I pay rent to my wife for the flat she owns and we live in it together. The officer says the whole thing is a colourable device and has disallowed my HRA. Is living under the same roof as my landlord by itself fatal?
No. The Tribunal read s.10(13A) with its own Explanation and held that the provision imposes only two conditions — that the assessee occupies the accommodation, and that he has actually incurred expenditure on rent — and that neither of them is broken merely because the landlord is his wife and lives in the same house. Where rent receipts were produced and the payments were traceable to bank transfers, the exemption was restored even though the Assessing Officer and the Commissioner (Appeals) had both branded the arrangement a device.
Decided by the ITAT (Shri A. Mohan Alankamony, Accountant Member and Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, 'C' Bench, Ahmedabad); order per Kul Bharat, Judicial Member) on 2013-07-12, reported as ITA No. 715/Ahd/2013, Assessment Year 2009-10 (ITAT Ahmedabad). It bears on section 10(13A), section 24(b), section 143(3) of the Income Tax Act 1961, in Salary & Perquisites, Capital Gains Exemptions and Evidence & Burden of Proof matters.
This is the case the taxpayer-side HRA argument is built on, and it is worth knowing exactly how narrow it is. The Tribunal did not hold that rent to a spouse is always allowable; it held that the two statutory conditions were met on the evidence in front of it — occupation, plus rent receipts backed by bank transfer entries the Assessing Officer had himself verified in a remand report. The same Tribunal, on the same section, has repeatedly refused the exemption where those two things were missing: the Mumbai Bench in Meena Vaswani and the Chandigarh Bench in Vinod Sharma both denied it where there was no rent agreement, no banking trail and no return of income from the recipient. So the line is not 'relative or stranger' — it is 'proved or not proved'. Note also that the Explanation to s.10(13A) blocks the exemption outright where the accommodation is owned by the assessee, which is why a claim for HRA on a flat the assessee co-owns is on much weaker ground than a claim on a flat owned wholly by the spouse. And note the regime: s.10(13A) is not available at all under s.115BAC, the default regime from AY 2024-25, so this argument is only worth running for an assessee who is in, or has validly opted into, the old regime.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee's case for AY 2009-10 was taken up for scrutiny and assessed under s.143(3). The Assessing Officer made additions on account of short-term capital gain, disallowance of interest claimed under s.24, disallowance of the s.10(13A) exemption of Rs 1,11,168, and an addition under s.68. The Commissioner (Appeals) partly allowed the appeal but confirmed the interest disallowance of Rs 42,371 and the HRA disallowance of Rs 1,11,168, and those two confirmations came to the Tribunal. On the HRA point the Assessing Officer had disallowed the claim on two grounds — that the assessee had not given details of payment and evidence, and that the assessee and his wife were living together, so that the payment of rent was 'just to avoid payment of taxes and to reduce the tax liability'. The Commissioner (Appeals) confirmed on the footing that the rent was paid by the assessee as tenant to his wife as landlord, that landlord and tenant were living together in the same house property, and that the very fact of their staying together indicated a colourable device. The Assessing Officer's remand report before the Commissioner (Appeals) recorded that the assessee had produced rent receipts of Rs 15,000 dated 3 July 2008 and Rs 1,65,000 dated 31 March 2009 and had said the payments were made through bank transfer entries; verification showed the transfers on the given dates, though the receipt date and the amount of Rs 1,65,000 were not reflected as a transfer. The remand report also commented that it was not ascertainable whether the assessee stayed at his wife's house or at his own house, which he had declared self-occupied while claiming relief under s.24.
The appeal was allowed on both grounds. On HRA, the Tribunal held that the assessee had fulfilled the twin requirements of s.10(13A) — occupation of the house and payment of rent — and was therefore entitled to the exemption; the addition was deleted and the Assessing Officer directed to allow the exemption of Rs 1,11,168 (para 7.1). On the first ground, pre-construction period interest of Rs 42,371 on borrowed capital was held allowable under s.24(b) and that addition too was deleted (para 5).
The Tribunal set out s.10(13A) together with its Explanation and read the two together as fixing the whole of the statutory test (para 7). The clause exempts a special allowance granted by an employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee, to the prescribed extent; the Explanation withdraws the exemption in only two situations — where the accommodation occupied is owned by the assessee, and where the assessee has not actually incurred expenditure on payment of rent. Neither disqualification was attracted. The Assessing Officer had himself found as a fact that the assessee and his wife were living together as a family, from which the Tribunal inferred that the house owned by the wife was occupied by the assessee as well; and the remand report recorded rent receipts and bank transfer entries on the stated dates. Occupation and payment being established, the statutory conditions were satisfied, and the characterisation of the arrangement as a colourable device by the Assessing Officer and the Commissioner (Appeals) could not add a third condition the section does not contain (para 7.1). The Tribunal noted that the Assessing Officer and the Commissioner (Appeals) had each proceeded on a different ground, and that the Commissioner (Appeals) had chosen not to enhance by withdrawing the s.24 relief, so that aspect was left untouched.
