TMI Blog1996 (4) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... ee claimed the same to be exempt under section 10(14) of the I.T. Act as the amount was received by him as compensation for additional expenses which he was to incur per force during the performance of his service. Reference was made to the following decisions of the Tribunal:--- 1. ITO v. R. T. Lawrence [1986] 15 ITD 490 (All.). 2. ITO v. J.C. Smith [IT Appeal No. 5378 (Delhi) of 1985] 'C' Bench,Delhi. 3. ITO v. Hemingway Raymond [IT Appeal No. 2926 (Delhi) of 1984]Delhi'D' Bench. The Assessing Officer rejected the assessee's contention. According to him, the amount was paid to the assessee for meeting his extra cost of living in India as part of his salary but not in connection with the performance of his duties in India and, therefore, it was assessable as part of his salary. 3. The CIT(Appeals) upheld the action of the Assessing Officer. Before him, the assessee placed reliance on the decision of the Gujarat High Court in the case of CIT v. S. G. Pgnatale [1980] 124 ITR 391, wherein the allowance paid by way of reimbursement was held to be exempt under section 10(14). The CIT(Appeals), however, noticed that in the said decision the Explanation added to section 10(14) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it was in force at the relevant point of time read as under: " 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included---- (14) any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose. Explanation : For the removal of doubts, it is hereby declared that any allowance granted to the assessee to meet his personal expenses at the place where he ordinarily resides shall not be regarded, for the purposes of this clause, as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties; " The allowance which is exempt under this provision is that which is allowed to meet the expenditure by an assessee incurred wholly and exclusively in the performance of his duties of an office or employment of profit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tally, and spend money incidentally because he has the office. He has to get to the place of employment, for one thing .... but it is not in doing the work of the office, which begins when he arrives, and sets to work to perform his duties. " The decision of the Gujarat High Court in the case of J.G. Mankad v. CIT [1965] 55 ITR 448, was also referred to in the said decision of the Madras High Court, wherein at page 454 of the report, it was held : " But in both cases the expenses must be expenses which are wholly and necessarily incurred in the performance of the duties of the office .... The expenses must also be expenses which the assessee is required by the conditions of his service to incur out of his remuneration .... the expenses of traveling between Ahmedabad andBhavnagarcould not be said to be expenses incurred by the assessee wholly and necessarily into the performance of the duties of the office of part-time professor of accountancy held by the assessee, for they were incurred partly before the assessee commenced to perform such duties and partly after he concluded them. " After referring to these two decisions, the Madras High Court held that under section 4(3)(vi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uties. More important is the requirement that it is not 'for the' performance of his duties that he has to spend it but 'in the' performance of his duties. The term 'in the performance' is much narrower in scope than the term 'for the purpose of the performance'. Many items of expenditure may be incurred by an assessee to enable him to perform his duties properly. These are not expenses incurred in the performance of his duties as these are limited to expenses incurred during the process of the performance of the duties. The expenses must be incurred wholly in the discharge of the duties and exclusively in the discharge of the duties. Only such expenditure as is incurred after the process of performance of duties has commenced is deductible. " That was a case of claim under section 16(v) of the I. T. Act in respect of amount of room rent paid by the assessee, on the ground that the conditions of his service required his stay at that particular place and the court held that "even if the assessee were required to stay at a particular place by his conditions of service, expenses incurred by way of payment of rent for the room in which he was staying could not be said to have been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, such expenses are wholly, exclusively and necessarily incurred in the performance of the duties. In coming to this conclusion one should not overlook the provisions of Fundamental Rule 11 which provides that ordinarily the whole time of a Government servant is at the disposal of the Government which pays him. The sole object of compensatory (city) allowance is to compensate the Government servant for the extra expenditure which he will be called upon to bear by reason of his posting at a particular place. The receipt of such an amount, in our opinion, has been rightly held by the Tribunal as a permissible allowance under section 10(14) of the Act. " 11. In the case of V. Enrico decided by the Delhi Bench of the Tribunal, rent-free accommodation and free meal were found to have been given to the assessee in terms of the contract and were held to be perquisite within the meaning of section 17(2) of the Act being expenditure incurred by the employer and it was held that the same expenditure would have been incurred by the assessee had it not been incurred by the employer. In those circumstances, it was held that section 10(14) has no application. 12. In R. T. Lawrence's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was cited before us by the learned counsel for the assessees. The departmental contention in all these appeals on this point, thus, fails. " 13. The contention of the learned departmental representative that the assessee was not holding office or employment of profit and, therefore, section 10(14) does not apply, has no force in view of the decision of the Andhra Pradesh High Court in the case of CIT v. Maddi Sudarsanam [1988] 174 ITR 659, wherein it was held that a director of nine companies held an "office" within the meaning of section 10(14), that the expression "office or employment of profit" should be read as "office" or "employment of profit". The words "of profit" qualify "employment" and not "office" and it would be enough if a person was holding an office and for the purpose of performing the duties associated with that office, he is granted an allowance or benefit specifically to meet the expenses. We, therefore, hold that even if the "living allowance" is in the nature of income from "other sources", the provisions of section 10(14) would be applicable as the assessee was holding an office within the meaning of this section. 14. In view of the conflicting views of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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