Law:

Section:

Section 10(13A) of the income-tax act, 1961, read with rule 2A, of the income-tax rules, 1962-Exemption-House rent allowance-Whether house rent allowance received by petitioners who were actually residing in their own residential houses was not exempt and could be included in total income-Held, yes. Interpretation of statutes-Literal rule of construction-Relevance of rules framed under the act for purposes of construing provisions of the act. Facts The petitioners, who were actually residing in their own residential houses, claimed exemption under section 10(13A), read with rule 2A, qua house rent allowance, which was received by them as per their service contracts. On writs : Held 1. Section 10(13A ) grants exemption from tax of an allowance (i ) specially granted, (ii) to meet expenditure and (iii ) actually incurred on payment of rent. 'To meet' suggests that the special allowance should be granted to discharge or to pay fully or to satisfy. 'Expenditure' is something which the assessee pays out of his own pocket or makes a disbursement to meet a liability. The words "actually incurred on payment of rent' spell out the intention that the allowance must be to meet expenditure already incurred on payment of rent for the residential accommodation occupied by the employee. Looking at clause (13A) as a whole and by adopting the literal construction, the logical conclusion in the instant case was that the employees who were actually residing in their own residential houses/flats could not claim exclusion of the house rent allowance received by them from the total income under clause (13A) as those employees did not come within the specific words of the statute. Further, reliance on rule 2A as an aid to the construction of the statute was also misplaced. Rules under the statute may be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect. But the rules cannot travel beyond the Act and have to be read subject to the provisions. The exclusion in the various clauses cannot be enlarged by the rules. If it directs exclusion of certain other allowances, then it could be ultra vires. The rules have to be…

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