2013 (9) TMI 683 - HC - Income Tax

TDS on Perquisites - Payment of conveyance allowance to Development Officers of LIC of India are salaried persons - scope of section 10(14)(i) - exemption Held that - For getting the business, they were paid conveyance/additional conveyance allowances and also incentive bonus - Perquisite is excluded from the purview of Section 10(14). Perquisite is defined under Section 17(2) of the Act. Explanation 3 under Section 17(2) clearly provides that Salary includes the pay, allowance, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be - Conveyance/additional conveyance allowance is covered by the word perquisite and the same is taxable. - LIC is not competent to determine the allowances which are exempted from the tax. Letter dated 07.04.2004 has rightly been issued by the Senior Divisional Manager, LIC for deducting the Tax at source from the amount paid pertaining to the conveyance/additional conveyance allowances incurred in the performance of duty as Development Officers for generating the business being a permissible deduction as the same is exigible to tax. The members of the petitioner s association being salaried persons on furnishing their return of income return be assessed by the assessing authority and it is only after due assessment he entitled for refund of the amount, if any, deducted by the employers conveyance allowance Writ petition dismissed.

Summary

Issues:
Challenge to communication for TDS on conveyance/additional conveyance allowance.

Detailed Analysis:
The petitioners contested a communication by LIC to deduct Tax at Source (TDS) on conveyance/additional conveyance allowance for Field Officers. They argued that the allowance should be exempt as it is for business procurement and not covered by specific tax sections. The petitioners emphasized that Assessing Officers lack jurisdiction to review LIC decisions. They cited legal precedents supporting their position, including the case of Topman Exports Vs. CIT. The petitioners also referred to a Rajasthan High Court ruling upheld by the Supreme Court, directing non-deduction of TDS on similar allowances.

The department argued that the Development Officers are salaried individuals receiving conveyance allowances and incentive bonuses. They contended that the allowances are taxable perquisites under Section 17(2) of the Income Tax Act. The department cited Rule 2BB and Rule 3 of the Income Tax Rules to support their stance. They referenced legal judgments like Commissioner of Income Tax Vs. M.D. Patil and National Federation of Field Workers of India Vs. Union of India to assert the taxability of such allowances.

The court analyzed the provisions of the Income Tax Act and ruled that conveyance/additional conveyance allowances are taxable perquisites falling under the definition of 'salary'. The court emphasized that tax liability must be determined based on the Act's provisions and rejected the petitioners' arguments. The court highlighted the employer's responsibility to issue certificates for allowances used exclusively for official purposes. It concluded that the petition lacked merit and upheld the communication for TDS deduction on conveyance allowances, advising petitioners to claim refunds through proper channels after assessment.

In conclusion, the court dismissed the petition, affirming the legality of TDS deduction on conveyance/additional conveyance allowances for Development Officers, considering them taxable perquisites under the Income Tax Act. The judgment emphasized adherence to tax laws and procedures for claiming refunds post-assessment.