Thangirala Immanuel, Palacole V. The Income Tax Officer, Ward-1, , Palacole

ITA 14/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4938 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUMAN MALIK
• Keywords: TDS; Set aside
• Section: 10(14); 201; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 13 & 14 / VIZ/201 9 ( / ASSESSMENT YEAR S : 2008 - 09 & 201 1 - 12 ) THANGIRALA IMMANUEL, DEVELOPMENT OFFICER LIC OF INDIA 1 ST LANE, BRODIPETA PALAKOL VS. INCOME TAX OFFICER WARD - 1 PALAKOL ( / APPELLANT) ( / RESPONDENT) ./ I .T.A.NO. 16/VIZ/2019 ( / ASSESSMENT YEAR : 2011 - 12) AVADHANULA SRINIVASA RAO DEVELOPMENT OFFICER LIC OF INDIA 1 ST LANE, BRODIPETA PALAKOL VS. INCOME TAX OFFICER WARD - 1 PALAKOL ( / APPELLANT) ( / RESPONDENT) ./ I .T.A.NO. 25 /VIZ/201 9 ( / ASSESSMENT YEAR: 2011 - 12) NUTHALAPATI RAVI SHANKAR DEVELOPMENT OFFICER LIC OF INDIA 1 ST LANE, BRODIPETA PALAKOL VS. INCOME TAX OFFICER WARD - 1 PALAKOL ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : S HRI G.V.N.HARI, A R / ASSESSEE BY : S MT.SUMAN MALIK , AR / DATE OF HEARING : 30 . 04. 201 9 / DATE OF PRONOUNCEMENT : 29 .0 5 . 201 9 2 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL / O R D E R P ER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : THESE APPEALS ARE FILED BY THE ASSESSEES AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)], RAJAMAHENDRAVARAM DATED 26.09.2018 AND 15.10.2018. SINCE THE FACTS OF THE CASE ARE IDENTICAL, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE. 2. ALL THE ASSESSEES ARE DEVELOPMENT OFFICERS IN LIFE INSURANCE CORPORATION OF INDIA. THEY HAVE FILED THE RETURNS OF INCOME DECLARING TOTAL INCOME AS UNDER : SL.NO. NAME A.Y. RETURNED INCOME (RS.) (I) THANGIRALA IMMANUEL 2008 - 09 4,74,240 2011 - 12 6,97,120 (II) AVADHANULASRINIVASARAO 2011 - 12 9,88,360 (III) NUTHALAPATI RAVI SHANKAR 2011 - 12 12,41,650 THE ASSESSING OFFICER (AO) FOUND THAT THE ASSESSEES HAVE CLAIMED THE EXEMPTION U/S 10(14) OF THE INCOME TAX ACT,1961 (IN SHORT ACT) IN RESPECT OF THE FOLLOWING ALLOWANCES : 3 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL NAME A.Y. FIXED CONVEYANCE ALLOWANCE (RS.) CONVEYANCE EXPENDITURE (RS.) ALLOWANCE FOR PROCURING NEW BUSINESS (RS.) THANGIRALA IMMANUEL 2008 - 09 41,400 30,804 - 2011 - 12 45,500 33,964 33,964 AVADHANULA SRINIVASARAO 2011 - 12 45,500 66,097 66,097 NUTHALAPATI RAVI SHANKAR 2011 - 12 45,500 86,582 86,582 2.1. THE AO FURTHER OBSERVED THAT THE ABOVE AMOUNTS WERE PAID BY LIC AS SALARY OR PROFITS IN LIEU OF SALARY AND THE LIC OF INDIA HA D ALSO DEDUCTED THE TDS ON THE AMOUNTS AS THEY ARE TAXABLE. SINCE THE ABOVE AMOUNTS ARE TAXABLE, THE AO REOPENED THE ASSESSMENTS U/S 147 BY ISSUE OF NOTICE U/S 148 OF THE ACT AND TAKEN UP THE CASES FOR REASSESSMENT. DURING THE REASSESSMENT PROCE EDINGS THE ASSESSEE S HA VE FILED THE REPLY STATING THAT THE EXEMPTION WAS CLAIMED U/S 10(14) , SINCE, THE AMOUNTS WERE WHOLLY AND EXCLUSIVELY SPENT ON TOUR AND TRAVELLING FOR MOBILIZING THE BUSINESS AND ARE EXEMPT UNDER RULE 2BB(1)(C) OF THE I.T.RULES. T HE AO CONSIDERED THE EXPLANATION OF THE ASSESSEE AND NOT BEING SATISFIED WITH THE EXPLANATION , 4 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL HELD THAT THE ASSESSEE DID NOT SATISFY THE FOLLOWING CONDITIONS REQUIRED TO BE SATISFIED FOR ALLOWING EXEMPTION U/S 10(14) (I) THE AMOUNT IN QUESTION IS IN NATURE O F A SPECIAL ALLOWANCE OR BENEFIT (II) THE SPECIAL ALLOWANCE OR BENEFIT IS NOT IN THE NATURE OF PERQUISITE WITHIN THE MEANING OF SECTION 17(2) ] (III) SUCH AMOUNT IS SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT (IV) SUCH AMOUNT SHOULD BE SPECIFIED AND NOTIFIED IN THE OFFICIAL GAZETTE BY THE CENTRAL GOVERNMENT. 