Holding

The exemption under Section 10(19A) and Paragraph 15(iii) of the 1950 Order applies to the whole palace of a ruler even if part is let out, as the statute does not contemplate a split of the exemption.

Summary

Maharao Bhim Singh, the ruler of the former princely State of Kota, owned the Umed Bhawan residential palace, part of which was requisitioned and let out to the Ministry of Defence, generating rent. The issue before the Supreme Court was whether the exemption under Section 10(19A) of the Income‑Tax Act, 1961 and Paragraph 15(iii) of the Part B States (Taxation Concessions) Order, 1950, applied to the whole palace or only to the portion actually occupied by the ruler. The Court examined the language of the statute, noting that it uses the term “palace” and does not contain any wording permitting a split of the exemption, and rejected reliance on the Wealth Tax Act, which uses different terminology. Relying on earlier decisions (Bharatchandra Banjdeo and H.H. Maharao Bhim Singh) and the principle of liberal construction of tax exemptions, the Court held that the exemption covers the entire palace even if part is let out. The appeal was allowed, setting aside the Rajasthan High Court order and granting the exemption for the whole palace.

Issues considered

Whether the exemption under Section 10(19A) of the Income‑Tax Act and Paragraph 15(iii) of the Part B States (Taxation Concessions) Order, 1950, applies to the entire residential palace of a ruler when a portion is let out.
Whether the language of Section 10(19A) permits splitting the exemption between occupied and let‑out portions of a palace.
Whether provisions of the Wealth Tax Act, 1957 can be used to interpret Section 10(19A).
Whether the principle of finality/res judicata bars re‑litigation of the same tax issue in subsequent assessment years.

Legislation cited

Income Tax Act, 1961s. 10(19A)
Merged States (Taxation Concessions) Order, 1949
Part B States (Taxation Concessions) Order, 1950s. Paragraph 15(iii)
Wealth Tax Act, 1957s. 5(iii)

Subjects

Income TaxSection 10(19A)Palace exemptionStatutory interpretationRes judicataTax exemptionRuler's residential property

Judgment

[2016] 11 S.C.R. 193

MAHARAO BHIM SINGH OF KOTA THR.MAHARAO BRIJ A
RAJ SINGH, KOTA
v.
COMMISSIONER OF INCOME-TAX, RAJASTHAN-11, JAIPUR
(Civil Appeal No. 2812of2015) B
DECEMBER 05, 2016
[RANJAN GOGOi AND ABHAY MANOHAR SAPRE, JJ.]
Income Tax Act, 1961: s. 10(19A) - Exemption ji·om payment
of income-tax on the residential palace of the Ruler - Part of the
residential palace found to be in occupation of tenant and remaining
c
in occupation of the Ruler for his residence - Ruler entitled to claim
exemption for whole of his residential palace u/s. 1O(l9A) or such
exemption would confine only to that portion of palace in his actual
occupation - Held: Even if the Ruler had let out the portion of his
residential palace, yet he would continue to enjoy the exemption in D
respect of entire palace because it is not possible to split the
exemption in two parts-one in his occupation and the other in
possession of the tenant - If Legislature intended to spill the 'palace'
in part(s), alike houses for taxing the subject, it would have said so
by employing appropriate language ins. 10(19A), however; no such
E
language is employed therein - Part B States (Taxation Concessions),
Order 1950 - Paraf;raph 15 (iii).
Interpretation of Statutes: Rule of interpretation - 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 - Likewise, once assesseejuljills F
the conditions specified in section for claiming exe111ptio:1 under
the Act then provisions dealing with grant of exemption to be
construed liberally because the exemptions are for the benefit of
assessee.
Allowing the appeal, the Court G
HELD: 1.1 Section 10 of the Income Tax Act, 1961 provides
that in computing the total income of a previous year of any
person, any income falling within any of the sub-clauses of Section
10 shall not be included. Sub-clause (19A) says that the annual
value of any one palace which is in occupation of a Ruler and H
193
194 SUPREME COURT REPORTS [2016] 11 S.C.R.

A whose annual value was exempt from income-tax before the
commencement of the Constitution (Twenty-sixth Amendment)
by virtue of the provisions of the Merged States (Taxation
concessions) Order, 1949 or the Part B States (Taxation
Concessions), Order 1950 would be exempt from payme:at of
income-tax. Paragraph 15 (iii) grants exemption to the bona fide
B
annual value of the residential palace of the Ruler of a State, which
is declared by the Central Government to be Rulers ancestral
property from payment of income-tax. [Paras 23, 24][203-A-CJ
1.2 In order to claim exemption from payment of income-
tax on the residential palace of the Ruler under Section 10(19A),
c it is necessary for the Ruler to satisfy that first, he owns the palace
as his ancestral property; !iecond, such palace is in his occupation
as his residence; and third, the palace is declared exempt from
payment of income-tax under Paragraph 15 (iii) of the Order, 1950
by the Central Government. [Para 25][203-D]
D 1.3 The view taken by the Madhya Pradesh High Court in
the case of *B/l(lmtcluuu/m Banjdeo that 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
E his occupation and the other in possession of the tenant; and the
one taken in the case of the appellant in **Malmmo Bltim Singltji's
case by rightly placing reliance on Bltaratc/umdra Banjdeo '.5 case
is the correct view and there is no good ground to take any other
view. As rightly held in the case of Blmmtc/l(lnt/ra Ba11jdeo 's case,
no reliance could be placed on Section 5(iii) of the Wealth Tax
F Act while construing Section 10(19A) of the I.T. Act. It is due to
marked difference in the language employed in both sections.
[Paras 32, 33][206-E-F]
Co111111issioner of Income-tax v. Bharatchandra Banjdeo
(1985) 154 ITR 236 (MP); C.I.T. v. H.H. Maharao Bhim
G Singhji (1988)173 ITR 79(Raj.) - approved.
1.4 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
H S(iii) of the Wealth Tax Act. This distinction cannot be ignored
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 195
RAJASTHAN-11, JAIPUR

while interpreting Section 10(19A) which is significant. If the A
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. However,
no such language is employed in Section 10(19A). [Paras 34,
35][207-C-D]
B
1.5 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, no such expression is found in
Section 23, specifically dealing with the cases relating to ".oalace".
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 c
intend to tax portion of the "palace" by splitting it in parts. [Para
36] [207-E]
1.6 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 othzr while D
interpreting such Statutes. Similarly, once the assessce 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 asscssee. [Para 37)(207-F-G] E
1. 7 The q ucstion involved in the instant 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. F
In such a factual situation where the Revenue consistently lost
the matter on the issue then, there was no reason much less
justifiable reason for the Revenue to have pursued the same issue
any more in higher courts. [Paras 39, 40][208-A-B]
1.8 Though principle of res judicutu docs not apply to income- G
tax proceedings and each assessment year is an independent year
in itself, yet, 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, applies to the instant case on all H
196 SUPREME COURT REPORTS r1016111 S.C.R.

A force against the Revenue. [Para 41) (208-C-D]
Mis Radhasoami Satsang, Saomi Bagh, Agra v.
Commissioner of Income Tax (1992) 1 SCC 659 : 1991
(2) Suppl. SCR 312 - referred to.
1.9 The reasoning and the conclusion arrived at by the High
B Court in the impugned order does not lay down correct principle
of law. The impugned order is set aside. The question is answered
in favour of the appellant (assessee) and against the Revenue.
[Paras 43, 45) [208-E-F; 209-B]
*Commissioner of Income-tax v. Bharatchandra
c Bm1jdeo (1985) 154 ITR 236 (MP); Co111111issio11er of
Income-Tax v. Bharatchandra Bhanjdev (1989) 176
ITR 380 (MP); **CIT. v. HH Maharao Bhi111 Singlyi.
(1988)173 ITR 79 (Raj.) - approved.
Maharawal Lax111an Singh v. C.I.T. (1986) 160 ITR 103
D (Raj.) - disapproved.
The Parashuram Pottery Works Co. Ltd. v. The Income
Tax Officer, Circle-l Ward 'A' Rajkot, Gujarat (1977) 1
SCC 408 : 1977 (2) SCR 92; Com111issio11er of Income
Tax v. Excel Industries Ltd. (2014) 13 SCC 459 : 2013 ·
(10) SCR 490; Union of India & Ors. v. Wood Papers
E
Ltd. & Am: (1990) 4 sec 256 : 1990 (2) SCR 659;
Mohd Ali Khan v CIT (1983) 140 ITR 948 (Delhi);
Commissioner of Income-Tax v HH Maharao Bhim
Singh (2002) 124 Taxman 26 - referred to.
Case Law Reference
F
1991 (2) Suppl. SCR 312 referred to Para 14
1977 (2) SCR 92 referred to Para 14
20p (10) SCR 490 referred to Para 14
1990 (~) SCR 659 referred to Para 15
G (1983) 140 ITR 948 (Delhi) referred to Para 27
(2002) 124 Taxman 26 approved Para38
(1986) 160 ITR 103 (Raj.) disapproved Para 43
(1989) 176 ITR 380 (MP) approved Para 43
(1985) 154 ITR 236 (MP) approved Paras 32,33, 38,43
H
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT. 197
RAJASTHAN-11, JAIPUR

