1993 (10) TMI 73 - HC - Income Tax

High Court: No exemption for house rent allowance if assessee owns house, doesn't pay rent.

Commissioner Of Income-Tax Versus Rajeshwar Prasad

Commissioner Of Income-Tax Versus Rajeshwar Prasad - [1994] 207 ITR 926, 81 TAXMANN 503 Issues:Interpretation of section 10(13A) of the Income-tax Act, 1961 regarding house rent allowance exemption for an assessee occupying his own house.Analysis:The case involved a dispute over the eligibility of an assessee, who owned his own house, to claim house rent allowance exemption under section 10(13A) of the Income-tax Act, 1961 for the assessment year 1981-82. The Income-tax Officer initially disallowed the deduction citing rule 2A of the Income-tax Rules, 1962. However, the Appellate Assistant Commissioner allowed the appeal based on a decision in a similar case by the Punjab and Haryana High Court.In the subsequent appeal before the Income-tax Appellate Tribunal, it was observed that an assessee, even if occupying his own house, could be entitled to the deduction. The Tribunal referenced the Punjab and Haryana High Court's view that an assessee who occupies his own house and is compensated by the employer through a special allowance should be exempt from income tax, as he has disentitled himself from potential rent. However, the Revenue argued that the Tribunal ignored the Explanation to section 10(13A), which clearly states that the exemption does not apply if the residential accommodation is owned by the assessee and no actual expenditure on rent is incurred.The Explanation to section 10(13A) was inserted with retrospective effect from April 1, 1976, and was applicable to the case in question. The Tribunal's decision was deemed incorrect as the assessee's residential accommodation was owned by him, making him ineligible for the deduction. Moreover, the judgments of other High Courts, including Delhi, Karnataka, and Andhra Pradesh, had dissented from the Punjab and Haryana High Court's view. The retrospective amendment further supported the disallowance of the exemption for the assessee.Ultimately, the High Court ruled in favor of the Revenue and against the assessee, holding that the house rent allowance received by the assessee, who occupied his own house and did not pay any rent, was not exempt under section 10(13A) of the Income-tax Act, 1961. The decision was based on the clear provisions of the Explanation and the retrospective effect of the relevant amendments.This judgment clarifies the interpretation of section 10(13A) and establishes that an assessee owning his residential accommodation and not incurring actual rent expenditure is not eligible for house rent allowance exemption, even if compensated by the employer.