The Supreme Court of India(SCI)held on Monday Dec 05,2016 that the income earned by erstwhile
rulers of a princely state or their heirs by renting out a portion of
the Residential Palace was not taxable and rapped the Income Tax department for pursuing a case despite their income being exempted under IT Law
A bench of Justices Ranjan Gagoi and Abhay Manohar Sapre allowed a plea of the ruler of the former princely state of Kota, now a part of Rajasthan, challenging the high court order for bringing his income from rent in the Income Tax net. The ruler owns extensive properties, including two residential palaces known as Umed Bhawan Palace and the City Palace.
The ruler is using Umed Bhawan Palace for his residence and a portion of it was rented out to the ministry of defence way back in 1976.
Although the Centre had in 1950 declared residential palace of an erstwhile ruler, situated within the state, as his inalienable ancestral property to be exempted from payment of income-tax, the I-T department had in 1984 initiated proceedings for assessment of income earned from renting out a portion of the palace. The Centre had incorporated Section 10(19A) in the IT Act to give exemption to former rulers.
The department contended that IT exemption was given for personal use and income earned from the rent was taxable. Commissioner of Income Tax and Income Tx Appellate Tribunal however, turned down the plea of the IT department which had moved the Rajasthan HC.
The HC had ruled that as so long as the ruler continued to remain in occupation of his official palace for his own use, he would be entitled to claim exemption but if he let out any part of his palace, he became disentitled to claim benefit of exemption available under Section 10(19A) for the entire palace
A bench of Justices Ranjan Gagoi and Abhay Manohar Sapre allowed a plea of the ruler of the former princely state of Kota, now a part of Rajasthan, challenging the high court order for bringing his income from rent in the Income Tax net. The ruler owns extensive properties, including two residential palaces known as Umed Bhawan Palace and the City Palace.
The ruler is using Umed Bhawan Palace for his residence and a portion of it was rented out to the ministry of defence way back in 1976.
Although the Centre had in 1950 declared residential palace of an erstwhile ruler, situated within the state, as his inalienable ancestral property to be exempted from payment of income-tax, the I-T department had in 1984 initiated proceedings for assessment of income earned from renting out a portion of the palace. The Centre had incorporated Section 10(19A) in the IT Act to give exemption to former rulers.
The department contended that IT exemption was given for personal use and income earned from the rent was taxable. Commissioner of Income Tax and Income Tx Appellate Tribunal however, turned down the plea of the IT department which had moved the Rajasthan HC.
The HC had ruled that as so long as the ruler continued to remain in occupation of his official palace for his own use, he would be entitled to claim exemption but if he let out any part of his palace, he became disentitled to claim benefit of exemption available under Section 10(19A) for the entire palace
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