Therefore, in our considered opinion, the assessee has fulfilled twin requirements of the provision, i.e. occupation of the house and the payment of rent.
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal read s.10(13A) with its own Explanation and held that the provision imposes only two conditions — that the assessee occupies the accommodation, and that he has actually incurred expenditure on rent — and that neither of them is broken merely because the landlord is his wife and lives in the same house. Where rent receipts were produced and the payments were traceable to bank transfers, the exemption was restored even though the Assessing Officer and the Commissioner (Appeals) had both branded the arrangement a device. This was decided by the ITAT (Shri A. Mohan Alankamony, Accountant Member and Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, 'C' Bench, Ahmedabad); order per Kul Bharat, Judicial Member) and bears on section 10(13A), section 24(b), section 143(3) of the Income Tax Act 1961. It is reported as ITA No. 715/Ahd/2013, Assessment Year 2009-10 (ITAT Ahmedabad). This is the case the taxpayer-side HRA argument is built on, and it is worth knowing exactly how narrow it is. The Tribunal did not hold that rent to a spouse is always allowable; it held that the two statutory conditions were met on the evidence in front of it — occupation, plus rent receipts backed by bank transfer entries the Assessing Officer had himself verified in a remand report. The same Tribunal, on the same section, has repeatedly refused the exemption where those two things were missing: the Mumbai Bench in Meena Vaswani and the Chandigarh Bench in Vinod Sharma both denied it where there was no rent agreement, no banking trail and no return of income from the recipient. So the line is not 'relative or stranger' — it is 'proved or not proved'. Note also that the Explanation to s.10(13A) blocks the exemption outright where the accommodation is owned by the assessee, which is why a claim for HRA on a flat the assessee co-owns is on much weaker ground than a claim on a flat owned wholly by the spouse. And note the regime: s.10(13A) is not available at all under s.115BAC, the default regime from AY 2024-25, so this argument is only worth running for an assessee who is in, or has validly opted into, the old regime. If it applies to you, the first step is this: Frame the answer to the notice around the two conditions the Tribunal identified — occupation of the accommodation, and rent actually incurred — and answer each with documents rather than argument.
The assessee's case for AY 2009-10 was taken up for scrutiny and assessed under s.143(3). The Assessing Officer made additions on account of short-term capital gain, disallowance of interest claimed under s.24, disallowance of the s.10(13A) exemption of Rs 1,11,168, and an addition under s.68. The Commissioner (Appeals) partly allowed the appeal but confirmed the interest disallowance of Rs 42,371 and the HRA disallowance of Rs 1,11,168, and those two confirmations came to the Tribunal. On the HRA point the Assessing Officer had disallowed the claim on two grounds — that the assessee had not given details of payment and evidence, and that the assessee and his wife were living together, so that the payment of rent was 'just to avoid payment of taxes and to reduce the tax liability'. The Commissioner (Appeals) confirmed on the footing that the rent was paid by the assessee as tenant to his wife as landlord, that landlord and tenant were living together in the same house property, and that the very fact of their staying together indicated a colourable device. The Assessing Officer's remand report before the Commissioner (Appeals) recorded that the assessee had produced rent receipts of Rs 15,000 dated 3 July 2008 and Rs 1,65,000 dated 31 March 2009 and had said the payments were made through bank transfer entries; verification showed the transfers on the given dates, though the receipt date and the amount of Rs 1,65,000 were not reflected as a transfer. The remand report also commented that it was not ascertainable whether the assessee stayed at his wife's house or at his own house, which he had declared self-occupied while claiming relief under s.24. The matter was decided on 2013-07-12 by the ITAT (Shri A. Mohan Alankamony, Accountant Member and Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, 'C' Bench, Ahmedabad); order per Kul Bharat, Judicial Member). On those facts the ITAT held as follows. The appeal was allowed on both grounds. On HRA, the Tribunal held that the assessee had fulfilled the twin requirements of s.10(13A) — occupation of the house and payment of rent — and was therefore entitled to the exemption; the addition was deleted and the Assessing Officer directed to allow the exemption of Rs 1,11,168 (para 7.1). On the first ground, pre-construction period interest of Rs 42,371 on borrowed capital was held allowable under s.24(b) and that addition too was deleted (para 5).
