Standard deduction restricted to Rs.1,000 in receipt of conveyance allowance. - Income Tax - 1144/CBDT

INSTRUCTION NO. 1144/CBDT Dated : January 27, 1978 Section(s) Referred: 16(i) Statute: Income - Tax Act, 1961 It has been brought to the notice of the Board that many employers who are paying conveyance allowance to their employees have changed the nomenclature of the allowance to 'local travelling expenses', personal allowance', 'vehicle/car allowance', etc. 2. Under the proviso to section 16(i) of I.T.Act, 1961, where the assessee is in receipt of a conveyance allowance from his employer or where any motor-car, motor-cycle, scooter or other moped is provided to the assessee by his employer for use by the assessee otherwise than wholly and exclusively in the performance of his duties or where one or more motor-cars are owned or hired by the employer of the assessee and the assessee is allowed the use of such motor-car or of such motor-cars otherwise than wholly and exclusively in the performance of his duties, the standard deduction is to be restricted to Rs.1,000. 3. If the employee is in receipt of an allowance which partakes the character of a conveyance allowance, the standard deduction should be restricted to Rs.1,000 whatever be the nomenclature given to the allowance. 4. A conveyance allowance normally would connote a lumpsum payment given at regular periodical intervals and is to be distinguished from the reimbursement of actual expenses as and when incurred in the performance of duties. The facts of each case should be gone into to determine whether it is in actuality a reimbursement of expenses incurred in the performance of duties or it is merely an allowance camouflaged as reimbursement of actual expenses so as to secure a higher tax benefit. If it is merely a reimbursement of actual expenses incurred in the performance of his duties the standard deduction would not be restricted to Rs.1,000 for this reason and the employee will be entitled to the deduction as prescribed in section 16(i) of the Income-tax Act, 1961. 5. It may also be pointed out that journeys from residence to office and back are not considered as a journey performed in the performance of one's duties. Such use of a conveyance provided by the employer or the reimbursement of expenses incurred for such purposes will be regarded as the use of conveyance or reimbursement of expenses incurred for private or personal use of the employee.