Tax on Kit Maintenance Allowance, Reimbursement of Premium Amount and Special Travelling Allowance. - Income Tax - 985/CBDT

INSTRUCTION NO. 985/CBDT Dated : July 24, 1976 Section(s) Referred: 10(14) Statute: Income - Tax Act, 1961 Reference is invited to Board's Instruction No. 778** (F. No. 200/64/74-ITAI), dated the 30th October 1974 on the above subject. 2. Representations have been received by the Board from Air India as well as Indian Airlines Corporation against the direction of the Board to bring to tax the three allowances namely, Kit Maintenance Allowance, Reimbursement of Premium Amount and Special Travelling Allowance. The Board has re-examined the question of taxability of these allowances in the light of the representations received. 3. Kit Maintenance Allowance is paid to the pilots towards reimbursement of the expenditure incurred by them in maintenance of their uniforms etc. This allowance is, therefore, covered by section 10(14) of the Income-tax Act, 1961. 4. Insurance for the loss of licence by pilots is taken to avoid Corporations having to pay compensation to them if their licences are withdrawn. The benefit from insurance is, therefore, derived by the Corporations and not by the pilots. Reimbursement of the amount of premium cannot, in the circumstances, be treated as perquisite in the assessments of the pilots. However, if a pilot receives compensation against loss of his licence, he would be liable to pay tax on the amount as this will be hit by the mischief of section 17(3) of the Income-tax Act, 1961. 5. In so far as the Special Travelling Allowance is concerned Board holds the view that it is taxable as it is a receipt by way of addition to the remuneration. 6. These revised instructions will apply for and from the assessment year 1975-76. No addition need be made in respect of any of these allowances upto assessment year 1974-75. From assessment year 1975-76 onwards Special Travelling Allowance alone will be assessed. If any assessment has been completed in accordance with the Board's Instruction No. 778 necessary relief may be granted on the lines of the present instructions either by way of rectification or revision. If any appeal is pending, it may be conceded.