1. By this reference under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as 'the Act', the Income-tax AppellateTribunal, Indore Bench, has referred the following question of law to this court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that capital gains of Rs. 71,481 realised on the sale of a portion of land within the compound of Jhabua Kothi, which was declared as 'official residence' of the Ruler of Jhabua was not entitled to exemption from tax within the meaning of Para. 15(1)(iii) of Part B States (Taxation Concessions) Order, 1950 ?'
2. The material facts giving rise to this reference briefly are as follows : The assessee is an Ex-Ruler of Jhabua State. During the assessment year 1971-72, the assessee realised a capital gain of Rs. 71,481 on the sale of a portion of land forming part of the compound of Jhabua Kothi which was declared as official residence of the Ruler of Jhabua. The contention of the assessee before the ITO was that the amount of capital gain was exempt from taxation by virtue of para. 15(1)(iii) of Part B States (Taxation Concessions) Order, 1950 (hereinafter referred to as the 'Taxation Concessions Order'). This contention was not upheld by the ITO on the ground that in the Taxation Concessions Order no mention had been made about exemption of capital gains. The ITO, therefore, subjected the capital gain to capital gains tax. The appeal preferred by the assessee before the AAC was dismissed. On further appeal, the Tribunal also upheld the order of the ITO. Hence, at the instance of the assessee, the Tribunal has referred the aforesaid question of law to this court for its opinion.
3. The answer to the question referred to us turns on the construction of the relevant provisions of Para. 15 of the Taxation Concessions Order. That provision reads as follows :
'15. (1) Any income falling within the following clauses shall be exempt from income-tax and super-tax and shall not be included in the total income or total world income of the person receiving them : .........
(iii) the bona fide annual value of the palaces of Rulers of Indian States which are declared by the Central Government as the official residences of such Rulers.'
4. From a perusal of the aforesaid provision, it is clear that what has been exempted is the bona fide annual value of the palace of a Ruler of an Indian State which is declared by the Central Govt. as the official residence of such Ruler. The exemption could by no stretch of imagination be held to embrace income in the nature of capital gains realised on the sale of land forming part of the official residence of a Ruler. In this view of the matter, the Tribunal was justified in holding that capital gains realised by the assessee on the sale of a portion of land within the compound of Jhabua Kothi which was declared as the official residence of the Ruler ofJhabua was not entitled to exemption from tax by virtue of Para. 15(1)(iii) of the Taxation Concessions Order.
5. For all these reasons, this reference is answered in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.