S.S. Chadha, J.
(1) Officers of Oriental Bank of Commerce in C.W.P. 1540/83 and officers of Lakshmi Commercial Bank Ltd. in C.W.P. 626183 are entitled to House Rent Allowance. (for short H.R.A.) as per their service contracts and subject to a maximum of Rs. 400 per month depending upon the cities where they are transferred. Officers are being paid H.R.A. by the said banks irrespective of the. fact whether they arc residing in tenancy premises or residing in their own residential accommodation. The question raised in these petitions is that the amount of H.R.A. received by the officers who are actually residing in their own residential houses/flats is not liable to bs included in computing the total income of a previous year under the Income-tax Act, 1961 (hereinafter referred to as the Act).
(2) The plea of the petitioners is that .the amount received is exempt in view of the provisions of Section 10(13A) read with Rule2-A of the Income-tax Rules, 1962 (hereinafter referred to as the Rules). It is apposite to reproduce these provisions :
'10(13A) any special allowance specifically granted to an assessed by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessed, to such extent (not exceeding four hundred rupees per month) as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations.'
2A.Limits for the purposes of section 10(13A). The amount which is not to be included in the total income of an assessed in respect of the special allowance referred to in clause (13A) of section 10 shall be
(A) the actual amount , such allowance received by the assessed in respect of the relevant period; or
(B) the amount by which the expenditure actually incurred by the assessed in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessed in respect of the relevant period ; or
(c) an amount equal to
(I) where such residential accommodation is situate at Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bombay, Calcutta, Cochin, Coimbatore, Delhi, Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Lucknow. Madras, Madurai, Nagpur, Patna, Poona. Sholapnr, Srinagar, Surat, Trivandrum, Vadodara (Baroda) or Varanasi (Banaras), one-fifth of the amount of salary due to the assessed in respect of the relevant period, and
(II) where such residential accommodation is situate at any other place, one-tenth of the amount of salary due to the assesses in respect of the relevant period; or
(D) a sum calculated at the rate of Rs. 400 per month in respect, of the relevant period,
whichever is the least. Explanationn. In this rule
(I) 'salary' shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;
(II) 'relevant period' means the period during which the said accommodation was occupied by the assessed during the previous year.'
(3) The submission of Shri Chandrasekharan, the learned counsel for the petitioners is that on a combined reading of Section 10(13A) of the Act, and Rule 2-A of the Rules, the fact that an assessed was living in his own residential accommodation does not take the H.R.A. paid to him by his employer out of the purview of clause 13 of Section 10 of the Act firstly because by living in his own house/flat and by paying tax on the annual letting value of the self-occupied property, he has actually incurred expenditure within the meaning of Section 10(13A) of the Act and secondly, there is no requirement of law or limitation that expenses must actually be incurred. According to the counsel, if the assessed incurs a loss thereby disentitling himself for the receipt of rent of his house to which he was entitled in case he had not occupied his house himself, the provisions of Section 10(13A) of the Act read with Rule 2-A shall stand satisfied. Reliance is heavily placed on the decisions of the Punjab and Haryana High Court in cases of 'Commissioner of Income-tax V. Justice S.C. Mittal' (1), '.Commissioner of Income-tax v. V. R. Thuli' (2) and 'Commissioner of Income-tax v. M. S. Gujral' (3). The latter two decisions followed the law laid down in the first case as under : 'After hearing the learned counsel for the parties and taking into consideration the provisions of law, we are of the opinion that the question referred to us has to be answered in the negative, i.e., against the revenue and in favor of the assessed. The provisions of s. 10(13A) of the Act, have been enacted to compensate the assessed regarding the expenditure incurred on payment of rent in respect of residential accommodation occupied by him. The main object for enacting this provision appears to be that in case an assessed actually suffers monetary loss by way of expenditure or otherwise in respect of residential accommodation occupied by him and if he is compensated by his employer in that case, subject to the limitations imposed under the Act and the Rules, the allowance paid to him by the employer, shall be exempt from income-tax. An assessed, who occupies his own house, has disentitled himself from the rent which he would have been entitled to if he had not occupied the same himself, and in that sense he suffered expenditure in that regard. In that sense, an assesses occuping his own house, if compensated by the employer by payment of a special allowance (HRA), subject to the restrictions as imposed under the Act and the Rules, the compensation paid to the assessed by his employer, cannot be subjected to tax. The Tribunal accepted the interpretation of the relevant provisions of the Act and we do not find any reason to take a different view than the one taken by the Tribunal.'
