TaxTMI 
TaxTMI 
1987 (4) TMI 126
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....the Government of Andhra Pradesh. Subsequently, under the terms of the deputation contained in G.O. Ms. No. 682/(Food and Agriculture III Department) dated 5-8-1976 the assessee was sent as Vice Chancellor of Agricultural University on deputation. Copies of the G.O. under which the deputation order was passed as well as the terms and conditions forming part of the said G.O. were furnished to us. The assessee shall be paid a salary of Rs. 2,000 per month from 1-9-1974 to 31-7-1975 (AN) and Rs. 2,000 per month plus pension as allowed under the existing rules from 1-8-1975 to 24-6-1976 and Rs. 3,000 per month inclusive of pension and pension equivalent of gratuity from 25-6-1976 onwards. Under the terms and conditions of deputation the assessee is entitled to travelling allowance and daily allowance, conveyance allowance as well as leave. He was also governed by the other terms and conditions with which we are not concerned. The important clause in the terms and conditions as far as we are concerned is the 4th condition under which the assessee is entitled to a free-furnished house. It may at once be seen that the assessee is not entitled to any money whatsoever towards house rent all....
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.... 1979-80 for which the previous year ended by 31-3-1979 the assessee claimed arrears of Rs. 35,700 as property income. However, the Income-tax Officer applying the provisions of rule 2A read with s. 10(13A) held the HRA is taxable in his hands and also the income from property is assessable under s. 23 of the IT Act. Therefore as per the particulars furnished in his assessment order he had taken his salary along with arrears of HRA plus pension at Rs. 70,619 over which he allowed a standard deduction of Rs. 3,500. He also added an amount of Rs. 5,675 as income from house property (10-2-269/39), Srinagar Colony, Hyderabad, and he completed the assessment on a total income of Rs. 71,070. He gave relief under s. 89(1) and completed his assessment dated 6-6-1984. 4. The Appellate Assistant Commissioner at the close of para 4.4 of his impugned order concluded as follows : " So, the conclusion is inescapable that Dr. C. Krishna Rao, the appellant, in the personality of the Vice Chancellor received from his employer, the University, HRA which is includible in salary and assessable under the head 'Income from salary' by virtue of the provisions of s. 15 to s. 17 of the IT Act, 1961. ....
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....e records we are of the firm opinion that the orders of the lower authorities are not correct and they should be set aside. Our reasons are as follows : 6. Firstly the deputation order dated 5-8-1976 spoke of only providing a furnished house free of rent to the assessee. In such a case the assessee is not at all entitled to house rent allowance which forms part of salary. In our considered opinion the amount of arrears received by the assessee should either be part of salary or part of income from property. But there is no scope for one receipt of income to fall under two heads enumerated under s. 14 of the IT Act. In this regard we may quote the Supreme Court decision in East India Housing & Land Development Trust Ltd. v. CIT [1961] 42 ITR 49. In that case the assessee company was incorporated with the objects of buying and developing landed properties and promoting and developing markets. It had purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was whether the income realised from the tenants of the shops and stalls was liable to be taxed as 'business income' under s. 10 of the Income-tax Act or as income from property under s. 9. Ul....
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....35,700 can be regarded as an amount received from the assessee's employer as income from salary. In the term of his appointment he was not entitled at all to HRA. What all he was entitled was only to free-furnished accommodation. Even the University, in its proceedings dated 18-4-1978 held the following : " The Board of Management in its meeting held on 31-3-1978 considered this matter and decided that Dr. C. Krishna Rao, be paid rent for the house occupied by him at the rate of Rs. 1,000 per month... " Thus it is clear that what is sought to be paid by the University to the assessee is only rent for the house but not HRA as such. The difference between the rent for the house and the HRA is very much pronounced and well-marked. Simply because in the salary certificate the arrears of Rs. 35,700 was described as HRA the amount does not turn out automatically to be house rent allowance in the absence of a specific provision in that regard either in the conditions of his service or in the proceedings of the University referred to supra. Further the Income-tax Officer has assessed the property income at Rs. 1,000 per month for assessment years 1978-79 and 1979-80 as income from ho....