(1988) 173 ITR 79 (Raj.) approved Paras 32, 38,43 A
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2812
of2015.
From the Judgment and Order dated 26.03.2014 of the High Court
of Rajasthan at Jaipur in Income Tax Reference No. 64 of 1986.
Gopal Subramanium, Sr. Adv., Ms. Kavita Jha, Vaibhav Kulkarni, B
Ad vs., for the Appellant.
Y. P. Adhyaru, Sr. Adv., H. Raghavendra Rao, Rupesh Kumar,
S. A. Haseeb, R.R. Rajesh, Soumya Sinha, S. A. Siddiqui, M. K. Maroria,
Mrs. Anil Katiyar, Ad vs., for the Respondent.
The Judgment of the Cou1t was delivered by C
ABHAY MANOHAR SAPRE, J. I. This appeal is filed against
the final order dated 26.03.2014 passed by the High Court ofRajasthan
at Jaipur in D.B. Income Tax Reference No. 64 of 1986 relating to the
Assessment Year 1978-79 whereby the Full Bench of the 1-Iigh Court
answered the question of law referred to it against the appellant herein. o
2. In order to appreciate the issue involved in the appeal, it is
necessary to state the relevant facts in brief infra.
3. The appellant was the Ruler of the princely State ofKota, now
a part of State of Rajasthan. He owned extensive properties which,
inter alia, included his two residential palaces known as "Umed Bhawan E
Palace" and "City Palace". The appellant is using Urned Bhawan
Palace for his residence. So far as this appeal is concerned, the issue
involved herein centers around "Umed Bhawan Palace".
4. In exercise of the powers conferred by Section 60A of the
Indian Income Tax Act, 1922 (XI of 1922), the Central Government r
issued an 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 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 Order
G
was published in the Gazette oflndia, extraordinary, on 02.12.1950.
5. Paragraph 15 of the Order deals with various kinds of
exemptions. Item (iii) of Paragraph 15, which is relevant for this appeal,
provides that the bona fide annual value of the residential palace of the
Ruler of a State which is situate within the State and is declared by the
H
198 SUPREME COURT REPORTS f2016] 1l S.C.R.

A Central Government as his inalienable ancestral property would be
exempt from payment of Income-tax.
6. In pursuance of the powers conferred under item (iii) of
Paragraph 15 of the Order, the Central Government, Ministry of
Finanee(Revenue Division) issued a notification bearing No. S.R.0.1619
B dated 14.05.1954 declaring the appellant's aforementioned two palaces,
viz., Umed Bhawan and City Palace as his official residences (Serial
no. 21 of the Table).
7. On 20.09.1976, the Ministry of Defence requisitioned portion
of the Umed Bhawan Palace (918.26 Acres of the land including houses
c and other construction standing on the land) fortheirown use and realized
Rs.80,000/- as rent by invoking the provisions of Requisition and Exhibition
oflmmovable Property Act, 1952. According to the appellant, 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.

D 8. With the aforementioned factual background, the question arose
in the appellant's income-tax assessment proceedings regarding taxabil ity
of the income derived by the appellant (assesse) from the part of the
property requisitioned by the Defence Ministry, which was a po11ion of
the appellant's official residence (Umed Bhawan Palace). The qut-stion
was whether the rental income received by the appellant from the
E requisitioned property by way of rent is taxable in his hands. In other
words, the question was as to whether the appellant is entitled to get full
benefit of the exemption granted to him under Section 10 (l 9A) of the
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
F occupation as residence and the rest which is in occupation of the t~nant
would be subjected to payment of tax.
9. The Commissioner of Income Tax(Appeals) Rajasthan-11 by
order dated 23.02.1984 in Appeal No. CIT(A)/JPR/8/81-82 answered
the question in appellant's favour and held that since the appellant was
G in occupation of part of his official residence during the assessmen~ year
in question, he was entitled to claim full benefit of the exemption for his
official residence as provided under Section IO (19A) of the I.T. Act
notwithstanding the fact that portion of the residence is let out to the
Defence Ministry. The Revenue, felt aggrieved, carried the matter in
appeal before the Income Tax Appellate Tribunal. By order dated
H 11.07.1985, the Tribunal affirmed the orderofthe Commissioneroflncome
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 199
RAJASTHAN-11, JAIPUR [ABHAY MANOHAR SAPRE, J.]

Tax and dismissed the Revenue's appeal. The Tribunal, however, on an A
application made by the Revenue under Section 256( 1) of the I. T. Act
referred the following question of law to the High Court of R.ajasthan
for answer.
"Whether on the facts and in the circumstances of the case,
the Tribunal was justified in holding that the rental income B
from Urned Bhawan Palace was exempt under Section
10(19A) of the IT Act,1961."
10. The Division Bench of the High Court while hearing the
reference noticed cleavage of opinion on the question referred in this
case in two earlier decisions of the High Court of Rajasthan. One was c
in the case of Maharawal Laxman Singh vs. C.I.T., ( 1986) 160 lTR
103(Raj.) and another was in appellant's own case, C.I. T. vs. II.II.
Maharao Bhim Singh.ii, ( 1988) 173 lTR 79(Raj.). So far as the case
ofMaharwal Laxman Singh (supra) is concerned, the High Court had
answered the question in favour of the Revenue and against the assesse,
wherein it was held that in such factual situation arising in the case, D
annual value of the portion which was in the occupation of the tenant is
not exempt from payment oflncome-tax and, therefore, income derived
therefrom is required to be added to the total income of the assessee,
whereas in case of Il.H. Maharao Bhim Singhji (supra), the High
Court answered the question against the Revenue and in favour of the E
assesse holding therein that in such a situation, the assessee is entitled to
claim full exemption in relation to his palace under Section 1O(l9A) of
the LT. Act notwithstanding the fact that portion of the palace is let out
to a tenant. It was held that any rental income derived from the part of
his rental property is, therefore, not liable to tax. The Division Bench,
therefore, referred the matter to the Full Bench to resolve the conflict F
arising between the two decisions and answer the referred question on
merits.
11. By impugned order dated 26.03.2014, the High Court answered
the question against the appellant (assessee) and in favour of the
Revenue. While referring to various authorities of this Court and the G
High Courts, it was held that the law laid down in C.I.T. vs. H.H.
Maharao Bhim Singhji, (supra) does not lay down correct principle of
law whereas the law laid down in Maharawal Laxman Singh vs.
C.I.T.(supra) lays down the correct principle of law. It was held that so
long as the assessee continues to remain in occupation of his official
H
200 SUPREME COURT REPORTS f2016l I I S.C.R.