The Tribunal set out s.10(13A) together with its Explanation and read the two together as fixing the whole of the statutory test (para 7). The clause exempts a special allowance granted by an employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee, to the prescribed extent; the Explanation withdraws the exemption in only two situations — where the accommodation occupied is owned by the assessee, and where the assessee has not actually incurred expenditure on payment of rent. Neither disqualification was attracted. The Assessing Officer had himself found as a fact that the assessee and his wife were living together as a family, from which the Tribunal inferred that the house owned by the wife was occupied by the assessee as well; and the remand report recorded rent receipts and bank transfer entries on the stated dates. Occupation and payment being established, the statutory conditions were satisfied, and the characterisation of the arrangement as a colourable device by the Assessing Officer and the Commissioner (Appeals) could not add a third condition the section does not contain (para 7.1). The Tribunal noted that the Assessing Officer and the Commissioner (Appeals) had each proceeded on a different ground, and that the Commissioner (Appeals) had chosen not to enhance by withdrawing the s.24 relief, so that aspect was left untouched. In the words reproduced by the source cited on this page: "Therefore, in our considered opinion, the assessee has fulfilled twin requirements of the provision, i.e. occupation of the house and the payment of rent."
It was decided by the ITAT on 2013-07-12 and is reported as ITA No. 715/Ahd/2013, Assessment Year 2009-10 (ITAT Ahmedabad). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(13A), section 24(b), section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed on both grounds. On HRA, the Tribunal held that the assessee had fulfilled the twin requirements of s.10(13A) — occupation of the house and payment of rent — and was therefore entitled to the exemption; the addition was deleted and the Assessing Officer directed to allow the exemption of Rs 1,11,168 (para 7.1). On the first ground, pre-construction period interest of Rs 42,371 on borrowed capital was held allowable under s.24(b) and that addition too was deleted (para 5). It arises in Salary & Perquisites, Capital Gains Exemptions and Evidence & Burden of Proof matters, on section 10(13A), section 24(b), section 143(3) of the Income Tax Act 1961, and was decided by Shri A. Mohan Alankamony, Accountant Member and Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, 'C' Bench, Ahmedabad); order per Kul Bharat, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Produce a written leave and licence agreement or rent note, month-by-month rent receipts, and the bank statement showing each payment leaving your account and reaching the owner's; a bank trail is what carried this case. Get the owner's return of income and computation showing the rent offered under 'Income from house property', with the 30 per cent standard deduction taken; its absence is the single commonest reason these claims fail. Check that you are not claiming a s.24(b) interest deduction or self-occupied treatment on the same accommodation you say you are renting — the Assessing Officer's remand report in this case raised exactly that inconsistency. Confirm which regime the year falls in. From AY 2024-25 s.115BAC is the default and denies s.10(13A) altogether, so establish that a valid option out of it was exercised before running the claim at all.
Still good law. A citedby: search returns nothing, but a name probe finds two genuine applications of the s.10(13A) holding. In Shri Neerav Shailesh Parekh v DCIT (ITAT Ahmedabad SMC, 3 January 2024) the Bench allowed the HRA claim relying on 'the decisions taken by the Tribunal in case of Abhay Kumar Mittal (supra) and Bajrang Prasad Ramdharani (supra)', holding 'the assessee is entitled for deduction of rent paid against HRA as part of salary. Ground no.2 is allowed.' In Pankaj Kayathwal v ITO (ITAT Delhi, 26 July 2022) the Bench set out the Bajrang Prasad ruling in full ('The Tribunal in ITA no. 715/Ahd/2013 in the case of Bajrang Prasad Vs. ACIT 60 SOT 66 has held as under:') and allowed the s.10(13A) deduction. A third hit, an earlier order in Pankaj Kayathwal of 15 March 2022, is only a miscellaneous application recalling an order for non-consideration of this decision, not an application of it. Nothing overruling or doubting the order was found and no Gujarat High Court appeal was traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order is internally slightly untidy on the evidence. In para 7.1 the Tribunal records from the remand report that the assessee filed rent receipts of Rs 15,000 dated 3.7.2008 and Rs 1,65,000 dated 31.3.2009 and claimed the payments were made by bank transfer, and that verification showed the transfers on the given dates 'but the receipts date and amount of Rs.1,65,000/- not reflecting as transfer' — and it nevertheless concluded that rent had been paid. The disallowance in issue was Rs 1,11,168 while the receipts total Rs 1,80,000; the order does not reconcile the two. The Tribunal also expressly declined to comment on whether the assessee was simultaneously entitled to relief under s.24 on a house he had declared self-occupied, because the Commissioner (Appeals) had not enhanced on that footing. Read the case for its two-condition test, not for a finding that the payment trail was complete. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed on both grounds. On HRA, the Tribunal held that the assessee had fulfilled the twin requirements of s.10(13A) — occupation of the house and payment of rent — and was therefore entitled to the exemption; the addition was deleted and the Assessing Officer directed to allow the exemption of Rs 1,11,168 (para 7.1). On the first ground, pre-construction period interest of Rs 42,371 on borrowed capital was held allowable under s.24(b) and that addition too was deleted (para 5).
TaxSphere, “Bajrang Prasad Ramdharani v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/bajrang-prasad-ramdharani-hra-rent-paid-to-wife-twin-requirements/ (validity last checked 2026-09-07)
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