2003 (4) TMI 11 - HC - Income Tax

TDS - Petitions are filed by the associations representing the LIC Development Officers challenging the periodical circulars issued by the Executive Director (Marketing) of the LIC of India providing guidelines for deduction of income-tax at source on additional conveyance allowance paid to them - petitioners contention is that additional conveyance allowance paid to them qualifies for exemption under section 10(14) - Held that it is for the Income-tax Department to scrutinise the correctness of TDS made either while considering the LIC s TDS returns or while assessing the income of the LIC development officers. - Exemption on additional conveyance allowance has to be considered with reference to the proved facts of each assessee (LIC development officer) and therefore the issue cannot be decided by this court

Summary

Issues:
Challenging circulars on deduction of income-tax on additional conveyance allowance under section 10(14) of the Income-tax Act, 1961.

Analysis:
The petitioners, associations representing LIC Development Officers, challenged circulars by the Executive Director of LIC of India on income-tax deduction for "additional conveyance allowance." They argued that such allowance qualifies for exemption under section 10(14) of the Income-tax Act, contending the circulars were unauthorized. LIC maintained they must deduct income-tax as employers under section 192. The Income-tax Department supported deduction, citing section 10(14) and rule 2BB. The court reviewed the circulars and found them inconsistent with the Income-tax Act, emphasizing the specific conditions for exemptions under section 10(14) and rule 2BB.

The court clarified that the exemption under section 10(14) extends beyond conveyance allowance to special allowances for expenses incurred in office duties, subject to prescribed limits. Exemption for additional conveyance allowance is allowed for actual conveyance expenses reimbursed by the employer. Referring to previous judgments, the court highlighted the necessity for expenses to be wholly and necessarily incurred for duty performance to claim exemption. The circulars by the Executive Director, though based on consultations, lack statutory force and cannot bind the Income-tax Department or LIC officers.

Regarding income-tax deduction, the court noted the Assessing Officer's power under section 197 to grant certificates for tax exemption based on individual applications. It suggested LIC officers apply for such certificates or claim exemptions in assessments, with recourse to appeal if needed. The court stressed the need for individual assessment based on facts, indicating that the issue of additional conveyance allowance exemption should be determined at the individual assessee level.

In conclusion, the court disposed of the petitions, advising either approaching the Central Board of Direct Taxes for appropriate circulars or individual applications to Assessing Officers for tax exemption certificates. The court refrained from evaluating the circulars' correctness, emphasizing the need for proper tax deductions and assessments based on individual circumstances rather than representative petitions.