House rent allowance exemption denied where the assessee occupied self-owned accommodation and incurred no actual rent expenditure.

House rent allowance is exempt under section 10(13A) only when it is a special allowance granted to meet expenditure actually incurred on rent for residential accommodation occupied by the assessee. The retrospective Explanation inserted by the Taxation Laws (Amendment) Act, 1984 clarifies that the exemption does not apply where the accommodation is owned by the assessee or where no actual rent expenditure has been incurred. On the admitted facts, the assessee occupied his own house and paid no rent, so the allowance was not exempt and was includible in income.

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Issues: Whether house rent allowance received by an assessee was exempt under section 10(13A) of the Income-tax Act, 1961, when the residential accommodation occupied by the assessee was owned by him and no rent was actually paid.

Analysis: Section 10(13A) exempts only a special allowance granted to meet expenditure actually incurred on payment of rent for residential accommodation occupied by the assessee. The statutory position was clarified by the Explanation inserted by the Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1 April 1976, which declares that the clause does not apply where the accommodation is owned by the assessee or where no actual rent expenditure has been incurred. On the admitted facts, the assessee lived in his own house and did not incur rent expenditure.

Conclusion: The allowance was not exempt and was includible in the assessee's income; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Exemption under section 10(13A) is unavailable where the assessee occupies self-owned residential accommodation or has not actually incurred rent expenditure, and the retrospective Explanation governs the assessment years concerned.

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