2005 (10) TMI 418 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 2,13,016 in respect of additional conveyance allowance.
2. Exemption under section 10(14) of the Income Tax Act.
3. Verification and substantiation of expenses claimed by the assessee.
4. Applicability of Rule 2BB and relevant case laws.

Detailed Analysis:

1. Addition of Rs. 2,13,016 in respect of additional conveyance allowance:
The assessee, a Development Officer in LIC, received an additional conveyance allowance of Rs. 2,13,016. The Assessing Officer (AO) disallowed the exemption under section 10(14) of the Income Tax Act due to lack of documentary evidence such as logbooks, bills, and vouchers. The CIT(A) upheld this decision, questioning the authenticity of the notebook maintained by the assessee, which recorded taxi charges and other expenses. The CIT(A) pointed out inconsistencies and doubted the genuineness of the expenses claimed.

2. Exemption under section 10(14) of the Income Tax Act:
The assessee argued that the additional conveyance allowance was exempt under section 10(14) as it was spent wholly, necessarily, and exclusively in the performance of duties. The assessee provided petrol bills, repair bills, and a certificate from LIC stating that the amount was spent in the performance of duties. The CIT(A) dismissed this, emphasizing that the evidence did not conclusively prove the expenses were incurred for official duties.

3. Verification and substantiation of expenses claimed by the assessee:
The CIT(A) relied on a letter from the Senior Divisional Manager, LIC, which stated that the exempt amount was based on previous assessments. This letter was not presented to the assessee for verification, violating principles of natural justice. The Tribunal noted that the assessee complied with the LIC's internal circular requirements, including maintaining a vehicle expenditure register and producing petrol and repair bills. The Tribunal found the CIT(A)'s skepticism towards the notebook and other evidence unjustified.

4. Applicability of Rule 2BB and relevant case laws:
Section 10(14) read with Rule 2BB allows exemption for allowances granted to meet expenses incurred in the performance of duties. The Tribunal cited various case laws, including the Rajasthan High Court's decision in Life Insurance Corporation of India v. Union of India, which supported the assessee's claim. The Tribunal emphasized that the additional conveyance allowance was granted to meet actual expenses incurred in the performance of duties and that the assessee had provided sufficient evidence to substantiate this.

Conclusion:
The Tribunal concluded that the assessee was entitled to exemption under section 10(14) as the additional conveyance allowance was spent wholly, necessarily, and exclusively in the performance of duties. The Tribunal deleted the addition of Rs. 2,13,016 and allowed the appeal.

In the result, the appeal is allowed.