A residential palace for his own use, he would be entitled to claim exemption
available under Section I O(l 9A) of the I.T. Act but when he is found to
have let out any pai1 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 I 0( I 9A)
for the entire palace. It was held that in such circumstances, he is
B
required to pay income-tax on the income derived by him from the portion
let out in accordance with the provisions of the I.T. Act and the benefit
of exemption remains available only to the extent of portion which is in
his occupation as residence. It is against this order, the assessee has
filed this appeal.
c 12. Ikard Mr. Gopal Subramaniam, learned senior counsd, for
the appellant (assessee) and Mr. Y.P. Adhyaru, learned senior counsel,
for the respondent (Revenue).
13. Mr. Gopal Subramaniam while assailing the legality and
correctness of the impugned order contended that the reasoning and
D conclusion arrived at by the High Cou11 is not legally sustainable for
various reasons.
14. In the first place, learned senior counsel urged that when the
question involved in this appeal, was already decided in favour of the
appellant in all previous assessment years ( 1973-74 to 1977-78), by this
E Court, there was no justifiable reason for the Revenue to have pursued
the same question again only for the assessment year in question ( 1978-
79) to the High Court. Learned counsel urged that in any event, the
High Court should have taken note of this fact and answered the refe;ence
in appellant's favour by placing reliance on the earlier decision in the
F case of H.H. Maharao Bhim Singhji (supra). In support of this
submission, learned counsel placed reliance on the decisions of this Court
in Mis Radhasoami Satsang, Saomi Bagh, Agra vs. CQmmissioner
of Income Tax, ( 1992) I SCC 659, The Parashuram Pottery Works
Co. Ltd. vs. The Income Tax Officer, Circle-I, Ward 'A' Rajkot,
Gujarat, ( 1977) I SCC 408 and Commissioner of Income Tax vs.
G Excel Industries Ltd., (2014) 13 SCC 459.
15. In the second place, learned counsel contended that sin~e the
issue involved herein pertains to grant of exemption to the assessee
from payment of income-tax under Section I 0(19A) of the l.T. Act read
with paragraph 15 of the Order, such provisions should be regarded as
H exception and construed liberally in appellant's favour unlike the charging
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 201
RAJASTHAN-11, JAIPUR [ABHAY MANOl-IAR SAPRE, J.]

provisions, which are interpreted strictly. Reliance was placed on the A
decision of this Court in the case of Union oflndia & Ors. vs. Wood
Papers Ltd. & Anr., ( 1990) 4 SCC 256 and other decisions.
16. In the third place, learned counsel contended that the High
Court was not justified in placing reliance on Section S(iii) of the Wealth
Tax Act, 1957 while interpreting Sections 10(19A), 22 and 23 of the I.T. B
Act and Paragraph 15 of the Order. Learned counsel pointed out that
Section 5(iii) of the Wealth Tax Act and Section 23 of the 1.T. Act are
neither in pari materia with each other and nor identically worded.
Learned counsel pointed out the difference in the language employed in
both the aforementioned sections in support of his submission.
17. In the fom1h place, 1·earned counsel contended that the question
c
involved in this appeal has already been answered by the M.P. High
Court in the case of Commissioner oflncome-tax vs. Bharatchandra
Banjdeo, ( 1985) I 54 ITR 236(MP) = I 986 (27) Taxman 456 (M.P.) in
favour of the assessee. It was urged that there was no justifiable reason
for the High Court to have departed from the view taken by the M.P. D
High Court. Learned counsel urged that the reason given for distinguishing
the view taken by the M.P. High Court is 110t well founded and more so
when it has already been relied on by the Rajasthan High Court in H.H.
Maharao Bhim Singh.ii (supra) in appellant's own case.
18. In the fifth place, learned counsel contended that there is a E
significant departure in the wordings of Section I 0( I 9A) and Section 23
of the l.T. Act. Learned counsel pointed out that Section I O(l 9A) does
not use the same expression which occurs in Section 23(2), namely,
"annual value of such house or part of the house". According to
learned counsel, absence of these words in Section 10(19A) of the l.T.
Act goes to show that the appellant is entitled to claim exemption F
applicable to the entire palace even though the part of palace is in
occupation of tenant. It was urged that splitting of palace is not
permissible under Section l 0 ( l 9A) of the l.T. Act though it is permissible
in 'house".
19. It is these submissions, which were elaborated by the learned G
counsel with reference to case law and interpretative process of the
relevant provisions of the LT. Act and Order.
20. In reply, learned counsel for the respondent (Revenue)
supported the reasoning and the conclusion arrived at by the High Court
and prayed for its upholding.
J-1
202 SUPREME COURT REPORTS r2o 161 11 S.C.R.

