1997 JTR(SC) 407
1997 AIR(SC) 1165 ; 1997 AIR(SCW) 1175 ; 1997 139 CTR 335 ; 1997 224 ITR 672 ; 1997 3 JT 250 ; 1997 2 Scale 442 ; 1997 3 SCC 511 ; 1997 2 SCR 658 ; 1997 TaxLR 371 ; 1997 92 Taxman 52 ; 1997 KHC 789 ; 1997 1 KLT(Online) 1148 ; 1997 2 Supreme 722
1997(2) Supreme 722
SUPREME COURT OF INDIA
S.C. Agrawal and G.B. Pattanaik, JJ.
Shri Mohammad Ali Khan & Ors. -Appellants
versus
The Commissioner of Wealth Tax, New Delhi -Respondents
Civil Appeal No. 5352 (NT) of 1983
Decided on 4-3-1997
Act Referred :WEALTH TAX ACT : S.5(1)(iii)
(A) Section 5(1)(iii) of the Wealth Tax Act, 1957, read with Paragraph 13 of the Merged States (Taxation Concessions) Order 1949, provides that any one building declared by the Central Government as the official residence of a Ruler is exempt from wealth tax to the extent it is in the occupation of that Ruler. The statutory provision applies where the assessee claims exemption in respect of a palace that has been formally declared the official residence and is partly rented out. The scope and interplay of the words in the occupation of a Ruler and any one building determine the assessable wealth.
(B) Key principles include that taxing statutes must be interpreted according to their natural and ordinary meaning, giving effect to every word of the provision; the intention of the legislature is gathered from the language used; and if the literal meaning is clear, the court must apply the same without importing qualifications or diluting the text by reference to policy. The expression in the occupation of a Ruler is not susceptible to an interpretation that would read in a direction allowing exemption for only part of a building where the substantial portion has been let out.
Facts of the case:
The assessee owned the Khan Bagh Palace, which was declared by the Central Government as the official residence of the Ruler under the Merged States (Taxation Concessions) Order 1949. During the assessment year 1961-62, the assessee claimed exemption under Section 5(1)(iii) of the Wealth Tax Act. However, several buildings within the palace were let out to different tenants, generating rental income. The Wealth Tax Officer valued the rental portion at Rs. 3,55,000 and included it in the assessees net wealth. This decision was upheld on appeal and in a second appeal, leading the Tribunal to refer the question of law to the High Court.
Findings of Court:
The High Court held that a restrictive interpretation of Section 5(1)(iii) would wholly disentitle the assessee to any exemption, while a liberal interpretation would allow exemption only for the portion of the building actually occupied by the Ruler. It concluded that the liberal interpretation was correct and that only the building or portion in the occupation of the Ruler is exempt, with the rental value of the let-out portion being includible in net wealth. This finding was made in favor of the revenue.
Issues:
Whether the Tribunal was justified in holding that the buildings of the Khas Bagh Palace let out to different persons were not in the occupation of the assessee within the meaning of Section 5(1)(iii) of the Wealth Tax Act, and consequently whether the value thereof was includible in the net wealth of the assessee.
Ratio Decidendi:
Section 5(1)(iii) of the Wealth Tax Act must be given its natural and literal meaning, under which only the building or the part of the building in the actual occupation of a Ruler who has been declared the official residence is exempt. The expression in the occupation of a Ruler governs the exemption, and if the substantial portion of the building has been rented out, the income from such letting must be included in the assessees net wealth.
Result:
The appeal was dismissed with no order as to costs.
(A) Section 5(1)(iii) of the Wealth Tax Act, 1957, read with Paragraph 13 of the Merged States (Taxation Concessions) Order 1949, provides that any one building declared by the Central Government as the official residence of a Ruler is exempt from wealth tax to the extent it is in the occupation of that Ruler. The statutory provision applies where the assessee claims exemption in respect of a palace that has been formally declared the official residence and is partly rented out. The scope and interplay of the words in the occupation of a Ruler and any one building determine the assessable wealth.
