TMI Blog1997 (6) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... uties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as may be prescribed and to the extent as may be prescribed : Provided that nothing in sub-clause (ii) shall apply to any allow ance in the nature of personal allowance granted to the assessee to remune rate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence." Then rule 2BB(1)(c) of the Income-tax Rules reads as under: " 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." In the present petition we are required to consider section 10(14)(i) read with rule 2BB(1)(c) and to decide whether conveyance allowance of Rs. 100 given to the employees (is) to meet expenses incurred in the performance of duties of an office. It would be clear from the following discussions that payment of Rs. 100 as conveyance allowance is not granted to meet the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 1 declared that conveyance allowance is to be considered as part of salary and taxed. The petitioner has also relied on an affidavit filed by Shri Sharad Chandra Kapoor, the president of the association, setting out therein that during the course of discussions, it was clearly explained that conveyance allowance would not be taxable. It was in these circumstances that the petitioners had accepted the said conveyance allowance as it was non-taxable as held out by respondent No. 1. The petitioners rely on the judgment of this court in the case of CIT v. D. R. Phatak [1975] 99 ITR 14. On behalf of respondent No. 1 besides the affidavit-in-reply an additional affidavit dated April 9, 1997, has been filed on its behalf by Diwakar S. Shetty, Deputy Secretary. It is pointed out in the said affidavit that the conveyance allowance of Rs. 100 per month is not "expended in the performance of duties". It is further averred that the payment of Rs. 100 per month to every Class I officer as conveyance allowance under rule 9(b) of the Rules, who is not covered by any conveyance scheme of the first respondent, is a lump sum payment and is made even if the employee concerned be on leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 1962. It is next contended that respondent No. 2 has not directly communicated about conveyance allowance to respondent No. 1 and that the Reserve Bank of India settlement has no bearing on the notification issued by respondent No. 1 as in the case of the petitioners the conveyance allowance has been given in the nature of reimbursement whereas in the Reserve Bank of India's case it was part of the salary and that this distinguishing feature is crucial for determining the question of taxability of the allowance. The question, therefore, which has to be decided is as to whether conveyance allowance which is paid to the officers represented by the petitioner association is salary or is it an allowance as set out in rule 2BB(1)(c) of the Income-tax Rules and, therefore, exempt and as such is exempted from taxation. Section 10 of the Income-tax Act specifies incomes which do not form part of total income. Clause (14) of section 10 includes 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be satisfied before any deduction can be claimed under section 7(2)(iii) of the Act. The Division Bench of the Gujarat High Court in answering the question relied on a judgment of the House of Lords in Ricketts v. Colquhoun [1925] 10 TC 118, wherein a similar provision, viz., rule 9 of Schedule E to the English Act had come up for consideration and which rule read as under : "If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed." The Division Bench held that the assessee failed to satisfy the twin tests and consequently rejected his claim. The question whether car allowance could not be treated as part of salary for the purpose of calculating the excess amount of perquisites to be disallowed under section 40A(5) of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex court on a consideration of the facts and law observed as under: "The clause grants exemption in respect of expenses 'incurred', but on that account an allowance granted to meet expenses to be incurred in future in the performance of the duties of an office or employment of profit is not outside the exemption claimed. In the context in which the expression 'incurred' occurs, it undoubtedly means 'incurred or to be incurred'. To qualify for exemption, the allowance must, it is clear, be granted to meet expenses incurred or to be incurred wholly and necessarily in the performance of the duties of an office or employment of profit. But the purpose for which the allowance is granted, in our judgment, is alone not determinative of the claim to exemption. An allowance, though made to a person holding an office or employment of profit, intended for appropriation towards expenditure incurred or to be incurred in the discharge of the duties, does not constitute any real income of the grantee. It is in truth expenditure incurred by the employer through the agency of the grantee. The intention of the framers of the Act was to grant exemption in respect of amounts received by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
