1999 (3) TMI 65 - HC - Income Tax

Bombay High Court: House rent allowance taxable if assessee resides in own house.

The High Court of Bombay ruled in favor of the Revenue, holding that the house rent allowance received by the assessee was taxable for the assessment ... Exemption, House Rent Allowance Issues:Interpretation of section 10(13A) of the Income-tax Act, 1961 regarding house rent allowance exemption for an assessee residing in their own house.Analysis:The High Court of Bombay was presented with a question of law regarding the inclusion of house rent allowance in the total income of an assessee for the assessment years 1980-81 and 1981-82 under section 10(13A) of the Income-tax Act, 1961. The assessee, an individual, had received a house rent allowance from the employer during these years, claiming it was not taxable due to residing in their own house. The Income-tax Officer initially rejected this claim, but the Appellate Assistant Commissioner accepted it based on a decision by the Punjab and Haryana High Court. The Revenue's appeal against this decision was dismissed by the Income-tax Appellate Tribunal, leading to the reference to the High Court.The court considered the provisions of section 10(13A) of the Act, which exempt any allowance granted by an employer to meet rent expenses for residential accommodation occupied by the employee. The court noted a divergence of opinion among various High Courts on whether exemption under clause (13A) applied to an assessee residing in their own house. The Punjab and Haryana High Court had allowed the exemption, while the Delhi, Karnataka, and Andhra Pradesh High Courts had taken a contrary view.The controversy was resolved by the insertion of an Explanation to clause (13A) by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from April 1, 1976. The Explanation clarified that the exemption would not apply if the residential accommodation was owned by the assessee or if no expenditure was incurred on rent. The court applied this Explanation to the case at hand, where the assessee resided in their own house and did not pay rent, making them ineligible for the exemption.Therefore, the court answered the question in favor of the Revenue, concluding that the amount received by the assessee as house rent allowance was liable to be included in their income for the assessment years in question. The reference was disposed of with no order as to costs.