Law:

Section:

Section 5(iii) of Wealth-tax Act, 1957 - Exemption - Ruler's palace - Assessment years 1957-58 and 1959-60 - Assessee was previously ruler of Banaras State which had merged in India-Agreement of merger provided that assessee would continue to be exempt from all property and other municipal taxation - Whether immunity from 'property or other municipal taxes' purported to have been granted by agreement of merger was enforceable in Court of law - Held, no - Whether, therefore, assessee's building other than his official residence which was exempt under section 5(iii) was rightly included in net wealth of assessee - Held, yes FACTS Assessee was previously ruler of Banaras State which had merged in India. After Wealth-tax Act came into force, the WTO estimated value of net wealth of the assessee. He included value of ruler's building other than his official residence in the net wealth of the assessee. The assessee filed appeal contending that as per agreement of merger he was exempt from all property and municipal taxes. The AAC and the Tribunal, however, rejected the assessee's claim for exemption. On reference : HELD The terms of the agreement of merger, read with the letter of assurance, could not be regarded as law in force either by the Tribunal or by the High Court, so far as the taxability of an asset under the Act is concerned, only such exemptions could be allowed as have been mentioned in section 5. Under section 5(1)(iii), the ruler of an Indian State is entitled to exemption from taxation in respect of only one building which the Central Government had declared as his official residence under paragraph 13 of the Merged States (Taxation Concessions) Order, 1949. The WTO had already allowed such exemption. The assessee was not entitled to exemption from tax in regard to the value of the 'other building' under any provision of the Act. The immunity from 'property or other municipal taxes' purported to have been granted by the agreement of merger was not enforceable in a court of law. Therefore, the value of the building other than the official residential premises was rightly included in the net wealth of the assessee. Note : The case was decided against…

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