Law:

Section:

Section 297(2)(1) [As it stood prior to 9-9-1972] of the Income-tax Act, 1961-Repeals and savings-Notification issued under section 60a of the Indian Income tax Act, 1922 rescinded thereby withdrawing exemption to former ruler-Whether power to rescind a notification is inherent in power to issue a notification-Held, yes-Whether under section 297(2)(1) [As it stood prior to 9-9-1972] government had power to rescind a notification issued under section 60A of the 1922 Act-Held, yes Doctrine of estoppel-Whether doctrine of estoppel applies against state in its governmental, public or sovereign policy-Held, no Facts By a notification dated 14-5-1954 (Notification No. 31-IT) under section 60A of the 1922 Act, the Government had declared certain palaces of the assessee, being the former ruler of the then princely State of Mysore, as his official residence, making thereby income from such palaces exempt from tax. However, on 8-9-1971 the Central Government issued another notification [No. 266/F. No. 22/21/63 IT(A-II)] withdrawing the aforesaid exemption. The reason for this action was stated to be that a part of the palace at Mysore had been let out by the assessee to earn rents. On writ, the assessee challenged the second noti-fication, inter alia, on the following grounds: (i) that the source of power to rescind any notification flowed from the proviso to section 60A of the 1922 Act and that since that power to rescind under section 60A of the 1922 Act was not preserved in section 297 of the 1961 Act but was introduced for the first time on 9-9-1972 by means of the proviso to section 297(2)( l), the Central Government had on 8-9-1971 no power to issue the impugned notification; (ii ) that as the lease of a part of the palace at Mysore had been granted at the insistent request of the Central Government itself, the latter could not take advantage of its own acts, and stood estopped from withdrawing the exemption; and (iii) that in issuing the impugned notification of 1971, the assessee had been singled out for a hostile discrimination in view of the circumstance that in the cases of rulers of other former Indian States no withdrawal of exemption had been made under…

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