House-rent allowance exemption turns on the statutory meaning of salary; commission in lieu of fixed salary is excluded.

For house-rent allowance exemption under section 10(13A), "salary" is confined to the meaning adopted by rule 2A and rule 2(h) of Part A of the Fourth Schedule. Commission paid in lieu of fixed salary does not fall within that definition, because it is distinct from salary and outside the allowances expressly included. The assessee therefore could not claim HRA exemption on the basis that the commission component was salary, and that issue was decided in favour of the Revenue. Rule 2A was also held intra vires, as it operates within the statutory scheme and does not contradict the Act's definition framework.

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Issues: (i) Whether commission received in lieu of fixed salary could be treated as salary for the purpose of exemption of house-rent allowance under section 10(13A) read with rule 2A. (ii) Whether rule 2A was ultra vires on the ground that it curtailed the statutory concept of salary.

Issue (i): Whether commission received in lieu of fixed salary could be treated as salary for the purpose of exemption of house-rent allowance under section 10(13A) read with rule 2A.

Analysis: Rule 2A governs the extent of exemption under section 10(13A) and its Explanation adopts the meaning of salary from rule 2(h) of Part A of the Fourth Schedule. That definition includes dearness allowance, if the terms of employment so provide, but excludes other allowances and perquisites. On that footing, commission paid in lieu of fixed salary does not fall within salary for this exemption. The interpretation is also consistent with the distinction between salary and commission recognised in prior case law.

Conclusion: The assessee was not entitled to treat the commission component as salary for exemption under section 10(13A); this issue is decided against the assessee and in favour of the Revenue.

Issue (ii): Whether rule 2A was ultra vires on the ground that it curtailed the statutory concept of salary.

Analysis: The rule was held to operate within the statutory scheme. Section 17 itself limits the definition of salary for the purposes of sections 15 and 16, and rule 2A merely supplies the controlling meaning for section 10(13A). No inconsistency with the Act was found, and the challenge to the rule was not accepted.

Conclusion: Rule 2A was not ultra vires and the challenge failed.

Final Conclusion: The reference was answered in favour of the Revenue, and the assessee failed to establish entitlement to the claimed house-rent allowance exemption on the basis of commission treated as salary.

Ratio Decidendi: For purposes of section 10(13A), salary takes the meaning assigned by rule 2(h) of Part A of the Fourth Schedule as adopted by rule 2A, so commission received in lieu of fixed salary is excluded from salary for house-rent allowance exemption.

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