ORDER
Adarsh Kumar Goel, J.
1. This appeal has been preferred by the revenue under Section 27A of the Wealth-tax Act against the order of the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh passed on 28-4-2000 in W.T.A. No. 121/Chd./98 for the assessment year 1994-95, proposing to raise following substantial question of law.:
Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing exemption under Section 5(1)(iii) of the Wealth-tax Act to the assessee in respect of 'Mubarak Manzil' palace and surrounding lands admeasuring 75 kanals 10-2/3 marlas while she was not a Ruler/Ex-Ruler in terms of Central Government notification entitling her to the exemption?
2. The assessee is an individual and is widow of late Nawab of Malerkotla. During assessment under the provisions of Wealth-tax Act, the Assessing Officer noticed that value of the house known as 'Mubarak Manzil' and land appurtenant to it were not shown by the assessee in her wealth tax return.
3. The stand of the assessee was that the property was official residence of erstwhile Ruler of Malerkotla and thus, was exempt under Section 5(iii) of the Act, read with para 13 of the Merged States (Taxation Concession) Order, 1949.
4. The Assessing Officer rejected the claim of the assessee. The CWT(A) upheld the claim of the assessee and the Tribunal affirmed the same.
5. We have heard learned Counsel for the parties and perused the record.
6. Learned Counsel for the appellant-revenue referred to provisions of Sections 5(iii), 2(p) of the Act and article 366(22) of the Constitution to submit that the view taken by the Tribunal was erroneous. The said provisions are as under:
5. Exemptions in respect of certain assets.-Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee:
(i) to (ii)**
(iii) any one building in the occupation of a Ruler, being a building which immediately before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was his official 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, 1950;
2(p) 'Ruler' means a Ruler as defined in Clause (22) of Article 366 of the Constitution;
Article 366. Definitions.:(22) 'Ruler' means the Prince, Chief or other person who, at any time before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, was recognised by the President as the Ruler of an Indian State or any person who, at any time before such commencement, was recognised by the President as the successor of such Ruler,
7. It was submitted that there are two conditions for grant of exemption:
(i) the property being in occupation of the Ruler; and
(ii) the property being official residence notified by the Central Government.
8. It was submitted that the assessee was not a Ruler as defined in article 366(22), though she may be the widow/heir of ex-Ruler. The exemption was applicable to Ruler and not to the heir.
9. Learned Counsel for the assessee submitted that since the property in dispute was recognized as official residence in terms of the notification of the Central Government dated 14-5-1954, the exemption was applicable.
10. It is well known that under the Scheme of Merger of States with the Union of India, in the wake of Indian Independence Act, 1947, certain concessions were given to the ex-Rulers. The said concessions were withdrawn vide notification of Government of India dated 6-9-1970, declaring that the Rulers ceased to be recognized. This was struck down by the Supreme Court in Madhav Rao Jiwajirao v. Union of India : [1971] 1 SCC 85 : AIR 1971 SC 530. Thereafter, there was constitutional amendment. The Constitution (Twenty-sixth Amendment) Act of 1971 was enacted to bring about the same result which received the assent of President in December 1971. The said Act was upheld by the Supreme Court in Raghunathrao Ganpatrao v. Union of India : 1994 Supp. (1) SCC 191, following the earlier judgment in Kesavananda Bharati Sripadagalavaru v. State of Kerala : 1973 (4) SCC 225.
11. It is not the case of the assessee that she is covered by the definition of Ruler under article 366(22), which has been referred to in Section 2(p) of the Act Thus, the assessee could not claim exemption under Section 5(iii).
12. The Tribunal, in para 3.6, has allowed the exemption only on the ground that property in dispute was covered by notification of the Central Government as official residence of the Ruler. In doing so, the Tribunal ignored the requirement of exemption under Section 5(1)(iii) i.e., the building must be in occupation of the Ruler and not the heir of the Ruler. No contrary view has been brought to our notice. The question has, thus, to be answered in favour of the revenue and against the assessee.
13. We, accordingly, allow this petition and set aside the impugned order passed by the Tribunal and restore that of the Assessing Officer.