2015 (9) TMI 1116 - HC - Income Tax

Additional Conveyance allowance - whether is an eligible exemption under section 10(14) in view of circular no.701 dated 20.03.1995 and guideline framed by the CBDTF No.275/11/2001-IT(B) dated 1.02.2001 ? - Held that - There is no dispute that, as evident from the notification dated 9th June, 1989, any allowance granted to meet the expenditure incurred on conveyance in the performance of duties of office or employment of profit shall qualify for deduction under section 10(14)(i) of the Act only when there is reimbursement of the expenditure actually incurred. Further, as per letter of CBDT dated 1st February, 2001 it is evident that the conveyance allowance and additional conveyance allowance paid to the officers of the LIC are not exempted under section 10(14)(i) of the Act. Since in the instant case there is no evidence that the expenditure was reimbursed and as no notification has been issued for exempting additional conveyance allowance under section 10(14)(i), the Tribunal was not justified in dismissing the appeal filed by the Revenue. Though the CIT (A) in his order had observed that there are some judgements of the ITAT on this issue and though the Tribunal had held that the issue is covered by the orders passed by the Coordinate Benches of the Kolkata Tribunal and of various High Courts, however, but we are constrained to observe that there is no such reference in the orders passed by the CIT(A) and the Tribunal. - Decided against the assessee

Summary

Issues:
1. Interpretation of section 10(14) of the Income Tax Act, 1961 regarding additional conveyance allowance eligibility.

Analysis:
The case involved an appeal regarding the eligibility of an additional conveyance allowance received by an assessee working as a Development Officer in the Life Insurance Corporation of India (LIC) under section 10(14)(i) of the Income Tax Act, 1961. The Assessing Officer initially disallowed the deduction claimed by the assessee, stating that the relevant notification under section 10(14)(i) had not been issued by the Central Government. However, the CIT(A) allowed the appeal, emphasizing that the appellant was entitled to full exemption under section 10(14) based on certificates provided by the employer. The CIT(A) directed the Assessing Officer to treat certain amounts as exempt under section 10(14) and reduce the total income accordingly. The Tribunal upheld the CIT(A)'s decision, stating that the appellant was entitled to claim exemption under section 10(14) for conveyance allowances based on certificates provided by the employer, and dismissed the Revenue's appeal.

The appellant argued that since no notification had been issued by the Central Government exempting additional conveyance allowance for LIC employees, and as per notification No.GSR 606 (E) dated 9th June, 1989, reimbursement is required for actual expenditure incurred, the respondent was not entitled to the deduction. The appellant highlighted that the conveyance allowance and additional conveyance allowance paid to LIC officers were not exempt under section 10(14)(i) as per a CBDT letter dated 1st February, 2001. The appellant contended that without evidence of expenditure reimbursement and absence of a notification exempting additional conveyance allowance, the Tribunal erred in dismissing the Revenue's appeal.

The Court noted that the notification dated 9th June, 1989, specified that allowances for conveyance expenditure qualify for deduction under section 10(14)(i) only when actual expenditure is reimbursed. Additionally, the CBDT letter of 1st February, 2001 indicated that conveyance allowances for LIC officers were not exempt under section 10(14)(i). The Court disagreed with the Tribunal's decision and held in favor of the Revenue, stating that without reimbursement evidence and an exemption notification, the Tribunal was not justified in dismissing the appeal. The Court also observed discrepancies in references made by the CIT(A) and the Tribunal regarding supporting judgments, ultimately ruling against the assessee and in favor of the Revenue.

In conclusion, the Court answered both questions negatively, favoring the Revenue and ruling against the assessee. The appeal was allowed, overturning the decisions of the lower authorities and holding that the additional conveyance allowance was not eligible for exemption under section 10(14)(i) of the Income Tax Act, 1961.