1984 (6) TMI 115 - AT - Income Tax

Summary

Issues:
1. Whether the house rent allowance received by the employee is exempt under s. 10(13A) r/w r. 2A.
2. Whether the decision of the CIT(A) directing the deletion of the addition of the house rent allowance was correct.

Analysis:
1. The employee received a house rent allowance of Rs. 4800 from the employer company. The assessing authority denied the exemption as the employee was residing in his own property without incurring any rent expenditure. The CIT(A) allowed the exemption based on decisions of the Punjab & Haryana High Court and the Supreme Court of India. The Revenue appealed, arguing that no rent expenditure was actually incurred, citing an incorrect interpretation by the High Court. The ITAT considered the relevant provisions of s. 10(13A) and r. 2A, emphasizing that actual rent expenditure is necessary for exemption. Referring to past Supreme Court decisions, the ITAT concluded that exemption under s. 10(13A) requires actual payment of rent, which was not the case here. The ITAT reversed the CIT(A)'s decision, disallowing the exemption.

2. The ITAT disagreed with the CIT(A) and Punjab & Haryana High Court's interpretation that an assessee is entitled to exemption under s. 10(13A) even without incurring actual rent expenditure. The ITAT emphasized that the legislative intent and monetary limits set in r. 2A require actual expenditure on rent for claiming exemption. Referring to a Supreme Court decision on the meaning of "expenditure," the ITAT held that unless rent is actually paid out, exemption under s. 10(13A) does not apply. The ITAT also highlighted the Supreme Court's interpretation of "income" in a separate case, supporting the view that an assessee saving by using self-owned property does not qualify for rent expenditure exemption. Consequently, the ITAT reversed the CIT(A)'s decision and allowed the Revenue's appeal, disallowing the exemption for the house rent allowance received by the employee.