Skip to content


inspecting Assistant Commissioner Vs. Subodho ChandrA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberI. T. APPEAL NO. 3654 (DELHI) OF 1983 [ASSESSMENT YEAR 1981-82]
Reported in[1986]17ITD922(Delhi)
Appellantinspecting Assistant Commissioner
RespondentSubodho ChandrA.
Cases ReferredBhagwan Dass Jain v. Union of India
Excerpt:
- .....co. ltd., had received during the accounting year relevant to the assessment year 1981-82 house rent allowance of rs. 4,800 from its employer company. it had been claimed before the assessing authority that the house rent allowance was exempt under provisions of section 10(13a) of the income-tax act, 1961 (the act) read with rule 2a of the income-tax rules, 1962 (the rules). the assessing authority denied the exemption as according to him the assessed was residing in his own property and as no expenditure had been actually incurred by him on payment of rent in respect of his residential accommodation. dissatisfied with the order passed by the iac (appeals) the assessed appealed before the commissioner (appeals) and contended that in spite of the fact that he resided in his self-owned.....
Judgment:
ORDER

Per Shri B. Gupta, Accountant Member - The respondent an employee of Delhi Cloth & General Mills Co. Ltd., had received during the accounting year relevant to the assessment year 1981-82 house rent allowance of Rs. 4,800 from its employer company. It had been claimed before the assessing authority that the house rent allowance was exempt under provisions of section 10(13A) of the Income-tax Act, 1961 (the Act) read with rule 2A of the Income-tax Rules, 1962 (the Rules). The assessing authority denied the exemption as according to him the assessed was residing in his own property and as no expenditure had been actually incurred by him on payment of rent in respect of his residential accommodation. Dissatisfied with the order passed by the IAC (Appeals) the assessed appealed before the Commissioner (Appeals) and contended that in spite of the fact that he resided in his self-owned property and did not actually incur any expenditure by way of rent on it, he was entitled to deduction in accordance with the law laid down by the Hon' able Punjab and Haryana High Court in the case of CIT v. Justice S. C. Mittal . He also relied upon the decision of the Hon' able Supreme Court in Bhagwan Dass Jain v. Union of India : [1981]128ITR315(SC) . The Commissioner (Appeals) agreed with the representation made by the assessed and held relying upon the aforementioned decisions of the Hon' able Punjab and Haryana High Court and Supreme Court that exemption claimed under section 10(13A) was admissible to the assessed and that the sum of Rs. 4,800 would not form part of the assesseds total income.

2. It is in the above background of fact that the revenue is in appeal contending as follows :

'The Commissioner of Income-tax (Appeals) erred in directing the deletion of addition of Rs. 4,800 rightly made by the Income-tax Officer on account of house rent allowance.'

3. Shri M. K. Chakraborty, the learned authorised representative of the department, has taken us through the provisions of section 10(13A) and contended that no expenditure by way of rent having been actually incurred by the assessed, the question of exempting the house rent allowance of Rs. 4,800 did not arise. With great respect to the decision of the Hon' able Punjab and Haryana High Court in CIT v. Justice S. C. Mittals case (supra), the learned authorised representative submitted that was a decision based on an incorrect interpretation of the provisions of section 10(13A) and, thereforee, should not be followed. The learned departmental representative further referred to us to the views expressed on the subject in Income-tax Laws by Chaturvedi and Pithisaria, Vol. 1, Third edn. p. 449.

4. On the other hand, Shri S. K. Aggarwal, the learned Counsel for the respondent has supported the order passed by the Commissioner (Appeals) and relied upon the decision of the Hon' able Punjab and Haryana High Court in Justice S. C. Mittals case (supra) and on a single member decision of the Tribunal, Delhi in IT Appeal No. 2455 (Delhi) of 1982 dated 29-9-1982.

5. We have carefully considered the submission made on the two sides. We have also very carefully gone through the decision of the Hon' able Punjab and Haryana High Court in the case of Justice S. C. Mittal (supra) and other decisions of the same Hon' able High Court which were subsequently delivered in which the decision give in the case of Justice S. C. Mittal (supra) had been followed, We have also gone through the decision of the Hon' able Supreme Court of India in Bhagwan Dass Jains case (supra) which had been relied upon by the respondent in the course of proceedings before the first appellate authority.

6. Before deciding the issue we might reproduce here the exempting provision of Section 10(13A) which had been introduced by the Direct Taxes (Amendment) Act, 1964 with effect from 6-10-1964 :

'(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 prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations.'

The monetary limits for the grant of exemption under section 10(13A) have been laid down in rule 2A which may also be reproduced as below :

'The amount which is not 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 of 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 accommodation is situate in any one of the following places, namely :-

Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior (Lashkar), Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Poona, Srinagar, Surat, Vadodara (Baroda) or Varanasi (Banaras) or the urban agglomeration of each of such places;

(ii) where such accommodation is situate at Bombay, Calicut, Cochin, Ghaziabad, Hubli-Dharwar, Madras, Sholapur, Trivandrum or Vishakhapatnam, one-fifth of the amount of salary due to the assessed in respect of the relevant period; and

(iii) where such residential accommodation is situate at any other place, one-tenth of the amount of salary due to the assessed 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.'

