House Rent Allowance exemption under Rule 2A was upheld as the Section 143(1) adjustment lacked statutory basis.

House rent allowance exemption under Section 10(13A) was computed by applying Rule 2A to salary, rent paid, the prescribed salary percentage and HRA received, and the resulting allowable exemption matched the assessee's claim. The adjustment made in the intimation under Section 143(1) was therefore not supported by the statutory computation mechanism. On that basis, the disallowance of HRA exemption was held to be incorrect and the assessee's claim was allowed.

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Issues: Whether the assessee was entitled to exemption under Section 10(13A) of the Income-tax Act, 1961 in respect of house rent allowance and, consequently, whether the adjustment made in the intimation under Section 143(1) was sustainable.

Analysis: The assessee's HRA claim was tested against Rule 2A of the Income-tax Rules, 1962 on the basis of salary, rent paid, percentage of salary and HRA received. On that computation, the allowable exemption worked out to the amount claimed by the assessee. The adjustment made in the intimation was therefore found to be unsupported by the prescribed computation mechanism.

Conclusion: The disallowance of HRA exemption was held to be incorrect and the assessee's claim under Section 10(13A) was allowed.

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