2004 (5) TMI 36 - HC - Income Tax

Legality of rule 2B(1)(a) challenge to the provisions of rule 2B(1)(a) of the Income-tax Rules making the difference between the air travel charges and the railway first class AC charges exigible to tax under the Income-tax Act, 1961 - According to the petitioner, this rule is ultra vires the provisions of section 10(5) - By virtue of the provisions of section 10(5) of the Act, rule 2B of the Income-tax Rules is issued prescribing the conditions for the purpose of section 10(5) - Section 10(5) which is referred to above clearly provides for prescribing the conditions regarding the amount which shall be exempt from tax having regard to the travel concession or assistance granted to the employees of the Central Government. It is by virtue of this provision rule 2B has been issued. The petitioner is not able to point out any illegality in regard to the condition imposed in rule 2B(1)(a) as it stood prior to October 1, 1997. petition is dismissed as having no merit

Summary

Issues:
Challenge to the provisions of rule 2B(1)(a) of the Income-tax Rules regarding tax on the difference between air travel charges and railway first class AC charges under section 10(5) of the Income-tax Act, 1961.

Analysis:

The petitioner, an officer of the State Bank of India, challenged rule 2B(1)(a) of the Income-tax Rules, which subjected the variance between air travel charges and railway first class AC charges to tax under the Income-tax Act, 1961. The petitioner contended that this rule contravened section 10(5) of the Act. The petitioner, entitled to LTC facilities with air travel, argued that the tax assessment on the difference was unjust. The court noted that the Act mandates exemption conditions for travel concessions or assistance received by an individual from their employer. The court highlighted that unless there is a specific exemption, the petitioner cannot claim tax relief on the amount received for the leave travel facility.

The court emphasized that section 10(5) of the Act provides for conditions regarding the exempt amount for travel concessions, including those granted to Central Government employees. Rule 2B of the Income-tax Rules was issued to specify conditions for section 10(5) compliance. The court clarified that the legality of rule 2B(1)(a) before October 1, 1997, was not challenged by the petitioner. The court concluded that the petitioner failed to demonstrate any illegality in the conditions imposed by rule 2B(1)(a) before the specified date.

In light of the above analysis, the court found no merit in the writ petition and consequently dismissed it. The judgment underscores the importance of adhering to the prescribed conditions under section 10(5) of the Income-tax Act, emphasizing the need for specific exemptions to claim tax benefits related to travel concessions or assistance received from the employer.