The Delhi Bench of ITAT, comprising of members A.D Jain and Dr. B.R. Kumar, has ruled that HRA exemption under Income Tax Act, 1961 cannot be denied on the ground that the Assessee pays rent to its spouse.
Factual Background
The Assessing Officer, while making assessment, grouped the rental income earned by Assessee’s wife in the hands of the Assesssee on the ground that she had no independent source of income to purchase the house properly. The Commissioner of Income Tax confirmed the additions made to the Assessee’sincome on the ground that there was no substantial taxable income presented by wife in the previous assessment years. Also, the CIT (A) disallowed the exemption on House Rent Allowance on the rent paid by the Assessee to its spouse. The Assessee filed an appeal against the impugned order before the ITAT.
Case of the Assessee
The Assessee contended that under the Income Tax Act, exemption on HRA cannot be refused on rent paid by an assessee to its spouse. Also, he submitted that the loan advance by him to his wife for purchase of property has been repaid by him.
Observation of ITAT
The ITAT held that there is no bar on the Assessee to extend loan to his spouse from known sources of income or on the spouse to repay the same from liquidation or on the spouse to repay the same from liquidation of her own assets. The ITAT allowing the Assessee’s appeal ruled that there is no bar under the Income Tax Act on the Assessee husband to pay rent to his wife and the disallowance of exemption on the HRA by the CIT (A) cannot be upheld.
Case Details
Before: ITAT Delhi
Case Title: Abhay Kumar Mittal v. DCIT
Coram: Vice President (ITAT,Delhi) Mr. A.D. Jain and Dr. B.R. Kumar , Accountant
member.
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