ITO (TDS) - I, Ludhiana V. M/s Life Insurance Corpn. of India, Ludhiana

ITA 111/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57721 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: RAJIV SHARMA
• Keywords: Question of law
• Section: 10(14); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NOS. 110 & 111/CHD/2012 ASSESSMENT YEARS: 2003-04 & 2004-05 THE ITO (TDS)-1, VS THE BRANCH MANAGER, LUDHIANA LIC OF INDIA, UNIT NO.1, OPP. BHADAUR HOUSE, LUDHIANA PAN NO. JLDLO0436C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K. SAINI RESPONDENT BY : SHRI RAJIV SHARMA DATE OF HEARING : 07.3.2012 DATE OF PRONOUNCEMENT : 07.03.2012 ORDER PER H.L.KARWA, VP THESE TWO APPEALS BY THE REVENUE ARE AGAINST THE SE PARATE ORDERS OF CIT(A)-II LUDHIANA DATED 16.11.2011 RELATING TO ASS ESSMENT YEARS 2003-04 AND 2004-05. 2. IN ITA NO. 110/CHD/2012, THE REVENUE HAS TAKEN T HE FOLLOWING GROUND:- THAT THE LD. CIT(APPEAL-1) HAS ERRED IN LAW & FACTS IN DELETING THE ADDITION MADE ON NON DEDUCTION OF TDS ON 2 ACCOUNT OF CONVEYANCE ALLOWANCE AND ADDITIONAL CONVEYANCE ALLOWANCE OF DEVELOPMENT OFFICERS AMOUNTING TO RS. 3,64,811/-. 3. IN ITA NO.111/CHD/2012, THE REVENUE HAS TAKEN TH E FOLLOWING GROUND:- THAT THE LD. CIT(APPEAL-1I) HAS ERRED IN LAW & FACT S IN DELETING THE ADDITION MADE ON NON DEDUCTION OF T DS ON ACCOUNT OF CONVEYANCE ALLOWANCE AND ADDITIONAL CONVEYANCE ALLOWANCE OF DEVELOPMENT OFFICERS AMOUNTING TO RS. 2,80,405/-. 4. THE GROUND OF APPEAL IN BOTH THE APPEALS UNDER C ONSIDERATION IS COMMON EXCEPT THE AMOUNT. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A BRANCH MANAGER OF LIFE INSURANCE CORPORATION OF INDIA, A S TATUTORY GOVT. OF INDIA UNDERTAKING. THE BRANCH IS REIMBURSING EXPENSES IN CURRED BY THE DEVELOPMENT OFFICERS OF THE CORPORATION. THE ITO, (TDS), RANGE-III, LUDHIANA HAS HELD THE PERSON RESPONSIBLE HAS NOT D EDUCTED / SHORT DEDUCTED TDS ON REIMBURSEMENT OF EXPENSES (ADDITIONAL CONVEY ANCE ALLOWANCE) TO THE TUNE OF RS. 2,53,795/- AND CHARGED INTEREST OF RS. 1,11,016/-, THUS CREATING DEMAND OF RS. 3,64,811/- FOR THE ASSESSMENT YEAR 20 03-04. ON THE SAME FOOTING, THE ASSESSING OFFICER CREATED TOTAL DEMAND OF RS. 2,80,405/- FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSING OFFICER HEL D THAT THE ASSESSEE WAS IN DEFAULT U/S 201(1) / 201(1A) OF THE ACT AMOUNTIN G TO RS. 3,64,811/- AND RS. 2,80,405/- FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 RESPECTIVELY. 3 6. ON APPEAL, THE CIT(A) DELETED THE ADDITIONS FOR BOTH THE YEARS UNDER CONSIDERATION FOLLOWING THE JUDGMENT OF HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF CIT V BRANCH MANAGER, LIC OF I NDIA REPORTED IN (2008) 298 ITR 358 (P&H). 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH PA RTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HE HON'BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT V BRANCH MANAGER, LIC OF INDIA (SUPRA), WHEREIN IT IS HELD THAT THE LIC OF INDIA WOULD NOT LIABLE TO DEDUCT TDS ON RE-IMBURSEM ENT OF EXPENSES PAID TO DEVELOPMENT OFFICER. THE RELEVANT FINDINGS OF THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE ABOVE CASE IS AS UNDER:- IT IS, THUS, EVIDENT THAT THE CONVEYANCE ALLOWANCE AND THE ADDITIONAL CONVEYANCE ALLOWANCE ARE PAID TO THE DEV ELOPMENT OFFICERS FOR MEETING ACTUAL EXPENDITURE INCURRED B Y THEM IN DISCHARGE OF THEIR FIELD DUTIES AND, THUS, WHOLLY, NECESSARILY AND