The provisions of Section 10(13A) of the Income-tax Act, 1961 and Rule 2A of the Income-tax Rules, 1962 were enacted to compensate the assessee for the expenditure incurred on payment of rent in respect of residential accommodation occupied by him.

B.S.Dhillon, J.

1. The following question of law arising out of the order of the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as "the Tribunal"), in respect of I.T.A. Nos. 47, 48, 294 and 295 of 1977-78, for the assessment years 1972-73, 1973-74, 1974-75 and 1975-76, respectively, has been referred to us by the Tribunal at the instance of the revenue :

"Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the amount received by the assessee on account of house rent allowance was not liable to be included in his taxable income for each of the four years ?"

2. The brief facts giving rise to these references may thus be stated. The assessee, Honble Mr. Justice S.C. Mittal, is a sitting Judge of the Punjab and Haryana High Court. He claimed exemption in respect of house rent allowance (hereinafter shortly referred to as "the HRA") which he received at Rs. 3,150 in each of the first two years, Rs. 3,293 for the third year and Rs. 2,564 for the last year. The house in question is jointly held by Mr. Justice S.C. Mittal with his brother and Mr. Justice S.C. Mittal was paying a rent of Rs. 300 per month to his brother for occupying his portion of the house. As is clear from the facts the HRA was assessed and out of the assessed amount, Rs. 350 per month, i.e., 10 per cent. of the pay of the honble justice was being deducted by the Government and the assessed amount over and above the amount of Rs. 350 per month was paid to the honble judge. The plea that the said amount was exempt in view of the provisions of Section 10(13A) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), read with Rule 2A of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules"), did not find favour with the ITO.

3. It was contended before the AAC that the assessees occupation of the entire house for his residence, half of which belonged to his brother, tant-amounted to the assessee incurring expenditure. It was further contended that HRA was granted by the Govt. after the annual letting value of the house in occupation of Mr. Justice S.C. Mittal was determined by the Public Works Department and only the excess amount over 10 percent. of the salary was allowed as HRA which was not taxable. The AAC accepted the appeal and deleted the additions for each of the four years.

4. The appeal filed by the revenue was dismissed by the Tribunal. At the instance of the revenue, the question, reference to which has already been made in the earlier part of the order, has been, referred to this court for its opinion.

5. With a view to appreciate the contentions raised by the learned counsel for the parties, the provisions of Section 10(13A) of the Act and Rule 2A of the Rules may be reproduced as under :

"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 three 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 assessee 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 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 peri