A 21. Having heard learned counsel for the parties and upon pFrusal
of the record of the case and the written submissions, we find force in
the submissions urged by the learned counsel for the appellant (asse:;see).
22. Section 10(19A) of the I.T. Act and Paragraph 15(iii) of the
Order, which are relevant for this case, read as under:
B Section 10(19A) of the I.T. Act
"Section 10. Incomes not included in total income.-In
computing the total income of a previous year of any
person, any income falling within any of the following
clauses shall not be included-
c 1 to 19 ..................................................... .
(19A) The annual value of any one palace in the occupation
of a Ruler, being a palace, the annual value whereof was
exempt from income-tax before the commencement of the
Constitution (Twenty-sixth Amendment) Act, 1971, by
D virtue of the provisions of the Merged States (Tax:ition
Concessions) Order, 1949, or the Part B States (Taxation
Concessions) Order, 1950, or, as the case may be, the
Jammu and Kashmir (Taxation Concessions) Order, 1958:
Provided that for the assessment year commencing on
the 1'' day of April, 1972, the annual value of every such
E
palace in the occupation of such Ruler during the relevant
previous year shall be exempt from income-tax;]"

Paragraph 15 of the Order
F
15. Exemptions-Any income falling within the following
classes shall be exempt from income-tax and super-tax
and shall not be included in the total income or total world
income of the person receiving them:
(i) ....................................................... .
G
(ii) ••••••.•••..••...••••••.••...•.••••.•..••.•••••.•.•••.•
(iii) The bona fide annual value of the residential palace of
the Ruler of a State which is situate within the State end is
declared by the Central Government as his inalienable
ancestral property."
H
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 203
RAJASTHAN-II, JAIPUR [ABHAY MANOHAR SAPRt, J.]

23. Section I 0 provides that in computing the total income of a A
previous year of any person, any income falling within any of the sub-
clauses of Section 10 shall not be included. Sub-clause (l 9A) says that
the annual value of any one palace which is in occupation of a Ruler and
whose annual value was exempt from income-tax before the
commencement of the Constitution (Twenty-sixth Amendment) by virtue
B
of the provisions of the Merged States (Taxation concessions) Order,
1949 or the 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
the bona fide annual value of the residential palace of the Ruler of a
State, which is declared by the Central Government to be Rulers ancestral
c
property from payment of income-tax.
25. In order to claim exemption from payment of income-tax on
the residential palace of the Ruler under Section 1O(l9A), it is necessary
for the Ruler to satisfy that first, he owns the palace as his ancestral
property; second, such palace is in his occupation as his residence; and D
third, the palace is declared exempt from payment of income-tax under
Paragraph 15 (iii) of the Order, 1950 by the Central Government.
26. Now, the question arises that where part of the residential
palace is found to be in occupation of the tenant and remaining is in
occupation of the Ruler for his residence, whether in such circumstances, E
the Ruler is entitled to claim exemption for the whole of his residential
palace under Section I 0( I 9A) or such exemption would confine only to
that portion of the palace which is in his actual occupation. In other
words, whether the exemption would cease to apply to let out portion
thereby subjecting the income derived from let out portion to payment of F
income-tax in the hands of the Ruler.
27. This very question was examined by the M.P. High Court in
the case ofBharatchandra Banjdeo (supra) in detail. It was held that
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 G
in Section 5(iii) is not identical with the language of Section I 0(19A) of
the LT. Act. Their Lordships distinguished the decision of Delhi High
Court rendered in the case of Mohd Ali Khan vs. CIT, (1983) 140 !TR
948(Delhi), which arose under the Wealth Tax Act. It was held that
even ifthe Ruler had let out the portion of his residential palace, yet he
would continue to enjoy the exemption in respect of entire palace because H
204 SUPREME COURT REPORTS f2016] 11 S.C.R.

A it is not possible to split the exemption in two parts, i.e., the one in his
occupation and the other in possession ofthe tenant.
28. Justice G.L. Oza, the learned Chief Justice (as His Lordship
then was), speaking for the Bench held as under:
"8. It is, therefore, clear that under this order the income
B from all the palaces of a Ruler which are declared to be
the official residence were exempt. Under clause (19A) of
Section 10, only one palace in occupation has been
exempted and it appears that similarly in the W.T. Act
instead of using the word "palace" they have used the
c words "one building in occupation of a Ruler" which has
been exempted from tax.
9. It is not in dispute that in this reference the property in
question is a palace. It is also not in dispute that a portion
of it is in occupation. The only question which has been
D raised by learned counsel for the Revenue is that if only a
portion of the palace is in occupation, the exemption under
clause (19A) of Section 10 would be available only for that
part and not for the whole. The change brought about by
the insertion under the Merged States (Taxation
Concessions) Order is clearly illustrated by the two
E provisions quoted above. By clause (19A), the exemption
has been limited only to one palace in occupation. If the
Legislature intended a further splitting up, it would have
been provided in clause (19A) that such portion of the
palace in occupation is only exempted, but it appears that
F the language used by the Legislature did not contemplate
a further splitting up. In Mohd. Ali Khan's case: [1983)
140 ITR 948(Delhi) which is a case under the W.T. Act,
the only question considered was that if the palace which
was declared to be an official residence had a number of
buildings, as the exemption under the W.T. Act is available
G only in respect of one building which is in occupation and,
therefore, the assessee's contention, that the other
buildings which may not be in occupation but declared to
be an official residence should be exempted, was not
accepted. In clause (19A) of Section 10, in the place of
H "building", the phrase employed is "one palace" and so
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 205
RAJASTHAN-11, JAIPUR [ABHAY MANOHAR SAPRE, J.]

far as the case in hand is concerned, it is not disputed that A
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 a palace. The language
of clause (19A) of Section 10 does not justify it. It is settled
B
that in cases of exemption, the language of the 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 an intention for splitting up of the
palace into portions rould be gathered. In this view of the
matter, therefore, the contention advanced by the learned c
counsel for the Revenue cannot be accepted."
e
29. Relying upon the aforesaid decision, Rajasthan High Court in
the case of the appellant herein in Commissioner of Income-Tax vs.
H.H. Maharao Bhim Singhji, (supra) answered the question in favour
of the appellant for the assessment years (1973-74 to 1977-78). D
30. Justice J.S. Verma, the learned ChiefJustice (as His Lordship
then was) speaking for the Bench held as under:
"So far as the first question relating to exemption claimed
under section 10(19A) is concerned, there is a direct
decision in CIT v. Bharatchandra Banjdeo, [1985) 154 ITR E
236 (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 the ex-Ruler as his official
residence and to deny the benefit of exemption to the other
/
portion of the palace rented out by the RuJer, since the F
e.1tire palace is declared as his official residence.
Accordingly, it was held that even if only a part of the
palace is in the self-occupation of the former Ruler and
the rest has been let out, the exemption available under
section 10(19A) will be available to the entire palace. No
decision taking a contrary view has been cited before us. G
We do not find any good ground to depart from that view,
when the view taken in that decision is undoubtedly a
plausible view. In the case of a taxing statute, a plausible
view in favour of the assessee should be preferred in these
circumstances. Following that decision, the first question
H
206 SUPREME COURT REPORTS (2016) 11 S.C.R.

A has to be answe1·ed against the Revenue and in favour of
the assessee."
~I. Following the aforesaid view, the High Court of R.ajasthan
declined to make reference to the High Court under Section 256(1) of
the !.T. Act in later Assessment Years and dismissed the application
B made by the Revenue under Section 256(2) of the l.T. Act (see-
(Commissioner of Income-Tax vs. H.H. Maharao Bhim Singh
(2002) 124 Taxman 26) with the following observations.
" 5. In coming to this conclusion, this Court has followed
another decision of the Madhya Pradesh High Co~rt in
c CIT vs. Bharatchanda Banjdeo (1985) 154 ITR 236 (M.P.).
The decision of this Court in CIT vs. H.H. Maharao Bhim
Singhji (1988) 173 ITR 79, we are informed by the learned
counsel, bas not been appealed against.
6. In that view of the matter, we are of the opinion that
D the application under Section 256(1) has rightly been
rejected by the Tribunal and do not deserve further
consideration."
32. In our considered opinion, the view taken by the Madhya
Pradesh High Court in the case of Bltaratchandra Ban.ideo (supra)
and the one taken in the case of the appellant in Maharao Bhim
E
Singhji's case (supra) by rightly placing reliance on Bharatchandra
Banjdeo's case (supra) is the correct view and we find no good ground
to take any other view.
33. As rightly held in the case of Bharatchandra Banjdeo
(supra), no reliance could be placed on Section S(iii) of the Wealth Tax
F
Act while construing Section 10(19A) of the LT.Act. It is due to marked
difference in the language employed in both sections. It is apposite to
reproduce Section 5 (iii) of the Wealth Tax Act as under:
"5. Exemptions in respect of certain assets-Wealth-tax
shall not be payable by an assessce in respect of the
G following assets and such assets shall not be included in
the net wealth of the assessee-
(i) ..••........•••••....•..•......••......•••••..•..•••••...••••...•.••
(ii) .••••••••••.•••••.•••.•••••••••••.•••••••••••••••••••••••••••••••••
(iii) any one building in the occupation of a Ruler, being a
H
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 207
RAJASTHAN-H, JAIPUR [ABHAY MANOHAR SAPRE, J.]

