THE COMMISSIONER OF INCOME TAX V. SRI MOHD. SHABIR ALI

RC/1/2004

AI Insights

The case revolves around the interpretation of Section 10(14) of the Income Tax Act, 1961, concerning the exemption of additional conveyance allowance received by an employee from his employer. The respondent, a Development Officer at the Life Insurance Corporation of India, claimed the entire conveyance allowance as exempt, which was initially disallowed by the Assessing Officer but later allowed by the Commissioner of Income Tax (Appeals). The Tribunal upheld that the exemption is applicable only to the extent the expenditure was actually incurred. The Revenue challenged this decision, leading to the referral of the question to the High Court. The court, referencing a similar case, ruled in favor of the assessee, affirming the exemption of the allowance to the extent it was used for the intended purpose.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 737320 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 20-12-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Visakhapatnam v P.V.Narasimaha Rao, Visakhapatnam
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Keywords: Conveyance Allowance; Exemption; Income Tax; Section 10(14)
• Section: 10(14); 256(1)

Judgement Text

"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE R. KANTHA RAO REFERRED CASE No.1 of 2004 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax, Hyderabad, got the following question referred to the opinion of this Court under Section 256(1) of the Income Tax Act, 1961 (the Act). Whether on the facts and in the circumstances of the case, the ITAT was correct in law in holding that the additional conveyance allowance received by the assessee from his employer is entitled to exemption under Section 10(14) of the IT Act to the extent, the expenditure was actually incurred by him on conveyance? The brief fact of the matter is as follows. The respondent/assessee was a Development Officer in the Life Insurance Corporation of India. For the relevant assessment year, he received additional conveyance allowance. He claimed the entire conveyance allowance as exempt under Section 10(14) of the Act. The Assessing Officer disallowed the same. But, the Commissioner of Income Tax (Appeals) allowed the claim. In the Revenue’s appeal, the Tribunal held that exemption under Section 10(14)(i) of the Act is available to the assessee in respect of additional conveyance allowance, only to the extent expenditure conveyance allowance has actually been incurred by the assessee. Aggrieved by the same, the Revenue sought reference of the question to this Court. During the course of arguments, the Junior Standing Counsel brought to our notice an unreported decision of this Court i n Commissioner of Income Tax, Visakhapatnam v P.V.Narasimaha Rao, Visakhapatnam (Referred Case No.117 of 1992, dated 10.10.1996). Considering the similar question, this Court held as under. … 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 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 performance of the duty, grants monthly 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 it is not incurred for which it 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 for 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 insisted upon to claim exemption under Section 10(14) of the Act 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. In this view of the matter, we hold that the additional conveyance allowance is exempt under Section 10(14) of the Act. … The answer to the question referred to is therefore covered by the judgment in P.V.Narasimha Rao. Accordingly, the reference is answered in the affirmative in favour of the assessee and against the Revenue. The Referred Case is accordingly disposed of. _______________ (V.V.S.RAO, J) ____________________ (R.KANTHA RAO, J) 20.12.2011 vs "