(4) Clause 13A was inserted after clause 13 in Section 10 of the Act by Section 3 of the Direct Taxes (Amendment) Act, 1964. Section 10 provides that in computing the total income of a previous year of any person, any income falling within any of the clauses shall not be included. In other words, the incomes enumerated in various clauses of. Section 10 are not to be taken into computation of the total income. Clause 13A exempts any special allowance specifically granted to an assessed by his employer to meet expenditure incurred on payment of rent (by whatever named called) in respect of residential accommodation occupied by the assessed. I am called upon to interpret this clause. The dominant purpose in construing the provisions of a statute is to ascertain the intention of the legislature. A cardinal rule of construction is that the legislature speaks its mind by using correct expressions. The Court should thus adopt literal construction unless there are compelling reasons otherwise. If a literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature, then the Court may do some violence to the words and achieve the obvious intention. Another rule of interpretation is that a statute must be construed according to its plain language and neither should anything be added nor substracted unless there are adequate grounds to justify the inference that the legislature clearly so indicated.
(5) Clause 13 grants exemption from tax of the allowance which falls within the four corners of the conditions laid down. It is not any allowance or any special allowance but an allowance, I may be permitted to split, (i) specifically granted, (ii) to meet expenditure, (iii) actually incurred, (iv) on payment of rent. The intention of the legislature is clear from the words employed. The first requirement is meant in these cases that it is a House Rent Allowance specifically granted under the service contracts, but the other conditions are not fulfillled. To meet suggests that the special allowance should be granted to discharge or to pay fully or to satisfy. It is to provide for the expenditure incurred. The expenditure is something which the assessed pays out of his own pocket or makes a disbursement to meet a liability. It is an expense. In accrual-basis accounting it may be an outlay or the creation of a liability or expense item. It has to be an act or process of expending. It cannot be like incurring a loss thereby disentitling for the receipt of rent. A loss is something different in contrast to expenditure. The special allowance covered by the clause is to meet expenditure and is not intended to compensate for any monetary loss suffered by the assessed or to offset any other loss of a self-occupied flat/house. Then the words 'actually incurred on payment of rent' spell out the intention that the allowance must be to meet expendiure already incurred on payment of rent for the residential accommodation occupied by the employee. The employee concerned in order to claim exclusion of the house rent allowance has to show that he had paid house rent. I have endeavored to split the words used to find out the exact sense in which the words have been employed by the legislature in its particular context. Looking at the clause as a whole and by adopting the literal construction the logical conclusion is that the officers who are actually residing in their own residential houses/flats cannot claim exclusion of the H.R.A. received by them from the total income under clause 13. Those officers do not come within the specific words of the statute.
(6) Clause 13 provides that the limit up to which such allowance may not be included from the total income will be prescribed having regard to the area or place in which such accommodation is situate and other relevant consideration. 'Prescribed' means prescribed by rules made under the Act Section 2(34). thereforee, Rule 2A only prescribes the extent of exemption under the powers conferred by Section 295 of the Act read with clause 13. Rules under the statute may be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect. But the Rules cannot travel beyond the Act and have to be read subject to its provisions. The exclusion in various clauses of Section 10 cannot be enlarged by the Rules. Rule 2A lays down the limits for the purposes of Section 10(13A) as the heading mentions. The conditions of exemption are contained in clause 13. Sub-rules (a), (b), (e) and (d) of Rule 2A may be interpreted distinctively because of the use of the word 'or', but it cannot be read a,s laying down additional exemptions. If it directs exclusion of certain other allowances, then it would be ultra vires. The Rules have to be so interpreted that they are intra vires. In that case Rule 2A has to be read as only prescribing the limits of exemption. Recourse also cannot be had to the Rules made under the authority of the Act for the purpose of construing the provisions of the statute except where the construction of a statute may be ambiguous or doubtful and a particular construction has been put upon the Act by the Rules. .Rule 2A cannot be treated as an external aid to the construction of clause 13 as it only specifies the amount of the allowance which is to be treated as exempt from income-tax. The Rule does not put any construction on clause 13. Reliance by the counsel on Rule 2A as an aid to the construction of the statute is, thereforee. misplaced.
(7) With great respect to the learned Judges of the Punjab & Haryana High Court I am unable to subscribe to their view and must record a note of dissent.
(8) The petitioners also seek the quashing of the circulars bearing No. 278 dated August 26, 1980, No. 290 dated April 15, 1981 and No. 291 dated April 15, 1981 and No. 342 dated May 19. 1983 in which the. income-tax authorities have stated that they have not accepted the decisions of the Punjab and Haryana High Court referred to above and have moved appropriate proceedings in the Supreme Court against the same. In this view of the matter, the circulars proceed to say that income-tax would be deductible from employees in respect of H.R.A. if such employees are residing in houses/flats owned by them. I grant that there is power in the Board under Section 119 of the Act to issue orders, instructions and directions to other Income-tax authorities for the proper administration of the Act and such authorities and all other persons employed in the execution of the Act have to observe these. The Income-tax Authorities acting anywhere in the country, however, have to respect the law laid down by the High Court, whether of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. The said circulars and its language, thereforee, are not in good taste. Since lam taking a contra view to the Punjab and Haryana High. Court, the circulars cannot be quashed.
(9) The writ petitions fail and are hereby dismissed with no order as to cost.'