No HRA Exemption on Rent reimbursed to employer for rent-free accommodation

By Accommodation Times Bureau
The assessee is getting twin benefit from the employer, one of which is not taxed on the basis of reimbursement of rent by the assessee to the employer. The first benefit is of rent free accommodation provided by the employer to the assessee employee for which the employer is incurring rental expenditure of Rs. 1.70 lacs per month in addition to providing interest free deposit of Rs. 40 lacs with the land lord. The 2nd benefit being received by the assessee is this that he is getting HRA of Rs.3 lacs approximately per month including special HRA of Rs.1.70 lacs per month. Against these two benefits being received by the assessee, the assessee is making one payment i.e. reimbursement of rentals to the employer company @ Rs.1.70 lacs per month. Now, this reimbursement of rent to the employer company of Rs.1.70 lacs per month is considered against the free housing accommodation provided by the employer company to the employee assessee, then this reimbursement of house rent to employer is no more available to be considered for exemption u/s 10(13A). As per Rule 3, the perquisite value of the housing accommodation provided by the employer company has to be worked out @ 15% of the salary or actual amount of lease rental paid by the employer whichever is lower as reduced by the rent if any actually paid by the employee. In the present case, 15% of the salary will be more than the actual rent being paid by the employee i.e. Rs.1.70 lacs per month and the same amount has been reimbursed by the employee to the employer and, therefore, perquisite value of hosing accommodation provided by the employer company to the employee assessee is ‘nil’ as per Rule 3 of the Income Tax Rules. But once, the housing perquisite value is worked out as ‘nil’ after considering this rental payment of Rs.1.70 lacs per month to the employer company, there is no rental payment made by the assessee employee for the purpose of working out exemption of HRA u/s 10(13A) of the Act and, therefore, we are of the considered opinion that the disallowance made by the A.O. regarding the claim of the assessee for exemption u/s 10(13A) is in order and, therefore, the order of Ld. CIT(A) resulting in deletion of disallowance is not sustainable. We, therefore, reverse the order of Ld. CIT(A) on this issue and restore that of the A.O.

IN THE ITAT AHMEDABAD BENCH ‘D’

Deputy Commissioner of Income-tax

v.

Kuldeep D. Kaura





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