Commissioner of Income Tax vs M. Satyanarayana Sastry

Syed Shah Mohammed Quadri J.

The following question of law was referred to us by the Income Tax Appellate Tribunal for our opinion :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in allowing the assessee''s claim u/s 10(13A) ?"

The question arises in respect of the assessment years 1979-80 and 1980-81. The assessee is the managing director of Krishi Engineering Company. He was granted house rent allowance by the company in respect of the said assessment years. He received Rs. 2,700 and Rs. 2,500, respectively. The Income Tax Officer disallowed the claim of allowance and included the said amount in the income on the ground that the assessee was residing in his own house. However, the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal upheld the claim of the assessee having regard to the judgments of the Punjab and Haryana High Court in Commissioner of Income Tax Vs. Justice S.C. Mittal, and in Commissioner of Income Tax Vs. M.S. Gujral, Chief Justice, Sikkim High Court, . At the request of the Revenue, the said question was referred to us.

It is brought to our notice that an Explanation was added to clause (13A) of section 10 of the Income Tax Act. The Explanation reads as follows :

"For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where -

(a) the residential accommodation occupied by the assessee is owned by him; or

(b) the assessee has not actually incurred expenditure on payment of rent by whatever name called in respect of the residential accommodation occupied by him."

It may be noted that the said Explanation was inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from April 1, 1976.

Having regard to the wording of the Explanation that an assessee residing in his own house will not be entitled to the exemption of house rent allowance and in view of the retrospective operation given to the Explanation with effect from April 1, 1976, which would cover the assessment years in question, the question has to be answered in the negative, i.e., in favour of the Revenue and against the assessee. Reference is accordingly answered. No costs.