Performance bonus excluded from salary base for HRA exemption under section 10(13A), allowing recomputation of relief

For house rent allowance exemption under section 10(13A), "salary" is confined to basic salary and dearness allowance, where applicable, and performance bonus cannot be included in that computation. Applying the cited authority on identical facts, the Tribunal held that performance bonus is neither an allowance nor a perquisite for this purpose and must be excluded when determining the admissible HRA exemption. The assessee was therefore entitled to the exemption as recomputed without adding the performance bonus.

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Issues: Whether performance bonus forms part of "salary" for computing exemption under section 10(13A) of the Income-tax Act, 1961.

Analysis: The exemption for house rent allowance depends on the meaning of "salary" used for the statutory computation. The Tribunal accepted the assessee's contention that only basic salary and dearness allowance, where applicable, are to be taken into account, and that performance bonus is not an allowance or perquisite that can be included in salary for this purpose. Following the cited authority on identical facts, the Tribunal held that the performance bonus could not be treated as part of salary while working out the admissible HRA exemption.

Conclusion: The performance bonus does not form part of salary for section 10(13A), and the assessee is entitled to the HRA exemption as recomputed by excluding that bonus.

Ratio Decidendi: For the purpose of section 10(13A), performance bonus is excluded from the computation of "salary" and cannot be added to basic salary for restricting HRA exemption.

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