Holding

The expression "any one building in the occupation of a Ruler" means only the building or part of the building actually occupied by the ruler; consequently, the exemption does not apply to the portions let out, and the appeal is dismissed.

Summary

Sh. Mohammad Ali Khan owned the Khas Bagh Palace, which the Central Government declared as his official residence under the Merged States (Taxation Concessions) Order, 1949. He claimed exemption from wealth tax for the entire palace under Section 5(1)(iii) of the Wealth Tax Act, 1957, arguing that the provision covered the whole building declared as the ruler's residence. The Wealth Tax Officer held that only the portion of the palace actually occupied by the ruler was exempt, and the rest, which was let out, was taxable. The matter progressed through the Assistant Commissioner, the Tribunal and the Delhi High Court, which, after considering liberal versus restrictive interpretations, answered the reference question in favour of the Revenue. The Supreme Court affirmed the High Court's view, holding that the phrase "any one building in the occupation of a Ruler" refers only to the building or part thereof actually occupied by the ruler, and therefore the exemption does not extend to the rented portions, and dismissed the appeal.

Issues considered

Whether the buildings of the Khas Bagh Palace let out on rent are "in the occupation of the Ruler" within the meaning of Section 5(1)(iii) of the Wealth Tax Act, 1957 and thus exempt from wealth tax.

Legislation cited

Wealth Tax Act, 1957s. 27(1), s. 5(1)(iii)

Subjects

Wealth TaxStatutory interpretationOfficial residence exemptionOccupation of rulerTax liabilityConstruction of statutes

Judgment

A SH. MOHAMMAD ALI KHAN AND 9RS.
v.
THE COMMISSIONER OF WEALTH TAX, NEW DELHI
...
MARCH 4, 1997 ~

B (S.C. AGRAWAL AND G.B. PATTANAIK, JJ.]

Wealth Tax Act, 1957-Section S(l)(iii)-Net Wealth-Palace declared
as official ·residence of Ruler, by Central Govemment under Merged States
(Taxation Concessions) Order, 1949-Part of the Palace let out 011 rent-Ex-
c emption claimed in respect of whole Palace-Held, assessee would be entitled
to exemption only in respect of portion actually occupied by him.

Interpretation of Statutes--Taxi11g Statutes--Strict letter of law to be
followed....
--
D Words and Pharase~'Anyone building"-Mea11i11g of in the context of
Wealth TaiAct, 1957-:-Section 5(1)(iii).

Khas Bagh palace owned by the appellant-assessee was declared as
his official residence by the Central Government under paragraph· 13 of
the Merged States (Taxation Concessions) Order 1949. The assessee
E
during the assessment year 1961-62 claimed exemption of the aforesaid
Palace in computation of wealth under Section 5(1)(iii) of the Wealth Tax
Act, 1957. The Wealth Tax Officer concluded that as the Palace consisted
of many buildings, an exemption could be granted in respect of the portion
in occupation of the Ruler.
F
The assessee appealed to the Assistant Commissioner. Unable to ,
succeed, he also made a second appeal before the Tribunal. The Tribunal
confirmed the order. On an application the Tribunal referred to the High
Court, the question, as to whether on the facts and circumstances of the
case the Tribunal was justified in holding that the buildings of the Khas
G I
Bagh Palace, let out on rent by the assessee, were not in his occupation
within the meaning of Section 5(1)(iii) of the Wealth Tax Act, 1957.
-;·
The High Court came to the conclusion that a restrictive interpreta-
tion would disentitle the assessee as all buildings of the said Palace were
H not it the occupation of the Ruler, and a liberal interpretation would only
658
MOHD.ALIKHANv. COMMR.OFWEALTHTAX 659

entitle him to the extent of the occupied portions; therefore a liberal A
interpretation should be preferred. The High Court answered the question
»ii' . in favour of the Revenue.

In appeal to this Court it was contended on behalf of the assessee
that the expression "anyone building" in Section S(l)(iii) of the Act is not
to .be interpreted by making a further dissection to import int!) it the B
portion of the building or whole of the building and that while interpreting
the taxing statute it is not permissible for the court to look to the policy
behind the statute, but instead give a plain meaning to the words.

Dismissing the appeal, the Court
c
HELD : 1.1. The intention of the legislature is primarily to be
gathered from the language used, which means attention should be paid
to what has been said as also to what has not been said. (663-8)

1.2. It is a cardinal principle of construction that the words of a D
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. (663-B]

1.3. A construction which requires for its support addition or sub· E
stitution of words or which results in rejection of words as meaningless
has to be avoided. Similarly it is of universal application that effort should
be made to give meaning to each and every word used by the legislature.
(663-C]
J.K Cotton Weaving and Spinning Company Ltd. v. The State of U.P., F
(1961) 3 SCR 185, relied on.

2.1. In a taxing statute, regard must be given to the strict letter of
the law and if !he Revenue satisfies the Court that the case falls strictly in
the provisions of law, the subject can be taxed. (663-F]
G
2.2. A reading of Section S(l)(iii) of the Wealth Tax Act Would reveal
that only the building or the part of the building in occupation of the Ruler,
declared as the official residence by the Central Government will not be
included in tlie net wealth of the assessee. (663-F]

2.3. The expression, "in the occupation of the Ruler" would become H
660 SUPREME COURT REPORTS [1997] 2 S.C.R.

A redundant and those words in the provision would not have its play when
a substantial portion of the building declared as the official residence is
given on rent, even if a portion of the said building is in occupation of the
assessee. The said building cannot come under the purview of Section
5(1)(iii) of the Act. [663-G-HJ

B 3. The High Court rightly answered the question in favour of
Revenue and against the assessee and it does not require any interference
by this .Court. [664-8]

Jupudi Kesava Rao v. Pulavarathi Venkata Subba Rao and Others,
C [1971) 1 SCC 545 and M/s. Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. The
Excise Commissioner, U.P. and Others, [1971) 1 SCC 4, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5352
(NT) of 1983.

D From the Judgment and Order dated 16.11.82 of the Delhi High
Court in W.T.R No. 5 of 1974.

B.D. Sharma and Ranbir Yadav for the Appellants.

E Dr. V. Gaurishankar, S. Rajappa and C. Radha Krishana for the
Responde11t.

The Judgment of the Court was delivered by

PATIANAIK, J. In this appeal by grant of certificate by Delhi High
F Court interpretation of Section 5(1)(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 :
'I

"Whether on the facts and in the circumstances of the case the
G 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 occupa-
tion of the assessee within the meaning of Section 5(1)(iii) of the
Wealth Tax Act 1957 and hence the value thereof was includible
H in the net wealth of the assessee?"
MOHD.ALIKHANv. COMMR OFWEALTHTAX[PATIANAIK,J.] 661

The assessee Late H.H. Nawab Sir Syed Raza Ali Khan, Newab of A
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 B
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 die
conclusion that the Pal.ace 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 C
buildings which had been let out to be Rs. 3,55,000. This valuation obvious-
ly he found out on the basis of the rental income derived hy 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 D
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 Oil 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. E
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 F

--
assessee.

Mr. Sharma, the learned counsel appearing for the appellant con-
tended that the expression "anyone building" in Section 5(1)(iii) is not
susceptible of an interpretation by making a further disection to import G
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 States (Taxation Concessions) H ,
662 SUPREME COURT REPORTS [1997] 2 S.C.R.

A 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 trucing
statute it is not permissible for the Court to look to the policy behind the
B 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 oh
tlie decisions of this Court in Jupudi Kesava Rao v. Pulavarathi Venkata
Subbarao and Others, (1971) 1 Supreme Court Cases 545 and M/s.
Baidyanath Ayun:ed Bhawan (Pvt.) Ltd. v. The Excise Commissioner, U.P.
& Ors., [1971] 1 Supreme Court Cases 4. It is, therefore, urged thet a plain
C 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.
D
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
E 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.

In order to appreciate the rival contention it would be appropriate
F 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.

G (i) .................. .

(ii) ................ ..

(iii) any one building in the occupation of a Ruler declared by
the Central Government, as his official residence under Paragraph
H . 13 of the merged States (Taxation Concessions) Order 1949, or
MOHD.ALIKHANv. COMMR. OFWEAL1HTAX[PA1TANAIK,J.] 663

paragraph 15 of the Part B States (Taxation Concessions) Order A
1950".

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 un-
less that leads to some absurdity or unless their is something in the context B
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 construc-
tion which requires for its support addition or substitution of words or C
which results in rejection of words as meaningless has to be avoided.
Obviously the aforesaid rules of construction is subject to exceptions. Just
as its 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 by the legislature. In J.K Cotton Weaving and Spinning D
Company Ltd. v. State of U.P., (1961] 3 S.C.R. 185 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." E

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 p
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 G
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 H
664 SUPREME COURT REPORTS [1997] 2 S.C.R.

A would not have its play.
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 t.he principle we have adopted in this Case in interpreting
B Section 5(1)(iii) of the Act In the aforesaid premises. We are of thee
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.

C This appe?.I is accordingly dismissed. But in the circumstances, there
will be no order as to costs.

A.O. Appeal dismissed.