House rent allowance exemption denied where rent reimbursement was already absorbed in the accommodation perquisite calculation.

House rent allowance exemption under section 10(13A) was denied where the employer had taken the accommodation on lease, provided it as a perquisite, and recovered the same rent from the assessee by reimbursement. The rent reimbursement was already absorbed in computing the accommodation perquisite under Rule 3, which was treated as nil, so no separate rent remained actually paid by the assessee for exemption purposes. The first appellate view that reimbursement alone constituted sufficient rent payment was not accepted because it did not account for the accommodation benefit already received. The disallowance made by the Assessing Officer was restored.

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Issues: Whether the assessee was entitled to exemption of house rent allowance under section 10(13A) of the Income-tax Act, 1961 where the employer had taken the accommodation on lease, paid rent to the landlord, and recovered the same rent from the assessee by reimbursement.

Analysis: The accommodation was provided by the employer and the assessee also received HRA, including special HRA, while reimbursing rent to the employer. On these facts, the reimbursement was already absorbed in determining the perquisite value of the accommodation under Rule 3, which was treated as nil. Once that rent payment was so adjusted, no separate rent remained actually paid by the assessee for the purpose of claiming exemption under section 10(13A). The decision of the first appellate authority, which treated reimbursement to the employer as sufficient payment of rent, did not address the effect of the accommodation benefit already received by the assessee.

Conclusion: The assessee was not entitled to exemption under section 10(13A) on the rent reimbursement, and the disallowance made by the Assessing Officer was restored.

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