K. Padmanaban, CHENNAI V. ITO, CHENNAI

ITA 2757/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4239 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 23-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN JICIT
• Section: 10(14); 10

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.2757 /MDS./2016 ( / ASSESSMENT YEAR : 2008-09) MR.K.PADMANABAN , FLAT NO.C, BLOCK-5, JAINS KENCES RETREAT, NO.15, REDDY STREET, VIRUGAMBAKKAM, CHENNAI 600 092. VS. INCOME TAX OFFICER, SALARY WARD V(3), CHENNAI. PAN ADPPP 0522 L ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : NONE $% ! ' # / RESPONDENT BY : MR.V.SREENIVASAN, JICIT, D.R & ' ' ( ) / DATE OF HEARING : 19.06.2017 *+ ' ( ) /DATE OF PRONOUNCEMENT : 19.06.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-5, CHENNA I DATED 14.07.2016 PERTAINING TO ASSESSMENT YEAR 2008-09. ITA NO.2757/MDS/2016 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR CONSIDERATION. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE ON ACCOUNT O F HIS EMPLOYMENT AS AN ENGINEER IN SHIPS HAS TO INCUR A LOT OF EXPENDITURE ON VICTUALS, HOLIDAY TRAVEL, ACADEMICS AND RESEARCH, SPECIAL EXPENDITURE, UNIFOR M PURCHASE, UNIFORM WASHING, CONVEYANCE, MEDICAL TREATMENTS IN FOREIGN COUNTRIES, ETC. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT SHIP MANAGEMENT IS AWARE THAT AN EMPLOYEE HAS TO SPEND FROM HIS SOURCES ON THESE TYPES OF EXPENSES A ND EVEN MORE AND HENCE ARE ALLOWING THESE EXPENSES EVEN WITHOUT PRODUCTION OF BILLS AND VOUCHERS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THESE ALLOWANCES WHICH HA VE NO ELEMENT OF SAVINGS IMBEDDED IN THEM WILL QUALIFY FOR EXEMPTION UNDER S ECTION 10(14) IN WHOLE OR IN PART WHETHER THE ASSESSEE PRODUCES BILLS OR NOT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE COULD NOT PR ODUCE BILLS AND VOUCHERS FOR THE REASON THAT IN INTERNATIONAL PORTS AND FOREIGN LOCATIONS NO BILLS AND VOUCHERS ARE GIVEN SINCE PAYMENTS ARE BEING MADE BY WAY OF C REDIT CARDS AND MANY OTHER FORMS OF PAYMENTS OTHERWISE THAN BY WAY OF CASH. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT EXPENSES BY THEIR VERY DE SCRIPTIONS INDICATE THEIR OFFICIAL USAGE AND IN APPRECIATION OF THE FACT THE COMMISSIO NER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE EXPENSES IN FULL OR AT LE AST A REASONABLE PERCENTAGE AS RELATING TO THE PROFESSION OF THE ASSESSEE. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A SA LARY EMPLOYEE AND CLAIMED DEDUCTION IN HIS RETURN OF INCOME U/S. 10 OF THE ACT. THE AO FOUND FROM FORM NO.16 ISSUED BY M/S.INTERNATIONA L SEAPORT DREDGING LTD., THAT THE GROSS SALARY IS ` 9,74,365/- AND ALSO NET SALARY ITA NO.2757/MDS/2016 3 WAS ` 9,74,365/- AND THE ASSESSEE CLAIMED ALL THE ALLOWA NCES GIVEN BY THE EMPLOYER AS EXEMPTION U/S.10 OF THE ACT AS FOLLOWS. SL. NO. ALLOWANCE CLAIMED ASSESSEE EXEMPT AMOUNT RS. ALLOWANCE GIVEN BY EMPLOYER. BUT NOT ALLOWED AS EXEMPT IN FORM 16. AMOUNT RS. 1 VITUALLING ALLOWANCE 26,244 26,244 2 HOLIDAY TRAVEL ALLOWANCE 87,475 87,475 3 ACADEMIC & RESEARCH 65,605 65,605 4 SPECIAL ALLOWANCE 2,50,180 2,50,180 5 UNIFORM MAKING ALLOWANCE 57,734 57,734 6 UNIFORM WASHING ALLOWANCE 38,490 38,490 7 CONVEYANCE 9,600 19,245 8 MEDICAL 19,245 19,245 TOTAL EXEMPTION CLAIMED 5,54,573 5,64,218 THE AO DISALLOWED THE SAME ON THE FOLLOWING REASONS . 3.A. I) REGARDING UNIFORM ALLOWANCE , HE HAD STATED THAT THE UNIFORM AND WASHING EXPENDITURE WERE INCURRED WHILE THE ASS ESSEE WAS EXCLUSIVELY ON DUTY AND THE PROOF FOR THE SAME IS N OW NOT AVAILABLE WITH THE ASSESSEE AS THE ASSESSEE IS NOT MAINTAININ G REGULAR BOOK OF ACCOUNT TO KEEP EVIDENCE. 3.B. REASON FOR DISALLOWANCE: THE ASSESSEE CONTENTI ON IS NOT ACCEPTABLE AS THE ALLOWANCE IS GIVEN FOR INCURRING EXPENDITURE ON PURCHASE AND MAINTENANCE OF UNIFORM FOR PERFORMING DUTY. IF THE ITA NO.2757/MDS/2016 4 SAME WAS FURNISHED BEFORE THE EMPLOYER THE SAME WOU LD HAVE BEEN ALLOWED (THE EXTENT OF BILLS PRODUCED), BY THE EMPL OYER. SINCE THE EMPLOYER HAS NOT ALLOWED THE ALLOWANCE AS EXEMPT AN D THE ASSESSEE HAS NOT FURNISHED THE EVIDENCE FOR INCURRING EXPEND ITURE EVEN NOW, UNIFORM MAKING ALLOWANCE OF RS.57,734, UNIFORM WASH ING ALLOWANCE OF RS.38,490 ARE DISALLOWED AND ADDED TO HIS NET RE TURNED INCOME AS INCOME UNDER HEAD SALARY (54734 +38490) FOR A.Y.200 8-09. 3.C. II) REGARDING ACADEMIC RESEARCH ALLOWANCE HE H AD STATED THAT THE ALLOWANCE WAS PAID BY THE EMPLOYER TO UPGRADE T HE TECHNICAL KNOWLEDGE WHILE THE ASSESSEE WAS OFF BOARD. THE ASS ESSEE HAD INCURRED EXPENDITURE AND SPENT FOR COURSES OFFERED BY VARIOUS MARINE INSTATE AT MUMBAI AND CHENNAI. THE PROOF FOR THE SA ID EXPENDITURE IS NOT AVAILABLE NOW AS THE ASSESSEE IS NOT MAINTAININ G REGULAR BOOK OF ACCOUNT TO KEEP EVIDENCE. 3.D. REASON FOR DISALLOWANCE: THE ASSESSEE CONTENTI ON IS NOT ACCEPTABLE AS THE ALLOWANCE IS GIVEN FOR INCURRING EXPENDITURE ON ACADEMIC RESEARCH. IT IS CLEAR FROM THE WORK CONTRA CT ISSUED BY EMPLOYER, IN PARA 3 UNDER HEAD TRAINING AND PARA 3. 1. IT IS STATED AS: TUITION AND FOR EXAMINATION FEES FOR ATTENDING COU RSES AT RECOGNIZED INSTITUTIONS FOR OBTAINING CERTIFICATES UNDER THE S TCW 95 CONVENTION WILL BE REIMBURSED BY THE EMPLOYER TWO YEARS AFTER SUCCESSFUL COMPLETION OF THE COURSES AND PRODUCTION OF THE CER TIFICATES AND ORIGINAL RECEIPTS TO TUITION FEES PAID AS PROOF THE REOF. ITA NO.2757/MDS/2016 5 IF THE ASSESSEE HAD FURNISHED THE PROOF BEFORE THE EMPLOYER THE SAME WOULD HAVE BEEN ALLOWED AS EXEMPT U/S 10 BY THE EMP LOYER IN FORM 16. SINCE THE EMPLOYER HAS NOT ALLOWED THE ALLOWANC E AS EXEMPT AND THE ASSESSEE HAS NOT FURNISHED THE EVIDENCE FOR INC URRING EXPENDITURE EVEN NOW (HE COULD HAVE FURNISHED AT LEAST EVIDENCE OF COURSE CERTIFICATES IF ANY IN PROOF OF HIS CLAIM, WHICH HE HAS FAILED TO DO SO) THE SAME IS DISALLOWED NOW AND ADDED TO HIS NET RET URNED INCOME AS INCOME UNDER HEAD SALARY FOR A.Y.2008-09 OF ` 75,985/- 3.E. (III) REGARDING VICTUALLING ALLOWANCE: HE HAD STATED THAT THE EXPENDITURE IS NOTHING BUT FOOD EXPENDITURE WHILE O N DUTY. THE ASSESSEE HAD SPENT FOOD EXPENDITURE WHILE HE WAS ON DUTY. THERE IS NO PROOF AVAILABLE FOR THE SAME. 3.F. REASON FOR DISALLOWANCE : THE ASSESSEE HIMSELF HAS STATED THAT HE HAS NO PROOF FOR THE EXPENDITURE. IT IS CLEAR FR OM THE WORK CONTRACT ISSUED BY EMPLOYER, IN PARA 12.1 UNDER HEAD FOOD, A CCOMMODATION, BEDDINGS AND AMENITIES IT IS STATED AS: THE EMPLOYER SHALL PROVIDE FOOD, ACCOMMODATION, BE DDING AND OTHER AMENITIES AS PER STANDARDS, REGULATIONS A ND EMPLOYERS POLICY. IT HAS NOT STATED THAT THE EMPLOYEE (ASSESSEE) HAS TO PAY FOR THE SAME. THE EMPLOYER HAS NOT ALLOWED AS EXEMPTED THE SAME U/S 10 IN FORM 16. ALSO ALLOWANCE GIVEN FOR FOOD EXPEND ITURE IS NOT AN EXEMPTIBLE ALLOWANCE. HENCE THE SAME IS DISALLOWED NOW AND ADDED ITA NO.2757/MDS/2016 6 TO HIS NET RETURNED INCOME AS INCOME UNDER HEAD SAL ARY FOR A.Y 2008- 09 OF RS. 30,394/-. 3.G. IV) REGARDING SPECIAL ALLOWANCE . HE HAD STATED THAT THE ALLOWANCE (2,50,180) ARE GRANTED TO MEET EMPLOYEES PERSONAL EXPENSES, SUCH ALLOWANCE ARE GRANTED BY THE EMPLOYE R TO REMUNERATE THE EMPLOYEE OR TO COMPENSATE HIM FOR PE RFORMING DUTIES OF SPECIAL NATURE. 3.H. REASON FOR DISALLOWANCE/RESTRICTED : UNDER RULE 2BB THE PRESCRIBED ALLOWANCE FOR THE PURPOSE OF CLAUSE (14) OF SECTION 10 ANY ALLOWANCE GRANTED TO AN EMPLOYEE WORKING IN ANY TRA NSPORT SYSTEM TO MEET HIS PERSONAL EXPENDITURE DURING HIS DUTY PERFO RMED WILL BE 70 PER CENT OF SUCH ALLOWANCE UP TO A MAXIMUM OF RS.6, 000/- P.M. 70 % OF ALLOWANCE IS ` 1,75,126 (250180 * 70H). HENCE AS THE ASSESSEE IS WORKING IN SHIP A SUM OF ` 72,000 (6000 * 12) IS ALLOWED AND THE EXCESS CLAIM IS DISALLOWED NOW AND ADDED TO HIS NET RETURNED INCOME AS INCOME UNDER HEAD SALARY FOR A.Y.2008-09 OF (250 180 -72000) ` 1,78,180. 3.1 V) REGARDING HOLIDAY TRAVEL ALLOWANCE , THE ASSESSEE REPRESENTATIVE HAD FILED A LETTER ON 31/01/2014 STA TING THAT THE HOLIDAY TRAVELLING ALLOWANCE IS NOTHING BUT THE ALLOWANCE P AID FOR THE EXPENSES INCURRED TO JOIN AND LEAVE SHIP TO MEET TH E ORDINARY DAILY ITA NO.2757/MDS/2016 7 CHARGES INCURRED BY AN EMPLOYEE ON ACCOUNT OF ABSEN CE FROM IS NORMAL PLACE OF DUTY. 3.J. REASON FOR DISALLOWANCE : THE ASSESSEES REPRESENTATIVES CONTENTION IS NOT ACCEPTABLE AS TILL DATE HE HAS NO T FURNISHED ANY EVIDENCE. ALSO HOLIDAY TRAVEL ALLOWANCE(LTA) IS ALL OWED ONLY FOR EMPLOYEE AND HIS FAMILY IN CONNECTION WITH HIS PROC EEDING ON LEAVE TO ANY PLACE IN INDIA, FOR WHICH HE HAS TO FURNISH PROOF FOR HAVING INCURRED THE SAME, AS IT CAN BE ALLOWED ONLY ON ACT UAL EXPENDITURE INCURRED. HENCE THE SAME IS DISALLOWED NOW AND ADDE D TO HIS NET RETURNED INCOME AS INCOME UNDER HEAD SALARY FOR A.Y .2008-09 OF ` 1,01,312/-. 3.K. VI) REGARDING CONVEYANCE, AND MEDICAL ALLOWAN CE THE SAME IS ALLOWED AS THE ASSESSEE HAD CLAIMED CONVEYANCE ALLO WANCE EXEMPTION TO THE EXTENT ALLOWABLE OF ` 9,600/- AS AGAINST RECEIVED OF ` 19,245 AND REGARDING MEDICAL ` 15,000 IS ALLOWED AS MEDICAL REIMBURSEMENT AS AGAINST RECEIVED AND CLAIMED OF RS .19,245. AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFIC ER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE LD. ASSESSING OFFICER. AGAINST THE ORDER OF THE CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.2757/MDS/2016 8 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BEFOR E THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.425/MDS./2016 VIDE ORDER DATED 06.05.2016 WHEREI N TRIBUNAL HELD THAT:- 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD, JUDICIAL DECISIONS AND WRITTEN SUBMISSIONS. IN THE CASE OF EMPLOYEES THERE IS A CONTRACTUAL AGREEMENT WITH EMPLOYER AND REIMBURSE MENT OF EXPENSES ARE FIXED BASED ON TERMS AND CONDITIONS OF THE EMPLOYME NT. THE ASSESSEE IS A MARINE ENGINEER IN M/S. INTERNATIONAL SEAPORT DREDG ING LTD AND PROVIDED ALLOWANCES IN ADDITION TO THE BASIC SALARY SUCH AL LOWANCES ARE MANDATORLY FOR UPBRINGING EMPLOYEES TO BE PHYSICALLY AND MENTALLY TO BE FIT TO CONDUCT THE DUTY WITH GREAT RESPONSIBILITY. THE LD. ASSESSING O FFICER HAS ACCEPTED AND REFERRED TO THE DIFFERENT TYPE OF ALLOWANCES IN HIS ASSESSMENT ORDER INCURRED BY ASSESSEE AND DUE TO NON-SATISFACTION OF CLAIM F OR EXPENDITURE WITHOUT ANY EVIDENCE THE DISALLOWANCE ARE CONSIDERED IN THE ASS ESSMENT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AND JUDICIAL DECISIONS AND PROVIS IONS OF SEC. 10(14) OF THE ACT AND OF THE OPINION THAT ALLOWANCES ARE TO BE UT ILIZED WHOLLY AND EXCLUSIVELY BY THE EMPLOYEE IN CONDUCTING HIS DUTY AND SHOULD BE ACTUALLY INCURRED FOR THE PURPOSE AS PER THE PROVISIONS OF SEC.10(14) AS UNDER:- ITA NO.2757/MDS/2016 9 (1) ANY SUCH SPECIAL ALLOWANCE OR BENEFIT, NOT BEING IN THE NATURE OF A PERQUISITE WITHIN THE MEANING OF CL AUSE (2) OF SECTION 17, SPECIFICALLY GRANTED TO MEET EXPENSES W HOLLY, NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORM ANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT [AS MAY BE PRESCRIBED] TO THE EXTENT TO WHICH SUCH EXPENSES AR E ACTUALLY INCURRED FOR THAT PURPOSE. (2) ANY SUCH ALLOWANCE GRANTED TO THE ASSESSEE EITHER T O MEET HIS PERSONAL EXPENSES AT THE PLACE WHERE THE D UTIES OF HIS OFFICE OR EMPLOYMENT OF PROFIT ARE ORDINARILY P ERFORMED BY HIM OR AT THE PLACE WHERE HE ORDINARILY RESIDES OR TO COMPENSATE HIM FOR THE INCREASED COST OF LIVING [ A S MAY BE PRESCRIBED AND TO THE EXTENT AS MAY BE PRESCRIBED] [PROVIDED THAT NOTHING IN SUB-CLAUSE (II) SHALL APP LY TO ANY ALLOWANCE IN THE NATURE OF PERSONAL ALLOWANCE GRANT ED TO THE ASSESSEE TO REMUNERATE OR COMPENSATE HIM FOR PERFOR MING DUTIES OF A SPECIAL NATURE RELATING TO HIS OFFICE O R EMPLOYMENT UNLESS SUCH ALLOWANCE IS RELATED TO THE PLACE OF HI S POSTING OR RESIDENCE] THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELIE D ON THE JUDICIAL DECISIONS AND CONCURRED WITH THE FINDINGS OF ASSESS ING OFFICER AND FOUND AS PER PROVISIONS OF SEC. 10(14) IT IS THE DUTY CAST O N THE ASSESSEE THAT THE EXPENSES ARE ACTUALLY INCURRED AND TO PRODUCE THE S UPPORTING EVIDENCE OF BILLS AND VOUCHERS. THE LD. ASSESSING OFFICER HAS NOT DISPUTED ON THE NATURE OF ALLOWANCE OR ANY ADVERSE CLAIM OF EXPENDITURE B UT NON AVAILABILITY OF SUPPORTING VOUCHERS OR BILLS. CONSIDERING THE APPA RENT FACTS, PROVISIONS OF LAW AND THE CONDUCT OF THE ASSESSEE IN PERFORMANCE OF DUTY, THERE IS A PRESUMPTION THAT ASSESSEE HAS INCURRED THE EXPENDIT URE IN DISCHARGING THE DUTIES BUT THE ASSESSEE COULD NOT SUPPORT WITH ANY VALID EXPLANATIONS FOR NOT FILING THE BILLS AND VOUCHERS. AS PER THE PROVISIO NS OF SECTION 10(14) OF THE ACT EXPENSES ARE ACTUALLY INCURRED FOR THE PURPOSE OF EMPLOYMENT AND ACTUAL SPENT FOR THE PERFORMANCE OF DUTY. THERE IS A LAPSE ON THE PART OF THE ASSESSEE FOR NOT OBTAINING VALID BILLS/VOUCHERS FOR EXPENSES WHICH ARE TO BE ITA NO.2757/MDS/2016 10 SUBMITTED TO EMPLOYER OR BEFORE ASSESSING OFFICER I N ASSESSMENT. WE APPLY THE BENEFIT OF DOUBT ON THE CLAIM OF EXPENDITURE IN FAVOUR OF THE ASSESSEE BY RESTRICTING THE DISALLOWANCE BY 50% OF TOTAL ALLOWA NCE RECEIVED BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RESTR ICT THE DISALLOWANCE TO 50% OF 6,07,876/- AND PASS THE ORDER AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8.IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.425/MDS/2016 IS PARTLY ALLOWED. 5. IN VIEW OF THIS, WE DIRECT THE AO TO DISALLOW O NLY 50% OF THE ABOVE DISALLOWANCE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 19 TH JUNE, 2017 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /A CCOUNTANT MEMBER CHENNAI, DATED THE 19 TH JUNE, 2017 . K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF