions) Order, 1950, or, as case may be, Jammu and Kashmir (Taxation Concessions) Order, 1958: Provided that for assessment year commencing on 1 st day of April, 1972, annual value of every such palace in occupation of such Ruler during relevant previous year shall be exempt from income-tax;] Paragraph 15 of Order 15. Exemptions-Any income falling within following classes shall be exempt from income-tax and super-tax and shall not be included in total income or total world income of person receiving them: (i) .. (ii) . (iii) bona fide annual value of residential palace of Ruler of State which is situate within State and is declared by Central Government as his inalienable ancestral property. 23. Section 10 provides that in computing total income of previous year of any person, any income 15 falling within any of sub-clauses of Section 10 shall not be included. Sub-clause (19A) says that annual value of any one palace which is in occupation of Ruler and whose annual value was exempt from income-tax before commencement of Constitution (Twenty-sixth Amendment) by virtue of provisions of Merged States (Taxation concessions) Order, 1949 or Part B States (Taxation Concessions), Order 1950 would be exempt from payment of income-tax. 24. As mentioned above, Paragraph 15 (iii) grants exemption to bona fide annual value of residential palace of Ruler of State, which is declared by Central Government to be Rulers ancestral property from payment of income-tax. 25. In order to claim exemption from payment of income-tax on residential palace of Ruler under Section 10(19A), it is necessary for Ruler to satisfy 16 that first, he owns palace as his ancestral property; second, such palace is in his occupation as his residence; and third, palace is declared exempt from payment of income-tax under Paragraph 15 (iii) of Order, 1950 by Central Government. 26. Now, question arises that where part of residential palace is found to be in occupation of tenant and remaining is in occupation of Ruler for his residence, whether in such circumstances, Ruler is entitled to claim exemption for whole of his residential palace under Section 10(19A) or such exemption would confine only to that portion of palace which is in his actual occupation. In other words, whether exemption would cease to apply to let out portion thereby subjecting income derived from let out portion to payment of income-tax in hands of Ruler. 27. This very question was examined by M.P. 17 High Court in case of Bharatchandra Banjdeo (supra) in detail. It was held that no reliance could be placed on Section 5(iii) of Wealth Tax Act while construing Section 10(19A) for reason that language employed in Section 5(iii) is not identical with language of Section 10(19A) of I.T. Act. Their Lordships distinguished decision of Delhi High Court rendered in case of Mohd Ali Khan vs. CIT, (1983)140 ITR 948(Delhi), which arose under Wealth Tax Act. It was held that even if Ruler had let out portion of his residential palace, yet he would continue to enjoy exemption in respect of entire palace because it is not possible to split exemption in two parts, i.e., one in his occupation and other in possession of tenant. 28. Justice G.L. Oza, learned Chief Justice (as His Lordship then was), speaking for Bench held as under: 8. It is, therefore, clear that under this 18 order income from all palaces of Ruler which are declared to be official residence were exempt. Under clause (19A) of Section 10, only one palace in occupation has been exempted and it appears that similarly in W.T. Act instead of using word "palace" they have used words "one building in occupation of Ruler" which has been exempted from tax. 9. It is not in dispute that in this reference property in question is palace. It is also not in dispute that portion of it is in occupation. only question which has been raised by learned counsel for Revenue is that if only portion of palace is in occupation, exemption under clause (19A) of Section 10 would be available only for that part and not for whole. change brought about by insertion under Merged States (Taxation Concessions) Order is clearly illustrated by two provisions quoted above. By clause (19A), exemption has been limited only to one palace in occupation. If Legislature intended further splitting up, it would have been provided in clause (19A) that such portion of palace in occupation is only exempted, but it appears that language used by Legislature did not contemplate further splitting up. In Mohd. Ali Khan's case: [1983] 140 ITR 948(Delhi) which is case under W.T. Act, only question considered was that if palace which was declared to be official residence had number of buildings, as exemption under W.T. Act is available only in respect of one building which is in occupation and, therefore, assessee's contention, that