EXCLUSIVELY FOR MEETING SUCH EXPENDITURE, THE ALLOWANCE IS BEING EXEMPT AS PER THE NORMS SET OUT IN THE LI FE INSURANCE CORPORATION CIRCULAR DATED AUGUST 3, 1987, REFERRE D TO IN THE PRECEDING PARA. IT APPEARS THAT THE LIFE INSURANCE CORPORATION HAS, WORKED OUT THE ADDITIONAL CONVEYAN CE ALLOWANCE TO THE DEVELOPMENT OFFICERS CONSIDERING THE PROBABLE EXPENDITURE FOR PROCURING THE BUSINESS. T HE LIFE INSURANCE CORPORATION APPEARS TO HAVE DEVISED THE GENERAL FORMULA HAVING A REFERENCE TO THE PARAMETERS OF THE BUSINESS AND, THUS THE PAYMENT OF ADDITIONAL CONVEYANCE ALLO WANCE IS A REIMBURSEMENT FOR ACTUAL EXPENDITURE INCURRED BY T HE DEVELOPMENT OFFICERS ON ACCOUNT OF CONVEYANCE IN RE LATION TO PERFORMANCE OF THEIR DUTIES AND THE SAID EXPENDITUR E HAS A 4 DIRECT NEXUS WITH THE PERFORMANCE OF DUTIES FOR DE VELOPMENT 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 INS URANCE POLICIES. NATURALLY, IN SUCH CIRCUMSTANCES, TOURIN G EXPENSES ARE INCURRED ON CONVEYANCE. SUCH CONVEYANCE EXPENS ES ARE REIMBURSED BY THE EMPLOYER AS PER THE PRESCRIBED NO RMS IN THE NAME OF ADDITIONAL CONVEYANCE ALLOWANCE. THE CE RTIFICATE IS GIVEN BY THE LIC-EMPLOYER OF THE MINIMUM AMOUNT WHICH THE LIFE INSURANCE CORPORATION CERTIFIES THAT IT I S 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- ASSESSEE (DEVELOPMENT OFFICERS). THE EXEMPTION LIMIT IS RES TRICTED BY THE INSTRUCTIONS ISSUED BY THE CENTRAL BOARD OF DIR ECT TAXES FROM TIME TO TIME. THEREFORE, WE HOLD THAT THE DEVE LOPMENT OFFICERS IN THE LIFE INSURANCE CORPORATION ARE ENTI TLED TO CLAIM EXEMPTION UNDER SECTION 10(14) OF THE ACT IN RESPECT OF CONVEYANCE ALLOWANCE/ADDITIONAL CONVEYANCE ALLOWAN CE UPON SATISFYING THE CONDITIONS THAT SUCH ALLOWANCES HAVE ACTUALLY BEEN SPENT FOR THE PURPOSE FOR WHICH THEY WERE GIV EN 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 TH E EXTENT SUCH CONVEYANCE ALLOWANCE/ADDITIONAL CONVEYANCE ALL OWANCE IS EXEMPT UNDER RULE 2BB AND FURTHER SUCH MINIMUM L IMIT IS SET FROM TIME TO TIME. THE ULTIMATE LIABILITY OF C LAIMING EXEMPTION AND PROVING THE SAME IS ON THE EMPLOYEE- ASSESSEES, I.E., THE DEVELOPMENT OFFICERS. THE TRIBUNAL AFTER DETAILED DISCUSSION ON THE CONTE NTIONS OF THE PARTIES AND ALSO KEEPING IN VIEW THE FACT THAT THE REVENUE HAD NOT CHALLENGED THE EARLIER ORDERS PASSED BY TH E TRIBUNAL ON THE SAME ISSUE, PERTAINING TO DIFFERENT OFFICES OF THE LIC, 5 UPHELD THE ORDER PASSED BY THE COMMISSIONER OF INC OME-TAX (APPEALS) AND DISMISSED THE APPEAL OF THE REVENUE. FOR THE REASONS GIVEN ABOVE AND RESPECTFULLY CONCUR RING WITH THE VIEW TAKEN BY THE RAJASTHAN HIGH COURT IN LIFE INSURANCE CORPORATION OF INDIAS CASE [2003] 260 ITR 41, WE DO NOT FIND ANY REASON TO DIFFER WITH THE VIEW TAKEN BY T HE TRIBUNAL AND HOLD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT CASE. 8. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V BRANCH MANAGER, LIC OF INDIA (SUPRA), WE HOLD THAT PAYMENTS MADE FOR THE REIMBURSEMENT OF AC TUAL EXPENDITURE INCURRED BY THE DEVELOPMENT OFFICERS IS NOT PART OF THEIR SALARY AND NO TAX CAN BE DEDUCTED AT SOURCE FROM THEM. IN THAT VIEW OF THE MATTER, WE DISMISS BOTH THE APPEALS OF THE REVENUE HOLDING THAT THE SA ME ARE DEVOID OF ANY MERIT. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF MARCH, 2012 SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 7 TH MARCH, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR