207. Subject as hereinafter provided; the Government of a unit shall not be liable to Federal taxation in respect of lands or buildings situate within the territories of the Federation or income accruing, arising or received within the Act

Provided that–

(a) where a trade or business of any kind is carried on by or on behalf of the Government of a unit, nothing in this sub-section shall exempt that Government from any Federal taxation or the levy of a sum in lieu of such taxation in respect of that trade or business or any operations connected therewith or any income arising in connection therewith or any property occupied for the purposes thereof;

(b) nothing in this sub-section shall exempt the Ruler of an Indian State from any Federal taxation in respect of any lands, buildings or income being his personal property or personal income.