2016 (12) TMI 1899 - HC - Income Tax

Court upholds recovery from petitioner's leave encashment, dismissing challenge on house rent allowance issue.

The court upheld the recovery of an amount from the petitioner's leave encashment, dismissing the petition challenging the deduction. The dispute arose ... Denial of benefit of House rent allowance (HRA) to both husband and wife - recovery from the leave encashment to be paid to the petitioner of house rent was for the period from February 1986 up to March 2014, when the petitioner retired - both the petitioner and his wife have been residing in the same house belonging to the late father of the petitioner, but house rent allowance has been paid to the wife of the petitioner from February 1986 as well as to the petitioner too - whether wife was an employee of Oriental Bank of Commerce and was receiving house rent allowance? - HELD THAT:- It is not in dispute that the wife of the petitioner was an employee of Oriental Bank of Commerce from February 1986 and that she has been receiving the house rent allowance - both the petitioner and his wife have been residing in the same accommodation. Government Order specifically provides that if both the husband and wife are in government service and if they are residing in the same accommodation, then house rent allowance can be claimed only by one of them. Also provides that the same conditions would apply if the spouse was employed in Local Bodies, Educational Institutions, Universities, Public Enterprises, Corporations etc, etc. The same condition was reiterated in the Government Order dated 28 April 2000. The wife of the petitioner was an employee of the Oriental Bank of Commerce. This is an enterprise of the Central Government. It cannot, therefore, be contended that the conditions set out in the Government Order dated 28 February 1984 would not apply to the petitioner. This is what has also been observed by the Appellate Authority. The Government Order on which reliance has been placed by the learned counsel for the petitioner will not come to the aid of the petitioner. It is only in relation to the government servants and provides that house rent allowance will be payable to both husband and wife, even if they are government servants and reside in the same house. As clarifies that earlier cases will not be reopened. The wife of the petitioner was not in government service. The communication dated 11 February 2015 will not, therefore, help the petitioner in any manner. The case of the petitioner would be covered by the Government Order dated 28 February 1984. As not possible for us to accept the contention advanced by petitioner that opportunity was not provided to the petitioner. In view of the complaint, a notice was sent to the petitioner to submit his reply and on consideration of the reply submitted by the petitioner, the order for recovery of the amount was passed against the petitioner. Even otherwise, it is an admitted fact that the wife of the petitioner was in service in the Oriental Bank of Commerce and she was receiving house rent allowance from February 1986 upto March 2014. Thus, no prejudice has been caused to the petitioner at all. WP dismissed. Issues:Quashing of order deducting amount from leave encashmentValidity of communication for recovery of amountInterpretation of Government Orders regarding house rent allowanceAnalysis:The petition sought to quash an order deducting an amount from the petitioner's leave encashment and the subsequent dismissal of the appeal against it. The petitioner, a retired Commercial Tax Officer, received house rent allowance since April 1975, while his wife, an Oriental Bank of Commerce employee since February 1986, also received the allowance. A complaint in December 2012 led to a notice to the petitioner in December 2012, seeking clarification on his wife's employment and allowance. The Deputy Commissioner sought action based on a Government Order from May 2013, resulting in a recovery notice of Rs.1,97,365 from the petitioner's leave encashment in April 2014, upheld in the appeal's rejection in October 2015.The key contention was whether the recovery was justified due to both spouses receiving house rent allowance while residing together. The Government Orders from 1984 and 2000 stipulated that if both spouses in government service lived together, only one could claim the allowance. The petitioner's wife's employment with a Central Government enterprise meant these conditions applied, as affirmed by the Appellate Authority. The petitioner's reliance on a 2015 communication was deemed irrelevant, as it pertained to government servants, not applicable to the petitioner's case.The court rejected the argument that the petitioner was not provided with an opportunity to respond, noting the notice and the petitioner's acknowledgment of his wife's allowance. The court found no prejudice to the petitioner since his wife received the allowance until his retirement. Consequently, the court dismissed the writ petition, upholding the recovery of the amount from the petitioner's leave encashment based on the Government Orders and factual circumstances.