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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-II, Raipur dated 08.03.2016, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-Tax Act, 1961 (for short ‘the Act’) dated 29.11.2013 for assessment year 2011- 12. Before us the assessee has assailed the impugned order on the following grounds of appeal: “On circumstances and facts of the case and in law, the learned CIT(Appeals) erred in confirming the disallowance of Rs.48,310/- made by the Assessing Officer in respect of House Rent Allowance. Relief claimed: The AO be directed to delete the disallowance of Rs.48,310/- The appellant craves leave to add, alter, modify or amend the Ground of appeal.”
Succinctly stated, the assessee who is an employee of Ultratech Cement, Durg had filed his return of income for assessment year 2011-12 on 28.11.2011, declaring an income of Rs.10,20,149/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act.
During the course of the assessment proceedings it was observed by the AO that the assessee had claimed deduction of house rent allowance (“HRA”, for short) u/s.10(13A) of the Act of Rs.1,01,703/-. Ostensibly as the 3 Shri Chittaranjan Kumar Vs. DCIT-1, Bhilai ITA No.149/RPR/2016 AO did not find favor with the assessee’s exclusion of the amount of special allowance for the purpose of computing the amount of HRA that was exempt u/s. 10(13A) i.e as per the methodology contemplated in Rule 2A of the Income Tax Rules, 1962, thus, rejected the same. It was observed by the AO that as the term “Salary” as provided in Rule 2A was to be construed as per the meaning assigned to it in Clause (h) of Rule 2 - Part A of the “Fourth Schedule”, therefore, the special allowance of Rs.4,83,096/- received by the assessee (as shown in Form 16) was also to be included as a part of salary for quantifying the amount of HRA that would be exempt under Sec. 10(13A) r.w Rule 2A of the Income-tax Rules, 1962. Accordingly, the A.O scaled down the amount of HRA that was claimed by the assessee as exempt and made a consequential disallowance of Rs.48,310/- in his hands.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
Controversy involved in the present appeal lies in a narrow compass i.e., as to whether or not the special allowance received by the assessee is to be included within the meaning of “Salary” as contemplated in Rule 2A for 4 Shri Chittaranjan Kumar Vs. DCIT-1, Bhilai ITA No.149/RPR/2016 the purpose of quantifying the amount of HRA exempt u/s.10(13A) of the Act?. Section 10(13A) reads as under:
“(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations. Explanation.—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 ;”
Quantification of the amount of HRA exempt u/s.10(13A) is contemplated in Rule 2A (supra) which reads as under: “2A. The amount which is not to be include in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall (a) the actual amount of such allowance received by the assessee in respect of the relevant period; or (b) the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or (c) an amount equal to- (i) where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period and (ii) where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period] (d)[******]
5 Shri Chittaranjan Kumar Vs. DCIT-1, Bhilai ITA No.149/RPR/2016
Whichever is the least. Explanation- 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 assessee during the previous year.] Clause (h) of Rule 2 of Part A of the “Fourth Schedule” as had been referred to in the “Explanation” to Section 2A provides the definition of “Salary”, as under: “Salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowance and perquisites” (emphasis supplied by us) On a conjoint perusal of Rule 2A of the Income-Tax Rules, 1962 r.w Rule 2(h) of Part A of the “Fourth Schedule”, it transpires that though salary includes dearness allowance if the terms of employment so provide, but excludes all other allowance and perquisites. Admittedly, as per the annexure to Form-16 which provides the bifurcated details of the gross amount of salary, reveals that the assessee during the year under consideration was in receipt of a special allowance of Rs.4,83,096/-. Apart from that we find that the employer vide its certificate dated 07.01.2014, Page 6 of APB had categorically stated that though salary structure of the company comprises of basic salary, special allowance etc. but no dearness allowance was being given.
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7. Considering the aforesaid facts, it can safely be concluded that the special allowance received by the assessee could by no means be brought within the meaning of dearness allowance. As Rule 2(h) of Part A of the “Fourth Schedule” specifically excludes all allowances except for dearness allowance from the definition of salary, therefore, we find no infirmity in the computation of the exempt amount of HRA as has been worked out by the assessee by not including the amount of special allowance of Rs. 4,83,096/- as a part of his salary. We, thus, not being able to concur with the view taken by the lower authorities who had dislodged the assessee’s claim of HRA exempt u/s. 10(13A) of the Act set-aside the order of the CIT(Appeals) and direct the A.O to vacate the addition of Rs.48,310/-. Thus, the ground of appeal raised by the assessee is allowed in terms of our aforesaid observations.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 23rd September, 2022 SB
7 Shri Chittaranjan Kumar Vs. DCIT-1, Bhilai ITA No.149/RPR/2016