TMI Blog1997 (7) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with travelling by its employees including hotel expenses and allowances. The Income-tax Officer computed the disallowance out of such expenditure under section 37(3) of the Income-tax Act, 1961 ("the Act"), and rule 6D of the Income-tax Rules, 1962 ("the Rules"), at Rs. 22,895. While computing the amount of disallowance under section 37(3) and rule 6D, the Income-tax Officer took into account the total expenditure incurred by each employee in each trip undertaken by him. The assessee was aggrieved by the method of computation adopted by the Income-tax Officer as, according to it, he should have computed the amount allowable as deduction under section 37(3) read with rule 6D by multiplying the per day rates specified in rule 6D with the total number of days spent during the year in travelling. The assessee, therefore, appealed to the Commissioner of Income-tax (Appeals). The case of the assessee before the Commissioner (Appeals) was that the disallowance under rule 6D should be worked out by taking into consideration all the trips undertaken by the employee during the year together and not on the basis of each trip. The Commissioner of Income-tax accepted this conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-rule (2) read as follows : " Expenditure in connection with travelling, etc.--. . . (2) The allowance in respect of expenditure incurred by an assessee in connection with travelling by an employee or any other person within India outside the headquarters of such employee or other person for the purposes of the business or profession of the assessee shall not exceed the aggregate of the amounts computed as hereunder :-- (a) in respect of travel by rail, road, waterway or air, the expenditure actually incurred ; (b) in respect of any other expenditure (including hotel expenses or allowances paid), in connection with such travel, an amount calculated at the following rates for the period spent outside such headquarters :-- (i) in respect of an Rs. 80 per day or part thereof; employee whose salary is Rs. 1,000 per month or more (ii) in respect of any Rs. 40 per day or part thereof; other employee (iii) in respect of any an amount calculated at the rates other person applicable in the case of the highest paid employee of the assessee : Provided that if the stay of such employee or other person outside his headquarters is at Bombay, Calcutta or Delhi, the amount comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We are, therefore, not concerned with sub-rule (1) of rule 6D. The controversy in this case is about the allowance of expenditure incurred by the assessee in connection with travelling by the employees within India which is governed by sub-rule (2) of rule 6D which prescribes the ceiling and conditions of the allowability thereof. It provides that the allowance in respect of expenditure incurred by the assessee in connection with travelling by an employee or any other person in India outside the headquarters of the employee shall not exceed the aggregate of the amounts computed in the manner set out in clauses (a) and (b) thereof. Clause (a) deals with the expenditure in respect of travel by rail, road, waterways or air. The actual expenditure incurred by the assessee on such travel is allowable under this clause. Clause (b) deals with the expenditure including hotel expenses and allowances paid by the assessee in connection with such travel and puts a ceiling on the expenditure incurred on that account. Different ceilings have been prescribed in respect of employees whose salary is Rs. 1,000 per month and more and employees whose salary is less than Rs. 1,000 per month. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay, Calcutta and Delhi, the allowable deduction would be higher by thirty-three and one-third per cent. as set out in the first proviso) and also the fact whether the employee was staying free of charge in a guest-house maintained by the assessee or was getting lodging free of charge (because, in that event, the allowance per day would be reduced to one-third or one-half as the case may be). Such a computation is possible only on per day basis or on the basis of a chart containing the following information in respect of each day of the stay of the assessee in connection with his travel : (i) the salary of the employee at the time of the journey, whether it was Rs. 1,000 per month or more or less than Rs. 1,000 per month ; (ii) the place of stay, whether Bombay, Calcutta or Delhi or any other place ; (iii) whether stayed in a guest house maintained by the assessee free of charge ; (iv) whether lodging provided free of charge of the assessee. Based on the above information, the deductible expenditure under clause (b) of sub-rule (2) of rule 6D might vary even for different days of one journey or trip. The ceiling is on the expenditure incurred on each day of the journey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illustration would make the position clear. Say, in one journey, the employee stayed for two days in a hotel and eight days in a guesthouse maintained by the assessee free of charge. The expenditure incurred by him for the stay in hotel for two days might be much more than the maximum allowable amount. The deduction of this expenditure in the hands of the assessee would be restricted to the amount calculated at the rates specified in clauses (i) to (iii) of rule 6D(2)(b). So far as his stay for the remaining eight days in the guest house maintained by the assessee is concerned, the maximum expenditure allowable in the hands of the assessee would be an amount calculated as one-third of the rate prescribed in clause (b) of rule 6D(2). There is thus no scope for applying the maximum rate in all cases without having any regard to the place of stay, type of accommodation, etc. Moreover, the scheme of rule 6D being absolutely clear and unambiguous, the calculation has to be made in accordance with the same. If that is done, the amount allowable as a deduction under section 37(3) read with rule 6D in a particular year would be the same, no matter whether the calculation is made journey-wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of each employee. The aggregate amount allowable in case of travel within the country is to be calculated in the manner set out in clauses (a) and (b) of sub-rule (2). The manner of computation has been discussed by us earlier. The allowance will be restricted to the aggregate of the actual expenditure incurred on travel and a sum not exceeding the specified amount per day calculated in the manner set out in rule 6D(2). The Tribunal, in our opinion, went wrong in deciding the controversy in the manner done by it. The above interpretation of ours get support from clause (b) of sub-rule (2) of rule 6D as substituted in 1992. Under the substituted clause (b) also, the ceiling is on the expenditure incurred on travelling (other than the expenditure on travel) including hotel expenditure and allowances "per day". If the expenditure does not exceed Rs. 1,500 per day, it is allowable in full. If it exceeds Rs. 1,500, the allowance would be restricted to Rs. 1,500 plus 50 per cent (75 per cent ?) of such excess expenditure. This clearly goes to show that the allowance is to be calculated in the light of the actual expenditure incurred "per day". In view of the above, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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