B S AGGARWAL AND ORS. V. UNION OF INDIA AND ORS.

CWP/18662/2007

AI Insights

The case involves petitions filed by 73 Development Officers of the Life Insurance Corporation (LIC), challenging a tax demand raised by the Income Tax Officer. The petitioners argued that their conveyance allowances were exempt from tax under section 10(14) of the Income Tax Act, 1961, read with Rule 2BB of the Income Tax Rules, 1962. They cited previous judgments and claimed that LIC had not deducted tax at source, which they believed was illegal. The Income Tax department and LIC countered by referencing a circular mandating tax deductions on such allowances and cited conflicting judgments from other High Courts. The court decided not to override the statutory requirement for tax deduction at source, regardless of the benefits previously granted to the petitioners.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 737721 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 15-03-2010
• Assessment Year: misc
• Other Referred Cases: LIC v. The Union of India, Shivraj Bhatia v. The LIC of India, National Federation of insurance Field Workers of India v. Union of India, Sahib Ram vs. State of Haryana
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: B R MAHAJAN; VIVEK SETHI
• Assessee Lawyers: HEMANT SAINI
• Keywords: Conveyance Allowance; Development Officers; Income Tax; LIC; Tax Exemption
• Section: 10; 2(bb)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.18662 of 2007 (O&M) Date of decision:15.3.2010 B.S.Aggarwal and others ----- Petitioners Vs. Union of India and others -----Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE ALOK SINGH Present:- Mr. Hemant Saini, Advocate for the petitioners. Mr.B.R.Mahajan, Advocate for respondent Nos. 2 to 4. Mr. Vivek Sethi, Advocate for respondent No.5. Adarsh Kumar Goel,J. 1. This order will dispose of CWP Nos.18662, 19316 of 2007 and 1778 and 5982 of 2008. 2. These petitions have been filed by 73 persons working as Development Officers in the Life Insurance Corporation and seeks quashing of demand dated 7.12.2005, Annexure P.5, raised by the Income Tax Officer. 3. Case of the petitioners is that they spent money received by way of fixed conveyance allowance and additional conveyance allowance and the said amount was, thus, not exigible to tax in view of exemption under section 10 CWP No.18662 of 2007 (O&M) (14) of the Income Tax Act, 1961 (for short, ‘the Act’) read with Rule 2 BB of the Income Tax Rules, 1962 (for short, ‘the rules’). The petitioners were already given concession for the assessment year in question and thus, demand on account of alleged failure of the LIC to deduct tax at source was illegal. Reliance has been placed on judgment of Rajasthan High Court in LIC v. The Union of India and others and Shivraj Bhatia v. The LIC of India and others, Annexure P.8, against which SLP was dismissed by the Hon’ble Supreme Court, Annexure P.9. 4. Learned counsel for the Income Tax department states that the Orissa High Court vide judgment dated 3.4.2008 in National Federation of insurance Field Workers of India v. Union of India (UOI) and others, 106(2008) CLT 118 took a different view and held that in view of later circular of the Central Board of Direct Taxes dated 4.1.2001, the LIC was bound to make deduction of tax from conveyance allowance and additional conveyance allowance paid to Development Officers. Learned counsel for the LIC also relied upon the said judgment and submitted that exemption from tax will depend upon facts to be established by individual assessee at the time of assessment. It is pointed out that in the case considered by 2 CWP No.18662 of 2007 (O&M) the Rajasthan High Court, circular dated 4.1.2001 and subsequent circular dated 1.2.2001 were not taken into account which fact finds mention in para 17 of the judgment of the Orissa High Court (supra). The Orissa High Court also followed judgments of Bombay High Court and Madras High Court taking the same view. In para 20 of the said judgment, it was further mentioned that SLP against judgment of Rajasthan High Court was dismissed as the dispute in that case pertained to the assessment year 1990-91 and was not covered by the latest circulars. 5. Learned counsel for the petitioners also submitted that any benefit which has been given to the petitioners could not be withdrawn on the principle of estoppel, as held by the Hon’ble Supreme Court in Sahib Ram vs. State of Haryana, (1995) 1 Suppl. SCC 18, when they were not guilty of suppression or misstatement. 6. We are unable to accept this submission. There can be no estoppel against law and in making deduction at source, LIC is only complying with the provisions of the statute. The judgments relied upon are distinguishable and relate to giving of benefits by an employer and not taking of action mandated by a statute. 3 CWP No.18662 of 2007 (O&M) 7. In view of above, these petitions are disposed of with liberty to the petitioners to raise the issue before the Income Tax authorities in accordance with law. (Adarsh Kumar Goel) Judge March 15, 2010 (Alok Singh) ‘gs’ Judge 4 "