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Issues involved:
The judgment deals with the question of whether the amount received by the assessee as house rent allowance should be included in their taxable income for the assessment years 1972-73, 1973-74, 1974-75, and 1975-76. Summary: Facts and Contentions: The assessee, a sitting judge of the Punjab and Haryana High Court, received house rent allowance (HRA) and claimed exemption under section 10(13A) of the Income-tax Act, 1961. The HRA received was partially deducted by the Government, and the rest was paid to the judge. The Income Tax Officer (ITO) did not accept the exemption claim. The assessee contended that his occupation of the house for residence, jointly owned with his brother, constituted expenditure, making the HRA exempt. Appellate Proceedings: The Appellate Authority Commissioner (AAC) accepted the appeal and deleted the additions for all four years. The revenue's appeal was dismissed by the Tribunal, leading to the reference of the question to the High Court. Legal Analysis and Decision: The High Court analyzed section 10(13A) of the Act and rule 2A of the Rules, which provide for the exemption of special allowance for rent paid by the assessee. The Court held that the purpose of the provision was to compensate the assessee for rent expenditure on residential accommodation. Since the assessee incurred expenditure by paying rent to his brother, the HRA received was not taxable. The Court also noted that the HRA paid was below the maximum limit prescribed by the Rules, further supporting the assessee's exemption claim. The judgment favored the assessee, emphasizing that in case of multiple interpretations, the one favorable to the assessee should be preferred in a taxing statute. Conclusion: The High Court answered the question in favor of the assessee, ruling against the revenue and in favor of the exemption claim for the house rent allowance. The judgment was a unanimous decision by the judges G. C. Mittal and B. S. Dhillon.
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