(B) Key principles include that taxing statutes must be interpreted according to their natural and ordinary meaning, giving effect to every word of the provision; the intention of the legislature is gathered from the language used; and if the literal meaning is clear, the court must apply the same without importing qualifications or diluting the text by reference to policy. The expression in the occupation of a Ruler is not susceptible to an interpretation that would read in a direction allowing exemption for only part of a building where the substantial portion has been let out.
Facts of the case:
The assessee owned the Khan Bagh Palace, which was declared by the Central Government as the official residence of the Ruler under the Merged States (Taxation Concessions) Order 1949. During the assessment year 1961-62, the assessee claimed exemption under Section 5(1)(iii) of the Wealth Tax Act. However, several buildings within the palace were let out to different tenants, generating rental income. The Wealth Tax Officer valued the rental portion at Rs. 3,55,000 and included it in the assessees net wealth. This decision was upheld on appeal and in a second appeal, leading the Tribunal to refer the question of law to the High Court.
Findings of Court:
The High Court held that a restrictive interpretation of Section 5(1)(iii) would wholly disentitle the assessee to any exemption, while a liberal interpretation would allow exemption only for the portion of the building actually occupied by the Ruler. It concluded that the liberal interpretation was correct and that only the building or portion in the occupation of the Ruler is exempt, with the rental value of the let-out portion being includible in net wealth. This finding was made in favor of the revenue.
Issues:
Whether the Tribunal was justified in holding that the buildings of the Khas Bagh Palace let out to different persons were not in the occupation of the assessee within the meaning of Section 5(1)(iii) of the Wealth Tax Act, and consequently whether the value thereof was includible in the net wealth of the assessee.
Ratio Decidendi:
Section 5(1)(iii) of the Wealth Tax Act must be given its natural and literal meaning, under which only the building or the part of the building in the actual occupation of a Ruler who has been declared the official residence is exempt. The expression in the occupation of a Ruler governs the exemption, and if the substantial portion of the building has been rented out, the income from such letting must be included in the assessees net wealth.
Result:
The appeal was dismissed with no order as to costs.
JUDGMENT
Pattanaik, J.-In this appeal by grant of certificate by Delhi High Court interpretation of Section 5(i)(iii) of the Wealth Tax Act, 1957 (hereinafter referred to as The Act ) is involved. On an application being filed under Section 27(1) of the Act the Tribunal referred the following question to the High Court for being answered :
"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the buildings of the Khas Bagh Palace which were let out to different persons from whom a rental income was received by the assessee were not in the occupation of the assessee within the meaning of Section 5(1)(iii) of the Wealth Tax Act 1957 and hence the value thereof was includible in the net wealth of the assessee ?"
2. The assessee Late H.H. Nawab Sir Syed Raza Ali Khan, Newab of Rampur is the owner of Khan Bagh Palace. The said Palace was declared by the Central Government in exercise of power under paragraph 13 of the Merged States (Taxation Concessions) Order 1949, to be the official residence of the Ruler. During the assessment year 1961-62 the assessee claimed exemption of the aforesaid Palace in computation of the wealth under the Wealth Tax Act under Section 5(1)(iii) of the Act. The Wealth Tax Officer on consideration of the Materials before him came to the conclusion that the Palace having consisted of number of buildings the assessee would be entitled to exemption only in respect of the building or the portions of the building which is in the occupation of the Ruler and on the said conclusion he found that the estimated market value of several buildings which had been let out to be Rs. 3,55,000/-. This valuation obviously he found out on the basis of the rental income derived by the assessee. He accordingly took that into consideration in computation and levying wealth tax on the same. Being aggrieved by the order of the Officer the assessee moved an appeal and the Asstt. Commissioner in appeal as well as the Tribunal in Second Appeal confirmed the assessment made. But on an application being filed under Section 27 of the Act the Tribunal made the reference on the question, as already stated. The High Court in the impugned decision came to the conclusion that a restrictive interpretation of Section 5(1) of the Act would disentitle the assessee of any exemption since the building in question is not under the occupation of the Ruler fully. It also came to the conclusion that liberal interpretation of the said provision would entitle the assessee to exemption to the extent the assessee occupies the building or the portion of the building and, therefore, the liberal interpretation should be preferred. With this finding the High Court answered the question referred to in favour of the revenue and against the assessee.
3. Mr. Sharma, the learned counsel appearing for the appellant contended that the expression "anyone building" in Section 5(1)(iii) is not susceptible of an interpretation by making a further direction to import into it the portion of the building or whole of the building as that would tantamount to a fresh legislation which the Court is not empowered to do. According to the learned counsel the Central Government having declared the Ram Bagh Palace to be the official residence of the assessee in exercise of power under paragraph 13 of the Merged Stated (Taxation Concessions) Order 1949, the said building would be excluded from the purview of the Act by virtue of Section 5(1)(iii) of the Act. This being the position, the High Court committed an error in answering the question posed in favour of the Revenue. The learned counsel urged that in interpreting the taxing statute it is not permissible for the Court to look to the policy behind the statute and the court would be entitled to give a plain meaning to the words used in the Statute. In support of this contention reliance was placed on the decisions of this Court in Jupudi Kesava Rao v. Pulavarathi Venkata Subbarao and Others1 and M/s Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. The Excise Commissioner, U.P. & Ors.2. It is, therefore, urged that a plain literal meaning being given to each part of Section 5(1)(iii), the said provision is susceptible of only one construction, namely, that building which has been declared by the Central Government to be the official residence of the Ruler cannot be included in the assets of the assessee for the purpose of determining the wealth tax payable by an assessee.
4. Dr. Gauri Shankar, the learned senior counsel appearing for the Revenue, on the other hand, contended that in interpreting Section 5(1)(iii) of the Act the expression "in the occupation of a Ruler" has to be borne in mind and if each and every word used in Section 5(1)(iii) of the Act is given its literal grammatical meaning then the only conclusion possible is the building or the part of the building in occupation of the Ruler and which has been declared by the Central Government as the official residence of the Ruler would be exempted under the said provision.
5. In order to appreciate the rival contention it would be appropriate to notice Section 5(1)(iii) of the Act :
"5(1) Wealth Tax shall not be payable by an assessee in respect of the following assets shall not be included in the net wealth of the assessee.
(i) ........................
(ii) .......................
(iii) any one building in the occupation of a Ruler declared by the Central Government, as his official residence under Paragraph 13 of the merged States (Taxation Concessions) Order 1949, or paragraph 15 of the Part B States (Taxation Concessions) Order 1950".
6. It is a cardinal principle of construction that the words of a statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning unless that leads to some absurdity or unless there is something in the context or in the object of the statute to suggest the contrary. It has been often held that the intention of the legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said. As a consequence a construction which requires for its support addition or substitution of words or which results in rejection of words as meaningless has to be avoided. Obviously the aforesaid rules of construction is subject to exceptions. Just as it is not permissible to add words or to fill in a gap or lacuna, similarly it is of universal application that effort should be made to give meaning to each and every word used by the legislature. In J.K. Cotton Weaving and Spinning Company Ltd. v. State of U.P.3 it was observed by this Court :
"The Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of statute should have effect."
7. In case of taxing statute it has been held by this Court in several cases that one must have regard to the strict letter of the law and if the revenue satisfies the Court that the case fall strictly in the provisions of law, the subject can be taxed. This being the position, a fair reading of Section 5(1)(iii) of the Act would reveal that only the building or the part of the building in occupation of the Ruler which has been declared by the Central Government to be the official residence under the merged States (Taxation Concessions) Order 1949, will not be included in the net wealth of the assessee. The contention advanced by the learned counsel for the appellant that once a building has been declared as the official residence and a portion of the said building is under occupation of the assessee then the said building should come under the purview of Section 5(1) (iii) of the Act even if the substantial portion of the same has been rented out by the assessee to the tenant or for any other purpose would make the expression "in the occupation of a Ruler" redundant and those words in the provision would not have its play.
8. We have carefully considered the principles of construction of statute enunciated by this Court in the decisions cited by the learned counsel for the appellant and we do not find any principle stated therein, which is contrary to the principle we have adopted in this Case in interpreting Section 5(1)(iii) of the Act. In the aforesaid premises, we are of the considered opinion that the High Court rightly answered the question posed in favour of Revenue and against the assessee and the said judgment of the High Court does not require any interference by this Court.
9. This appeal is accordingly dismissed. But in the circumstances, there will be no order as to costs.
Appeal dismissed.
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