other buildings which may not be in 19 occupation but declared to be official residence should be exempted, was not accepted. In clause (19A) of Section 10, in place of "building", phrase employed is "one palace" and so far as case in hand is concerned, it is not disputed that this official residence is only one palace and not more than one. Under these circumstances, in our opinion, clause (19A) could not be interpreted to mean that it contemplates further splitting up of portions of palace. language of clause (19A) of Section 10 does not justify it. It is settled that in cases of exemption, language of statute has to be liberally construed but even if this principle is not considered, there are no words in clause (19A) of Section 10 from which intention for splitting up of palace into portions could be gathered. In this view of matter, therefore, contention advanced by learned counsel for Revenue cannot be accepted. 29. Relying upon aforesaid decision, Rajasthan High Court in case of appellant herein in Commissioner of Income-Tax vs. H.H. Maharao Bhim Singhji, (supra) answered question in favour of appellant for assessment years (1973-74 to 1977-78). 30. Justice J.S. Verma, learned Chief Justice (as 20 His Lordship then was) speaking for Bench held as under: So far as first question relating to exemption claimed under section 10(19A) is concerned, there is direct decision in CIT v. Bharatchandra Banjdeo, [1985]154ITR236(MP) . It was held therein that it is not possible to split up one palace into parts for granting exemption only to that part in self-occupation of ex-Ruler as his official residence and to deny benefit of exemption to other portion of palace rented out by Ruler, since entire palace is declared as his official residence. Accordingly, it was held that even if only part of palace is in self-occupation of former Ruler and rest has been let out, exemption available under section 10(19A) will be available to entire palace. No decision taking contrary view has been cited before us. We do not find any good ground to depart from that view, when view taken in that decision is undoubtedly plausible view. In case of taxing statute, plausible view in favour of assessee should be preferred in these circumstances. Following that decision, first question has to be answered against Revenue and in favour of assessee. 31. Following aforesaid view, High Court of Rajasthan declined to make reference to High Court under Section 256(1) of I.T. Act in later 21 Assessment Years and dismissed application made by Revenue under Section 256(2) of I.T. Act (see- (Commissioner of Income-Tax vs. H.H. Maharao Bhim Singh (2002)124 Taxman 26) with following observations. 5. In coming to this conclusion, this Court has followed another decision of Madhya Pradesh High Court in CIT vs. Bharatchanda Banjdeo (1985) 154 ITR 236 (M.P.). decision of this Court in CIT vs. H.H. Maharao Bhim Singhji (1988) 173 ITR 79, we are informed by learned counsel, has not been appealed against. 6. In that view of matter, we are of opinion that application under Section 256(1) has rightly been rejected by Tribunal and do not deserve further consideration. 32. In our considered opinion, view taken by Madhya Pradesh High Court in case of Bharatchandra Banjdeo (supra) and one taken in case of appellant in Maharao Bhim Singhji s case (supra) by rightly placing reliance on Bharatchandra Banjdeo s case (supra) is correct view and we find no good ground to take any other 22 view. 33. As rightly held in case of Bharatchandra Banjdeo (supra), no reliance could be placed on Section 5(iii) of Wealth Tax Act while construing Section 10(19A) of I.T. Act. It is due to marked difference in language employed in both sections. It is apposite to reproduce Section 5 (iii) of Wealth Tax Act as under: 5. Exemptions in respect of certain assets-Wealth-tax shall not be payable by assessee in respect of following assets and such assets shall not be included in net wealth of assessee- (i) .. (ii) . (iii) any one building in occupation of Ruler, being building which immediately before commencement of Constitution (Twenty-sixth Amendment) Act, 1971, was his official residence by virtue of declaration by Central Government under paragraph 13 of Merged States (Taxation Concessions) Order, 1949, or paragraph 15 of Part B States (Taxation Concessions) Order, 1950; 34. We find that in Section 10(19A) of I.T. Act, Legislature has used expression "palace for 23 considering grant of exemption to Ruler whereas on same subject, Legislature has used different expression namely "any one building" in Section 5 (iii) of Wealth Tax Act. We cannot ignore this distinction while interpreting Section 10(19A) which, in our view, is significant. 35. In our considered opinion, if Legislature intended to spilt Palace in part(s), alike houses for taxing subject, it would have said so by employing appropriate language in Section 10(19A) of I.T. Act. We, however, do not find such language employed in Section 10(19A). 36. As rightly pointed out by learned senior counsel for appellant, Section 23(2) and (3), uses expression house or part of house . Such expression does not find place in Section 10(19A) of I.T. Act. Likewise, we do not find any such expression in Section 23, specifically dealing with 24 cases relating to palace . This significant departure of words in Section 10(19A) of I.T. Act and Section 23 also suggest that Legislature did not intend to tax portion of palace by splitting it in parts. 37. It is settled rule of interpretation that if two Statutes dealing with same subject use different language then it is not permissible to apply language of one Statute to other while interpreting such Statutes. Similarly, once assessee is able to fulfill conditions specified in section for claiming exemption under Act then provisions dealing with grant of exemption should be construed liberally because exemptions are for benefit of assessee. 38. In light of these reasonings, we are of considered opinion that view taken by M.P. High Court in Bharatchandra Banjdeo s case (supra) 25 and Rajasthan High Court in H.H. Maharao Bhim Singhji s case (supra) is correct view. 39. We also notice that 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 Revenue was dismissed by this Court on 25.08.2010 by affirming order of Rajasthan High Court referred supra. 40. In such factual situation where Revenue consistently lost matter on issue then, in our view, there was no reason much less justifiable reason for Revenue to have pursued same issue any more in higher courts. 41. Though principle of res judicata does not apply to income-tax proceedings and each assessment year is independent year in itself, yet, in our view, in absence of any valid and convincing reason, there was 26 no justification on part of Revenue to have pursued same issue again to higher Courts. There should be finality attached to issue once it stands decided by higher Courts on merits. This principle, in our view, applies to this case on all force against Revenue. [see M/s Radhasoami Satsang, Saomi Bagh, Agra s case (supra)]. 42. Learned Counsel for respondent (Revenue) though made sincere attempt to persuade us to uphold view taken by High Court but in light of what we have held above, we are unable to accept his submissions. 43. In light of foregoing discussion, in our considered opinion, reasoning and conclusion arrived at by High Court in impugned order including view taken by Rajasthan High Court in Maharaval Lakshmansingh s case (supra) does not lay down correct principle of law whereas view 27 taken by M.P. High Court in cases of Bharatchandra Bhanjdeo (supra), Commissioner of Income-Tax vs. Bharatchandra Bhanjdev (1989)176 ITR 380 (MP) and H.H. Maharao Bhim Singhji (supra) lays down correct principle of law. 44. This takes us to last submission of learned counsel for appellant who made feeble attempt to question legality and propriety of requisition proceedings initiated by Central Government (Ministry of Defence) in relation to portion of land. It was urged that even after expiry of period of requisition, Defence Ministry, continues to remain in possession of land to detriment of interest of appellant. To say least, in our view, this submission is wholly misplaced in this appeal. 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 28 out of income-tax proceedings and has nothing to do with requisition proceedings of land. 45. In view of foregoing discussion, appeal succeeds and is accordingly allowed. impugned order is set aside. As consequence, question referred to High Court in reference proceedings out of which this appeal arises is answered in favour of appellant (assessee) and against Revenue. ..........J. [RANJAN GOGOI] .........J. [ABHAY MANOHAR SAPRE] New Delhi, December 05, 2016. 29 ITEM NO.1A COURT NO.9 SECTION IIIA (For judgment) SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Civil Appeal No. 2812/2015 MAHARAO BHIM SINGH OF KOTA THROUGH MAHARAO BRIJ RAJ SINGH, KOTA Appellant(s) VERSUS COMMISSIONER OF INCOME TAX, RAJASTHAN-II, JAIPUR Respondent(s) Date : 05/12/2016 This appeal was called on for pronouncement of judgment today. For Appellant(s) Mr. Gopal Subramanium, Sr. Adv. Ms. Kavita Jha, Adv. For Respondent(s) Mrs. Anil Katiyar, Adv. Hon'ble Mr. Justice Abhay Manohar Sapre pronounced judgment of Bench comprising Hon'ble Mr. Justice Ranjan Gogoi and His Lordship. appeal is allowed in terms of signed reportable judgment. (Nidhi Ahuja) (Mala Kumari Sharma) Court Master Court Master [Signed reportable judgment is placed on file.] 30 Maharao Bhim Singh v. Commissioner of Income-tax, Rajasthan-II, Jaipur