TMI Blog2005 (3) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... 400 per year. The Assessing Officer observed that no evidence has been adduced by the assessee regarding the persons who are employed as Orderlies and to whom the payment has been made. He, therefore, concluded that the amount which was received by the assessee from his employer as compensatory allowance is liable to be taxed as perquisite in the hands of the employee. He was of the view that the claim of the assessee regarding expenditure incurred in connection with employing Orderlies for the purpose of duties of his office is not acceptable and the Orderlies even if accepted to have been employed as alleged could not be exclusively for the purpose of duties of his office and when the Orderlies are used for other purposes as domestic servant then section 17(2)(iv) comes into play. He therefore disallowed Rs. 14,400 in respect of compensatory allowance in each of the above cases. 4. The assessee took up the matter in appeal and it was vehemently argued by the learned counsel for the assessee before the first appellate authority that the assessee had received compensatory allowance on account of reimbursement of expenses towards the expenditure incurred by an employee for employm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three ingredients are independently proved, the claim cannot be allowed. Here is a case where the claim is based on a certificate issued by the claimant himself. This kind of certificate may be helpful to the assessee for submission before his DDO for the purpose of non-deduction of tax at source but for income-tax proceedings it would be considered as a weak piece of evidence. Any assessee in order to reduce his tax liability would readily submit such certificates with his return. Such self-serving certificate can be of no use and there must be a separate and independent evidence in the form of receipt issued by the ultimate recipient of such allowance. It is necessary in order to prove that the amount so received by the employee from his employer exchanged hands and has been transferred finally into the hands of the ultimate recipient [orderly] through the appellant. In such a situation the identity of the ultimate recipient, i.e., orderly should be established and the acknowledgement of receipt of such payment should also be established. This only would prove that the money to the extent of such allowance granted by the employer to the employee had reached the orderly and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the amount of reimbursement, by whatever name called, would not amount to perquisite in their hands within the meaning of the term defined in section 17(2). Accordingly, the Orderly allowance had specifically been granted to the Officers to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of their offices. Since there was practical difficulty of getting Orderly/helper at the meagre amount of Rs. 1,200 per month per Orderly/helper and frequent change of incumbent it was not practically possible to have track of these persons and produce them for verification. Otherwise all these officers, who are senior and responsible officers, had clarified in their certificates submitted by them before the Assessing Officer in assessment proceeding that they have incurred such expenses to the extent of allowance received by them wholly, necessarily and exclusively on the Orderlies/helpers engaged by them to assist them in the discharge of their duties of their respective office at their residences and Assessing Officer has not brought any material on record to disbelieve the statement/certification of the officers and to reject the same. Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of the contention, the assessee has filed copy of the return as well as order passed under section 143(1) in the case of the assessee for the assessment year 2001-02 and 2002-03. Reliance was also placed on the decision of ITAT, Jaipur Bench Rajasthan State Electricity Board v. ITO [1994] 48 ITD 100. It was pleaded for deletion of the impugned addition made/confirmed. 6. Learned D.R. while relying upon the basis and reasoning as given before the lower authorities has pleaded for the confirmation of the same. It was next submitted that language of section 10(14) makes it very clear that such exemption is allowable only when it is incurred wholly, necessarily and exclusively in performance of the duties of an office or employment of profit to the extent to which such expenses are actually incurred for that purpose. So the assessee has first to prove, to claim exemption under these provisions that the amount in question was not for his own benefit but for the purposes of meeting the expenses wholly, necessarily and exclusively for the purpose of his duties. Next to this, assessee needs to prove that expenses are actually incurred and further it has also to be proved that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to qualify for exemption under section 10(14)(i) the special allowance (i) should not be in the nature of a perquisite within the meaning of clause (2) of section 17, (ii) should have been specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an officer or Employment of profit as the Central Government may by notification in the Official Gazette specify, and would be exempt to the extent such expenses are actually incurred for that purpose. As regards the first requirement that the allowance should not be in the nature of perquisite, it was necessary to explain the expression 'perquisite'. 'Perquisite' has a normal meaning, namely, a personal advantage which would not apply to the mere reimbursement of necessary disbursement. To borrow the language of Lord Pearce in Owen v. Pook (Inspector of Taxes) [1969] 74 ITR 147 (HL), 'Perquisite' denotes something that benefits a man by going into his own pocket. It would be a wholly misleading description of an office to say that I had very large 'perquisite' merely because the holder of the office had to disburse very large sums out of his own pocket and subsequently rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the second requirement for the applicability of section 10(14)(i) was also fulfilled in the instant case. The last requirement was in respect to the nature, degree or standard of proof of actually incurring the amounts of the allowances received by the Officers, wholly, necessarily and exclusively for the purposes of performance of the duties of their respective offices. In this behalf, the concerned officers had submitted their certificates wherein they had certified that they had incurred expenses, to the extent of the allowance to be received by them, wholly, necessarily and exclusively on the helpers engaged by them to assist them in the discharge of the duties of their respective offices at their residences. In this regard in Circular No. 568, dated 27-7-1990, whereas the CBDT has required to disbursing authorities to satisfy themselves by insisting on production of evidence of making actual payment/expenditure, exemption in respect of which was claimed under section 10(13A), 80CCA, 80CCB, 80DD, 80GC and 80RR, no such insistence is stressed in respect to a claim for exemption under section 10(14)(i). The Principal Officer of the Electricity Board could not have, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f free electricity provided to the officers of MPSEB. The Assessing Officer in his order has observed that the electricity supplied by the MPSEB to the assessee at concessional rate was taxable as perquisite, particularly when the electricity had been used for personal purpose of the assessee. It was so because on inquiries it was found that the electricity supply in Jabalpur was not from the electricity completely produced by the MPSEB. The MPSEB was purchasing electricity from National Thermal Power Corporation also and supply the same to the consumers through a common grid. Therefore, the cost element was involved in respect of the electricity supplied to the consumers as well as to the employees. According to him under the circumstances, it could not be said that the electricity supplied to the employees was totally from the electricity produced by the MPSEB. Since no details of electric payment were furnished by the assessee, the help of case of other employees was taken where it was found that the electricity payment was shown to be Rs. 3,600 per annum. He accordingly concluded that the assessee was in receipt of electricity at concessional rate and the benefit of perquisite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause it is the net profit only which is taxable and whether such surplus electric energy is sold by the employer in the open market or is supplied free of cost to his employees does not effect the net profit from revenue point of view. But if the electric energy is supplied to the employee after purchasing the same from other outside agencies, then it would certainly reduce the net profit to that extent and result into taxation of lesser profit in the hands of the employer. Under the circumstances, the electric energy supplied to such extent would naturally be a perquisite in the hands of the employee, i.e., appellant and has to be taxed as per rule 3(d)(ii). Now here is a case where the appellant himself admits that to meet the requirement of the MPEB electricity is purchased from outside agencies also. The income-tax record of the MPEB itself reveals that the electricity generated is so insufficient that it has necessarily to purchase electric energy from other outside agencies like NTPC, Balco, Korba other State Governments including private sectors etc. The annual statement of accounts of the MPEB for the assessment year 2000-01 reveals total power purchase from such agencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the electricity was being purchased by the employer of the assessee, therefore, it cannot be said that the free facility has been provided out of the electricity generated. As such action of CIT(A) should be upheld. 12. Having heard both the sides and considering the material on record as well as documentary evidence filed with the lower authorities and copies placed before this Bench to which attention of the Bench was drawn, I find it to be undisputed fact that electricity is being generated by the MPSEB, and free electricity at the rate of Rs. 3,600 per annum to senior officers of the Board could easily be given out of such generation. Therefore, there appears to be no justification for treating it as perquisite. Since the case of the assessee falls within the purview of rule 3(d)(i)(as it then was) of the Income-tax Rules and as such, concession of electricity granted to there assessees cannot be treated as perquisite. Therefore, while accepting ground Nos. 2 and 4 of these appeals, I direct to delete the impugned addition in all these cases. 13. Ground No. 5 is general and calls for no adjudication. 14. As a result, the appeals of all the assesses are allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