2.2. ACCORDING TO THE AO, ALL THE ABOVE CONDITIONS REQUIRE D TO BE SATISFIED CUMULATIVELY, TO BE ENTITLED FOR EXEMPTION U/S 10(14) OF THE ACT AND ALSO THERE MUST BE A NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT. IN THE ABSENCE OF NOTIFICATION AND THE ASSESSEE NOT BEING SATISFIED WITH THE CONDITIONS DISCUSSED ABOVE, THE ASSESSEE IS HELD TO BE NOT ENTITLED FOR EXEMPTION U/S 10(14) OF THE ACT. ACCORDINGLY, MADE THE ADDITION TO THE RETURNED INCOME AND ASSESSED THE TOTAL INCOME OF THE ASSESSEES AS UNDER : NAME A.Y. TOTAL INCOME (RS.) THANGIRALA IMMANUEL 2008 - 09 5,46,140 2011 - 12 8,10,550 AVADHANULASRINIVASARAO 2011 - 12 11,66,050 NUTHALAPATI RAVI SHANKAR 2011 - 12 14,60.310 5 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL 3. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT EXEMPTION U/S 10(14) R.W.RULE 2BB IS NOT APPLICABLE . I N THE INSTANT CASE AS IT IS OBSERVED FROM THE FOOT NOTE OF RULE 2BB THAT ADDITIONAL CONVEYANCE ALLOWANCE AND INCENTIVE BONUS PAID TO LIC OFFICERS ARE NOT COVERED U/S RULE 2BB OF INCOME TAX RULES. ACCORDINGLY, THE L D.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD.AR ARGUED THAT THE ABOVE ALLOWANCES ARE FIXED ALLOWANCES AND PAID BY THE EMPLOYER AFTER BEING SATISFI ED THAT THE AMOUNTS WERE SPENT WHOLLY FOR THE PURPOSE OF CARRYING OUT THE DUTIES. THE ASSESSEE ALSO SUBMITTED IN HIS EXPLANATION THAT THE ALLOWANCES WERE RECEIVED FOR THE PURPOSE OF TOURS AND T HE AMOUNTS SPENT ON TOUR AND TRAVELLING WAS MORE THAN THE ALLOWANCES RECEIVED AND ARGUED THAT SINCE THE ENTIRE AMOUNTS WERE PAID WHOLLY AND EXCLUSIVELY ON TOUR TRAVELLING, THE SAME MAY BE ALLOWED AS DEDUCTION. THE LD.AR FURTHER ARGUED THAT THE AO HAD REOPE NED THE ASSESSMENT TAKING SUPPORT FROM THE 6 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMAYYA & OTHERS (214 ITR 368) AND THE ISSUE INVOLVED IN THE DECISION OF HONBLE HIGH COURT OF ANDHRA PRADESH WAS INCENTIVE BONUS, BUT NOT THE ALLOWANC ES WHICH ARE INCURRED FOR THE PURPOSE OF CARRYING OUT THE DUTIES. THEREFORE, ARGUED THAT THE CASE LAW RELIED UPON BY THE LD.CIT(A) OR AO IS NOT APPLICABLE IN THE ASSESSEES CASE AND THE ASSESSEES CASE IS SQ U ARELY COVERED FOR EXEMPTION U/S 10(14) R.W.RULE 2BB OF I.T.RULES. THE ASSESSEE ALSO RELIED ON THE DECISION OF K.PULLARAO VS. ITO IN ITA NO.1647/HYD/1995 DATED 31.01.2002, WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN APPEAL NO.117/1992 AND REQUESTED TO FOL LOW THE SAME. 5. ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. ON IDENTICAL FACTS IN THE CASE OF AVADHANULA SRINIVASA RAO, THE ITAT ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE ORDER OF SHRI K.PULLA RAO (SUPRA) FOR THE A.Y.2009 - 10 IN ITA NO.243/V IZ/2017 DATED 09 . 11 . 2018. 7 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL HONBLE JURISDICTIONAL HIGH COURT IN THE CASE LAW REFERRED IN APPEAL NO.117/1992 OBSERVED THAT 'WE APPROVE THE REASONING OF THE TRIBUNAL. IN OUR VIEW WHERE AMOUNTS ARE PAID TO THE EMPLOYEES BY AN EMPLOYER TO MEET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY FOR THE PERFORMANCE OF THE DUTIES, SUCH AMOUNTS CAN BE EXEMPTED TO THE EXTENT IT IS SHOWN THAT IT HAS BEEN INCURRED FOR T HE PURPOSE FOR WHICH IT WAS GRANTED. IN THE CASE OF EMPLOYEES OF THE STATE OR CORPORATIONS, WHETHER STATUTORY OR OTHERWISE, WHERE THE EMPLOYER AFTER HAVING SURVEYED THE ACTUAL EXPENDITURE NECESSARY FOR PERFORMANCE OF THE DUTY, GRANTS ACTUAL ALLOWANCE GENER ALLY TO ALL THE EMPLOYEES, IT IS TO BE PRESUMED THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE FOR WHICH IT HAS BEEN GRANTED, FOR IF IT NOT INCURRED FOR WHICH IS HAS BEEN GIVEN, IT WOULD ENTAIL DISCIPLINARY ACTION AGAINST THE EMPLOYEE. UNLES S SUCH A CASE HAS BEEN INITIATED AGAINST AN EMPLOYEE BY AN EMPLOYER, THE SAID PRESUMPTION THAT THE EMPLOYEE HAS INCURRED THE EXPENDITURE FOR WHICH IT IS GRANTED, WILL APPLY AND IT WILL NOT BE NECESSARY FOR THE EMPLOYEES TO SUBMIT ACCOUNTS EVERY MONTH TO TH E EMPLOYER AND ALONG WITH RETURN TO THE ASSESSING AUTHORITY. IF, IN SUCH MATTERS, FILING OF THE ACCOUNTS AND VOUCHERS/RECEIPTS ARE INSISTED UPON TO CLAIM EXEMPTION UNDER SECTION 10(14) OF THE ACT BY THE INCOME - TAX AUTHORITIES, IT WILL LEAD TO VOIDABLE WAST E OF TIME AND EXPENDITURE AND WOULD SERVE NO USEFUL PURPOSE BUT ON THE CONTRARY IT WOULD BE COUNTER - PRODUCTIVE. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF B. CHINNAIAH& OTHERS (SUPRA) HAS CONSIDERED THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONA L HIGH COURT AND ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE ADDITIONAL CONVEYANCE ALLOWANCE IS EXEMPT UNDER SECTION 10(14) OF THE ACT.' THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF K.PULLARAO HAS CONSIDERED THE RATIO LAID DOWN BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND ALLOWED THE EXEMP T ION CLAIMED BY THE ASSESSEE AND HELD AS UNDER : 'IN THE CASE OF EMPLOYEES OF THE STATE OR CORPORATIONS, WHETHER STATUTORY OR OTHERWISE, WHERE THE EMPL OYER AFTER HAVING SURVEYED THE ACTUAL 8 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL EXPENDITURE NECESSARY FOR PERFORMANCE OF THE DUTY, GRANTS ACTUAL ALLOWANCE GENERALLY TO ALL THE EMPLOYEES, IT IS TO BE PRESUMED THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE FOR WHICH IT HAS BEEN GRANTE D, FOR IF IT NOT INCURRED FOR WHICH IS HAS BEEN GIVEN, IT WOULD ENTAIL DISCIPLINARY ACTION AGAINST THE EMPLOYEE. UNLESS SUCH A CASE HAS BEEN INITIATED AGAINST AN EMPLOYEE BY AN EMPLOYER, THE SAID PRESUMPTION THAT THE EMPLOYEE HAS INCURRED THE EXPENDITURE F OR WHICH IT IS GRANTED, WILL APPLY AND IT WILL NOT BE NECESSARY FOR THE EMPLOYEES TO SUBMIT ACCOUNTS EVERY MONTH TO THE EMPLOYER AND ALONG WITH RETURN TO THE ASSESSING AUTHORITY. IF, IN SUCH MATTERS, FILING OF THE ACCOUNTS AND VOUCHERS/RECEIPTS ARE BY THE INCOME - TAX AUTHORITIES, IT WILL LEAD TO VOIDABLE WASTE OF TIME AND EXPENDITURE AND WOULD SERVE NO USEFUL PURPOSE BUT ON THE CONTRARY IT WOULD BE COUNTER - PRODUCTIVE'. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF K. PULLARAO (SUPRA) HAS CONSIDERED THE RATIO LAID DOWN BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT, WHICH IS EXTRACTED BY THE ITAT, AS UNDER: - 'WE APPROVE THE REASONING OF THE TRIBUNAL. IN OUR VIEW WHERE AMOUNTS ARE PAID TO THE EMPLOYEES BY AN EMPLOYER TO MEET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY FOR THE PERFORMANCE OF THE DUTIES, SUCH AMOUNTS CAN BE EXEMPTED TO THE EXTEN T IT IS SHOWN THAT IT HAS BEEN INCURRED FOR THE PURPOSE FOR WHICH IT WAS GRANTED. IN THE CASE OF EMPLOYEES OF THE STATE OR CORPORATIONS, WHETHER STATUTORY OR OTHERWISE, WHERE THE EMPLOYER AFTER HAVING SURVEYED THE ACTUAL EXPENDITURE NECESSARY FOR PERFORMAN CE OF THE DUTY, GRANTS ACTUAL ALLOWANCE GENERALLY TO ALL THE EMPLOYEES, IT IS TO BE PRESUMED THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE FOR WHICH IT HAS BEEN GRANTED, FOR IF IT NOT INCURRED FOR WHICH IS HAS BEEN GIVEN, IT WOULD ENTAIL DI SCIPLINARY ACTION AGAINST THE EMPLOYEE. UNLESS SUCH A CASE HAS BEEN INITIATED AGAINST AN EMPLOYEE BY AN EMPLOYER, THE SAID PRESUMPTION THAT THE EMPLOYEE HAS INCURRED THE EXPENDITURE FOR WHICH IT IS GRANTED, WILL APPLY AND IT WILL NOT BE NECESSARY FOR THE E MPLOYEES TO SUBMIT ACCOUNTS EVERY MONTH TO THE EMPLOYER AND ALONG WITH RETURN TO THE ASSESSING AUTHORITY. IF, IN SUCH MATTERS, FILING OF THE ACCOUNTS AND VOUCHERS/RECEIPTS ARE INSISTED UPON TO CLAIM EXEMPTION UNDER SECTION 10(14) OF THE ACT BY THE INCOME - T AX AUTHORITIES, IT WILL LEAD TO VOIDABLE WASTE OF TIME AND EXPENDITURE AND WOULD SERVE NO USEFUL PURPOSE BUT ON THE CONTRARY IT WOULD BE COUNTER - PRODUCTIVE. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF B. CHINNAIAH& OTHERS (SUPRA) HAS CONSIDERED THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT AND ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. IN THIS VIEW OF THE 9 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL MATTER, WE HOLD THAT THE ADDITIONAL CONVEYANCE ALLOWANCE IS EXEMPT UNDER SECTION 10(14) OF THE ACT.' 7. DURING THE APPEAL HEA RING THE LD.DR DID NOT BRING ANY OTHER CASE LAW TO CONTROVERT THE DECISIONS CITED SUPRA. SINCE THE FACTS ARE IDENTICAL, FOLLOWING THE RATIO LAID DOWN BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND THE ORDER OF THIS TRIBUNAL IN THE CASE OF A SRINI VASA R AO, WE ARE OF THE OPINION THAT THE EXEMPTION CLAIMED BY THE ASSESSEE NEEDS FAVOURABLE CONSIDERATION. AS DISCUSSED EARLIER, THE CASE LAW RELIED UPON BY THE AO IN RAMAYYA & OTHERS IS RELATED TO INCENTIVE BONUS AND IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, THE ORDERS PASSED BY THE LD.CIT(A) ARE SET ASIDE AND THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. 8 . IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY 2019. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 29 .0 5 .2019 L.RAMA, SPS 10 I.T.A. NO .13,14, 16 & 25/VIZ/2019 THANGIRALA IMMANUEL, AVADHANULA SRINIVASA RAO, NUTHALAPALLI RAVI SHANKAR, PALAKOL / COPY OF THE ORDER FORWARDED TO: - 1 . / THE REVENUE INCOME TAX OFFICER , WARD - 2(2) , PALAKOL 2 . / THE ASSESSEE S - (I ) THANGIRALA IMMANUEL (II) AVADHANULA SRINIVASA RAO (III) NUTHALAPATI RAVI SHANKAR, DEVELOPMENT OFFICER S , LIC OF INDIA , 1 ST LANE, BRODIPETA , PALAKOL 3. THE PR. COMMISSIONER OF INCOME TAX , RAJAMAHENDRAVARAM 4. THE COMMISSIONER OF INCOME - TAX (APPEALS ) , RAJAMAHENDRAVARAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM