TMI Blog2012 (5) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... MENT Heard Sri Rakesh Ranjan Agarwal learned counsel for the appellant and Sri Dhananjay Awasthi learned counsel appearing for the respondent-department. This is an appeal filed under Section 260A of the Income Tax Act 1961 against the judgment and order dated 18th June, 2003 of the Income Tax Appellate Tribunal in I.T.A. No. 458 (Alld ) /1998 for the assessment year 1996-97. The background facts of the case giving rise to this appeal are, that the Assessing Officer while scrutinising Form-24 and Form-16 submitted by the Life Insurance Corporation of India after issuing a notice to the responsible officers of Life Insurance Corporation of India created a demand of Rs. 1,06,800/- on the ground that the responsible officers of the LIC have wrongly allowed deduction of conveyance allowance and additional conveyance allowance which resulted in short deduction of tax. The shortfall and interest under Section 201 was computed and arrived at. The appeal was filed by the Life Insurance Corporation of India before the Commissioner of Appeal, Income Tax who held that the responsible persons of the Corporation have incorrectly allowed deduction for conveyance allowance and additional c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Corporation. In alternative it is submitted that in event the said allowances were not deductible, the appropriate decision could have been taken against the Development Officer in the assessment proceeding pertaining to their claim of deduction of allowances as conveyance allowance or additional conveyance allowance and it was open for the Assessing Officer to have determined the question in the appropriate proceedings against the Development Officer and he submits that the ultimate liability of claiming exemption and proving the same was on the employee assess (i.e. Development Officer) which has already been laid down by the Rajasthan High Court in LIC's case (supra). Hence any demand created against the Corporation was not justified. Sri Dhananjay Awasthi learned counsel for the respondentdepartment refuting the submission of learned counsel for the appellant contended that question whether the Development Officers were entitled for any deduction towards conveyance allowance or additional conveyance allowance was in the domain of the Assessing Officer and the Life Insurance Corporation or its responsible officers had no authority or jurisdiction to claim or show a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded. The definition of Section 10 (14) clearly specifies that income does not include any special allowance or benefit, not being in the nature of 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 officer or employment of profit.. Sri Dhananjay Awasthi further submits that Rule 2BB was inserted by income tax eighth amendment on 1 July, 1995 is applicable which provides as follows:- "2BB. (1). For the purposes of sub-clause (i) of clause (14) of section 10, prescribed allowances, by whatever name called, shall be the following, namely:- (a) any allowance granted to meet the cost of travel on tour or on transfer; (b) any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty; (c) any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit: Provided that free conveyance is not provided by the employer; (d) .... inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of not showing the aforesaid payment and the deductions claimed by the assessee i.e. Development Officer. There is any occasion for not submitting the form and to wait till the assessing officer of the Income Tax decides whether deduction is permissible or not. Rajasthan High Court has held in the case of LIC of India and another as follows:- " ..... The ultimate liability of claiming exemption and proving the same is on the employee-assessee (Development Officers). The exemption limit is restricted by the instructions issued by the Central Board of Direct Taxes from time to time. Therefore, we hold that the Development Officers in the Life Insurance Corporation are entitled to claim exemption under Section 19(14) of the Act in respect of conveyance allowance/additional conveyance allowance upon satisfying the conditions that such allowances have actually been spent for the purpose for which they were given wholly, necessarily and exclusively in the performance of duties. Therefore, the Life Insurance Corporation cannot be insisted for deduction of tax to be deducted at source to the extent such conveyance allowance/additional conveyance allowance is exempt under rule 2BB and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of conveyance in relation to performance of their duties and the said expenditure has a direct nexus with the performance of duties for development of the insurance business by way of meeting several people and to enrol new life insurance agents and to meet the insurance persons for encouraging them to take insurance policies. Naturally, in such circumstances, touring expenses are incurred on conveyance. Such conveyance expenses are reimbursed by the employer as per the prescribed norms in the name of additional conveyance allowance. The certificate is given by the LIC employer of the minimum amount which the Life Insurance Corporation certifies that it is the amount actually spent by the Development Officers in the performance of their duties. The ultimate liability of claiming exemption and proving the same is on the employee-assess (Development Officer). The exemption limit is restricted by the instructions issued by the Central Board of Direct Taxes from time to time. Therefore, we hold that the Development Officers in the Life Insurance Corporation are entitled to claim exemption under Section 10(14) of the Act in respect of conveyance allowance/additional conveyance al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the respondent No. 1 clearly demonstrates that the conveyance allowance in terms of rule 9(b) of the Rules is not reimbursement for expenditure incurred on conveyance in performance of duties of office. It is an allowance paid to all employees whether on duty or not irrespective of his place of residence and the place of his work and also irrespective of whether he is posted in any of the 2,000 offices of respondent No. 1. Clearly, therefore, there is no doubt whatsoever that the said allowance would not be exempt under section 19(14) of the Income Tax Act, 1961, read with Rule 2BB(1)(c) of the Income-tax Rules, 1962." Thus, the judgment of the Bombay High Court was on the premise that in the said case by virtue of rule 9B, the conveyance allowance was not reimbursement for expenditure incurred on conveyance in performance of duty but the said allowance was irrespective of the duty or not. The said is the main distinguishing feature in the present case hence, the above judgment was on its own fact and does not help the department in the present case. In Franco John's case (supra) the petitions were filed by Association of Officers challenging the periodical circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to appear before the assessing authorities and make individual application before the assessing officer in terms of Section 197 and obtain certificate which was to be followed by LIC in regard to the tax deduction at source. In the said judgment it was also laid down by the Kerela High Court that deduction is to be as per circular issued and covered by Central Board of Direct Taxes and the nonstatutory guidelines issued by the LIC shall not govern the field. There cannot be any dispute to the above proposition, in the said judgment the guidelines circulars issued by the LIC directing for deduction at source were held to be non-statutory and Court was of the view that it is circulars of Central Board of Direct Taxes which will govern the field. The said case also clearly said that assessee concerned ought to have obtain necessary certificate and due to said reason, the Court refused to interfere with the guidelines issued by the LIC in that context. It is also relevant to note that Rule 2BB (1(c) was also considered in the said case referring to the Bombay High Court judgment as noted above. It is useful to quote the following observations in the said judgment made by Kerela H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue circular, or otherwise, since all the LIC Development Officers are assessees they are free to make individual applications before the Assessing Officer concerned in terms of section 197 and obtain certificate which will be followed by the LIC in regard to tax deduction at source. I do not think there is any need for this court to go into the correctness of the two impugned circulars issued by the Executive Director of the LIC of India on deduction of income-tax, which as already held serves only as guidelines to subordinate officers. It is for the Income-tax Department to scrutinise the correctness of TDS made either while considering the LIC's TDS returns or while assessing the income of the LIC development officers. Going by the interpretation placed on section 10(14) and rule 2BB(1)(c) by this court above, exemption on additional conveyance allowance has to be considered with reference to the proved facts of each assessee (LIC Development Officer) and therefore the issue cannot be decided by this court in Ops filed by representative bodies. ........" We are of the view that the view taken by the Assessing Officer and confirmed by the appellate authority and the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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