After analysing the above provisions contained in the act and the Rules, it appears to us that in order that a special allowance in the shape of house rent allowance can be exempted from the total income, the recipient must actually incur an expenditure by way of rent. On the satisfaction of this condition the exemption is granted in accordance with the monetary limits prescribed in rule 2A. In other words, a rent must be paid in respect of residential accommodation in order to qualify for exemption under section 10(13A). The Hon' able Supreme Court had an occasion to consider the meaning of the word incurred as it appeared in the provisions of section 4(3) (vi) of the Indian Income-tax Act, 1922. These provisions of the 1922 Act were in the following terms :

'(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them :

(vi) any special allowance, benefit or perquisite specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an officer or employment of profit.'

Their Lordships of the Supreme Court in their decision in the case of CIT v. Tejaji Farasram Kharawalla Ltd. : [1968]67ITR95(SC) held that if the amount received by an assessed under the aforesaid provisions of section 4(3) (vi) had not been actually incurred and that if any sum remained in the hands of the recipient out of the allowance, thus, received and was not spent, to that extent the expenditure would not be incurred and the surplus remaining in the hands of grantee was, accordingly, held to be not exempt under the provisions of section 4(3) (vi) of the 1922 Act. In accordance with the law laid down by the Hon' able Supreme Court in the aforementioned decision it appears to us that in order to be exempt within the provisions of section 10(13A) of the 1961 Act, the house rent allowance had to be actually incurred on payment of rent hired for residence. Since in the recent case no rent had been actually paid and since no accommodation had actually been hired for residence as the assessed was residing in his own house, the question of granting exemption under the provisions of section 10(13A) did not arise. We are also at this stage reminded of another decision of the Hon' able Supreme Court in Indian Molasses Co. (P.) Ltd. v. CIT : [1959]37ITR66(SC) where their Lordships had an occasion to interpret the meaning of the word expenditure. It was held in the aforesaid case that expenditure is what is paid out or away and is something which has gone irretrievably. If the interpretation of the word expenditure as given by the Supreme Court was to be applied in interpreting the provisions of section 10(13A) it would appear that unless and until a sum by way of rent had actually been paid out or away and had gone irretrievably the question of allowing exemption under section 10(13A) would not arise. The intention of the Legislature also becomes quite clear from the monetary limits which had been laid down in rule 2A. In the provisions continued in these rules also it has been mentioned that one of the criteria for determining the amount admissible for deduction would be that the expenditure actually incurred by the assessed by way of rent in respect of residential accommodation occupied by him did not exceed one-tenth of the amount of salary due to him. If the provisions of section 10(13A) were to be harmoniously read, it would appear that the incurring of actual expenditure in monetary terms on a hired residential accommodation was essential for claiming exemption of house rent allowance. Since in the present case the assessed did not actually incur any expenditure by way or rent and since that was not necessary as he was residing in his own property, his case went out of the purview of exemption available in section 10(13A).

7. In the above view of matter we have not been able to follow the decision of the Punjab and Haryana High Court in Justice S. C. Mittals case (supra) where their Lordships had held that the main object of enacting the provisions of section 10(13A) is that in a case where an assessed actually suffers monetary loss by way of expenditure or otherwise he would be entitled to exemption under section 10(13A). With great difference to the aforesaid decision it appears to us that the provisions of section 10(13A) grant an exemption where an assessed actually incurs expenditure and not n any otherwise situation as held by the Hon' able High Court. We have gone through the commentary of Income-tax Law by the learned authors Chaturvedi and Pithisaria, Third edn., and we find that the view that has been expressed by us is also the view of the learned authors.

8. Before taking leave of this appeal, we would also respectfully refer to the decision of the Hon' able Supreme Court in Bhagwan Dass Jains case (supra) which had been relied upon on the side of the assessed before Commissioner (Appeals). In that case the question before their Lordships was as to whether it was open to the income-tax Department while determining the liability of an assessed to income-tax to include in the income of the assessed any amount calculated in accordance with section 23(2) of the Act in respect of a residential house belonging to him. While holding that the Income-tax Department was competent to assess income in respect of self-occupied property, their Lordships also had an occasion to interpret the meaning of the word income. It was held that according to the dictionary meaning, it means a thing that comes in. Their Lordships further elaborated the meaning of the word income and held that in its ordinary economic sense the expression includes not merely what is received or what comes in but also includes that which can be converted into an income. After thus interpreting the meaning of the word income their Lordships held that the income from property would not be only that which an assessed derives by letting it out but would also embrace within itself an eventuality of saving by using the property as self-residence. According to us the law thus laid down by Hon' able Supreme Court in fact, supports the view that we have taken. When an owner of a house property occupies it for its self-residence, it can be said that he is saying by using the property himself. But it could not mean that an assessed who is in receipt of house rent allowance but who does not incur any expenditure by way of rent as he resides in his own house is actually incurring any expenditure by way of rent.

9. In conclusion we would accept the view of the assessing authority that the house rent allowance of Rs. 4,800 received by the assessed who was not actually incurring any expenditure by way of rent and who was residing in his own house was not entitled to exemption under section 10(13A), read with rule 2A. The order passed by the Commissioner (Appeals) is, thereforee, reversed and the appeal filed by the departmental is allowed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //