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Interpretation of section 10(14) of the Income-tax Act, 1961 regarding exemption for living allowance received by the assessee. Analysis: The case involved a question of law referred by the Income-tax Appellate Tribunal, Patna Bench, regarding the exemption under section 10(14) of the Income-tax Act, 1961 for a living allowance received by the assessee. The assessee claimed exemption for an amount received as a living allowance from the Fertilizer Corporation of India Limited. The Income-tax Officer rejected the claim, but the Income-tax Appellate Tribunal upheld it, directing the deletion of the amount from the taxable income. The contract between the Fertilizer Corporation and a German firm specified a subsistence allowance of Rs. 120 per day for personnel delegated to India, which was given to the assessee in practice. The Revenue argued that the subsistence allowance was akin to dearness allowance and thus a perquisite under section 17(2) of the Act, not eligible for exemption. On the other hand, the assessee contended that it was a special allowance for working in India, covered under section 10(14). The court noted that the specific provision under section 10(14) required the allowance to be granted to meet expenses wholly, necessarily, and exclusively incurred in the performance of duties. The Supreme Court's interpretation in a previous case was referenced, emphasizing that the exemption only applied to the extent the expenses were actually incurred. The court found no evidence presented by the assessee to demonstrate that the living allowance was spent on expenses incurred in the performance of duties. As a crucial precondition for exemption was missing, the court held that the assessee could not claim exemption for the amount in question. Consequently, the Tribunal's decision to allow the exemption was deemed erroneous, and the reference was answered in favor of the Revenue and against the assessee. The judgment was agreed upon by both judges.
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