The main legal point established in the judgment is that the House Rent Allowance received by the petitioners who are in occupation of residential accommodation belonging to them cannot be excluded in computing the total income. Additionally, the encashment of salary received by the petitioners falls within the meaning of 'profits in lieu of salary' under section 17(3)(ii) of the Income Tax Act, 1961.

Mahendra, J.—On a reference made by one of us (Puttaswamy J.), these cases were posted before us for hearing.

2. As common questions of law arise for consideration in all these cases, they are heard together and disposed of by this common order.

3. The petitioners in some of these cases are the employees of the State Bank of Hyderabad working in several branches of the said bank in Gulbarga District and the petitioners in the other cases are the employees of the Bharat Electronics Limited, Bangalore.

4. All the petitioners, who draw salaries and allowances of varying amounts, in terms of their employment, are assessed under the I.T. Act, 1961 (hereinafter referred to as "the Act"). The taxes payable by the petitioners are deducted at source from their salary as provided in s. 192 of the Act. All the employees of the State Bank of Hyderabad and Bharat Electronics Limited, Bangalore, including the petitioners are paid monthly House Rent Allowance (HRA), and a certain amount as encashment of leave once a year or once in two years as the case may be, in terms of their conditions of service. All the petitioners are in occupation of their own houses. In computing the total income of the petitioners, both the H.R.A. and the cash amount of encashment of leave are included as part of their income for the purpose of deducting Income Tax under s. 192 of the Act. The petitioners have, in these petitions, filed under article 226 of the Constitution of India, prayed for the issue of a writ in the nature of mandamus directing the Commissioner of Income Tax in Karnataka, Bangalore, not to treat the House Rent Allowance and the encashment of leave as part of their income for the purpose of deducting the taxes payable by them under s. 192 of the Act.

5. Sriyuths Shivaraj Patil and M.C. Pattanshetti appeared for the petitioners and G. Sarangan assisted by H. Raghavendra Rao appeared for the Revenue.

6. The H.R.A. given to the petitioners, it was argued, is by way of compensation or special allowance to every employee irrespective of whether he is residing in a rented house or is residing in his own house and is, therefore, exempt from tax under s. 10(13A) of the Act read with rule 2A of the Rules. Reliance was placed for this contention on Commissioner of Income Tax Vs. Justice S.C. Mittal, (1980) 121 ITR 503 P & H ; Commissioner of Income Tax Vs. B.R. Tuli, Ex-Judge, P & H High Court, (1980) 125 ITR 460 P & H and Commissioner of Income Tax Vs. M.S. Gujral, Chief Justice, Sikkim High Court, (1980) 125 ITR 655 P&H.

7. But, for the Revenue, it was argued that the H. R. A. is a special allowance paid to meet or reimburse the actual expenditure incurred on payment of rent and as the petitioners in occupation of their own houses do not incur any expenditure on payment of rent for the premises in their occupation, the H. R. A. paid to such petitioners is not exempt from tax. It was further maintained that the decisions on which reliance was placed on behalf of the petitioners have not laid down the law correctly and an appeal filed by the Revenue challenging the decision in Justice Mittal's case is pending in the Supreme Court.

8. We may, at this stage, refer to s. 10(13A) of the Act and rule 2A of the I.T. Rules. They read :

"Section 10. Incomes not included in total income. - In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included. - ......

(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 (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."

"Rule 2A. Limits for the purposes of s. 10(13A). - The amount which is not to be included in the total inc