building which immediately before the commencement of A
the Constitution (Twenty-sixth Amendment) Act, 1971, was
his orficial residence by virtue of a declaration by the
Central Government under paragraph 13 of the Merged
States (Taxation Concessions) Order, 1949, or paragraph
15 of the Part B States (Taxation Concessions) Order,
B
1950;"
34. We find that in Section 10(19A) of the LT.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 c
Section IO(l 9A) which, in our view, is significant.
35. In our considered opinion, ifthe 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 I O(l 9A) of the
J.T. Act. We, however, do not find such language employed in Section D
10(19A).
36. As rightly pointed out by the learned senior counsel for the
appellant, Section 23(2) and (3), uses the expression "house or part of
a house". Such expression does not find place in Section I O(l 9A) of
the l.T. Act. Likewise, we do not find any such expression in Section 23, E
specifically dealing with the cases relating to "palace". This significant
departure of the words in Section 10(19A) of the I.T. Act and Section
23 al.so suggest that the Legislature did not intend to tax. portion of the
"palace" by splitting it in parts.
37. It is a settled rule of interpretation that if two Statutes dealing F
with the same subject use different language then it is not permissible to
appl)' 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
G
exemptions are for the benefit of the assessee.
38. In the light of these reasonings, we are of the considered
opinion that the view taken by the M.P. High Court in Bharatchandra
Banjdeo's case (supra) and the Rajasthan High Court in H.H. Maharao
Bhim Singhji's case (supra) is a correct view.
H
208 SUPREME COURT REPORTS f20161 11 S.C.R.

A 39. We also notice that the question involved in this case had also
arisen in previous Assessment Years' (1973-74 till I 977-78) and was
decided in appellant's favour when Special Leave Petition(c) No. 3764
of2007 filed by the Revenue was dismissed by this Court on 25.08.2010
by affirming the order of the Rajasthan High Court referred supra.
B 40. 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.
4 I. Though principle of res judicata does not apply to income-
c 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.
D [see Mis Radhasoami Satsang, Saomi Bagh, Agra's case (supra)].
42. Learned Counsel for the respondent (Revenue) though made
sincere attempt to persuade us to uphold the view taken by the High
Court but in the light of what we have held above, we are unable to
accept his submissions.
E
43. In the light of foregoing discussion, in our considered opinion,
the reasoning and the conclusion arrived at by the High Court in the
impugned order including the view taken by the Rajasthan High Court in
Maharaval Lakshmansingh's case (supra) does 'n1oi lay down correct
principle of Jaw whereas the view taken by the M.P. High Couit in
F cases of Bharntchandra 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 the last submission oflearned counsel for the
G appellant who made a feeble attempt to question the legality and propriety
of the requisition proceedings initiated by the Central Government
(Ministry of Defence) in relation to portion of land. It was urged that
even after expiry of the period of requisition, the Defence Ministry,
continues to remain in possession of the land to the detriment of the
interest of appellant. To say the least, in our view, this submission is
H
MAHARAO BHIM SINGH OF KOTA v. COMMNR. OF IT, 209
RAJASTHAN-11, JAIPUR [ABHAY MANOHAR SAPRE, J.]

wholly misplaced in this appeal. The appellant, in our view, has to raise A
this issue in appropriate proceedings before competent Fora for their
adjudication and not in this appeal which arises out of income-tax
proceedings and has nothing to do with requisition proceedings of the
land.
45. In view of foregoing discussion, the appeal succeeds and is B
accordingly allowed. The impugned order is set aside. As a consequence,
the question referred to the High Court in the reference proceedings out
of which this appeal arises is answered in favour of the appellant
(assessee) and against the Revenue.
Nidhi Jain Appea I allowed. C