Law:

Section:

Section 5(1)(iii), read with section 2(p), of the W ealth-tax Act, 1957 - Exemptions - Ex-ruler's Palace - Assessment years 1977-78 to 1980-81 - Assessee - On succession, was in possession of a P alace at Vadia which was exempted from tax under notification issued under P art B States (Taxation Concessions) Order, 1950 - Palace was declared as official residence of Ex-ruler of Vadia - It was demolished and scrap was partly sold and partly utilised for construction of a new building - Assessee claimed exemption under section 5(1)(iii) in respect of new building - Whether assessee being a successor of ex-ruler recognised by President prior to commencement of Constitution (Twenty-sixth Amendment) Act, 1971 was entitled to benefit of section 5(1)(iii), by not including in assessee's net wealth building in question notwithstanding fact that it was reconstructed after demolishing dilapidated Palace - Held, yes - Whether Tribunal was right in coming to conclusion that exemption under section 5(1)(iii) was admissible even in respect of new building constructed by assessee in place of old recognised Palace which was used as his official residence - Held, yes FACTS The assessee, on succession, was in possession of a Palace at Vadia which was exempted from tax under the notification issued under Part B States (Taxation Concessions) Order, 1950. The Palace was declared as official residence of Ex-Ruler of Vadia. It was demolished and the scrap was partly sold and partly utilised for the construction of a new building. The assessee claimed exemption under section 5(1)(iii) in respect of the new building. The WTO held that no exemption under section 5(1)(iii) would be available in respect of the new building constructed in place of demolished old Palace. On appeal, the Commissioner (Appeals) deleted the addition made by the WTO holding that the exemption in respect of building which was official residence of the assessee was enjoyed by the assessee upto the assessment year 1972-73 and, therefore, the exemption was available to the assessee even when he demolished the dilapidated Palace and constructed a new building at the same place. The Tribunal also granted the exemption.…

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