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Issues Involved:
1. Classification of Rs. 35,700 received by the assessee: whether it is house rent allowance (HRA) forming part of salary or arrears of rent for the assessee's house used as the official residence of the Vice Chancellor. Detailed Analysis: Issue 1: Classification of Rs. 35,700 Received by the Assessee Background: The assessee, an individual with income from salary and house property, was deputed as Vice Chancellor of the Andhra Pradesh Agricultural University. Under the deputation terms, the assessee was entitled to a free-furnished house, not house rent allowance (HRA). However, due to the university's failure to provide such accommodation, the Board of Management decided to reimburse the rent for the house occupied by the Vice Chancellor at Rs. 1,000 per month, resulting in a lump sum payment of Rs. 35,700 for the period from 1-9-1974 to 28-2-1978. Assessment by Income-tax Officer: For the assessment year 1979-80, the Income-tax Officer treated the Rs. 35,700 as HRA taxable under the head 'Income from Salary' and also assessed income from house property separately. The total income was computed at Rs. 71,070 after standard deductions. Appellate Assistant Commissioner's Decision: The Appellate Assistant Commissioner upheld the Income-tax Officer's decision, concluding that the amount received as HRA is includible in salary and also assessable as rent under 'Income from House Property.' He justified the dual classification by stating that the heads of income under Section 14 of the IT Act are mutually exclusive, citing the Supreme Court decision in United Commercial Bank Ltd. v. CIT. Tribunal's Analysis and Decision: The Tribunal disagreed with the lower authorities, stating that the deputation order only entitled the assessee to a free-furnished house, not HRA. The Tribunal emphasized that one receipt of income cannot fall under two heads as per Section 14 of the IT Act. Citing the Supreme Court decision in East India Housing & Land Development Trust Ltd. v. CIT, the Tribunal held that income derived from different sources falling under specific heads must be computed accordingly. The Tribunal further noted that the university's proceedings clearly indicated that the payment was rent for the house, not HRA. The Tribunal criticized the Appellate Assistant Commissioner for upholding the dual classification, calling it an "absurd proposition" without any legal foundation. Conclusion: The Tribunal concluded that the Rs. 35,700 received by the assessee should be classified solely as income from house property and not as part of salary or HRA. Consequently, the Tribunal directed the Income-tax Officer to exclude Rs. 35,700 from the total income for the assessment year 1979-80 and not to include it as arrears of HRA or salary. Result: The appeal was allowed, and the Income-tax Officer was directed to exclude the Rs. 35,700 from the assessment year 1979-80 income computation.
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