2018 (8) TMI 1190 - AT - Income Tax

Exemption towards receipt of various allowances u/s 10(14) read with Rule 2BB - member of Legislative Assembly (MLA) - whether assessee was an Ex-MLA or MLA during the relevant previous year. If the assessee was an Ex-MLA, he would not have received salary from the Legislative Assembly. He would have been at the best eligible for pension under the rules applicable for the Members of the Assembly. - Held that - Assessing Officer has in the assessment order itself mentioned receipt of salary of E6,00,000/- by the assessee from State Legislative Assembly. Hence, in my opinion, assessee was entitled to claim the benefits available to him u/s.10(14) of the Act. Allowances mentioned in Rule 2BB definitely covered transport allowance of E2,40,000/- received by the assessee. However, postal allowance is not covered by the said rule. Hence, in my opinion, assessee was eligible for claiming exemption on the transport allowance of E2,40,000/- received by him but not on the postal allowance of E30,000/-. - Decided partly in favor of assessee.

Summary

Issues: Disallowance of claim of exemption u/s.10(14) on postal and transport allowance

In this appeal, the assessee contested the disallowance of exemption under Section 10(14) of the Income Tax Act, 1961 on postal and transport allowance received during the relevant previous year. The assessee, a member of the Tamil Nadu Legislative Assembly, received a salary that included constituency allowance, postal allowance, and transport allowance. The authorized representative argued that the Assessing Officer incorrectly disallowed the exemption claimed on the postal and transport allowances, insisting that the assessee was entitled to exemption under Section 10(14) for both allowances. The contention was that the assessee, as an MLA, was eligible for such exemptions under Rule 2BB of the Income Tax Rules, 1962. However, the Departmental Representative argued that since the assessee was an Ex-MLA, Section 10(17) applied instead of Section 10(14).

The main issue was whether the assessee was an Ex-MLA or an MLA during the relevant year, determining the applicability of Section 10(14) or Section 10(17) of the Act. The Assessing Officer had acknowledged the receipt of salary by the assessee from the State Legislative Assembly, indicating that the assessee was entitled to claim benefits under Section 10(14). The Tribunal analyzed the provisions of Section 10(14) and Rule 2BB, which prescribe allowances for specific purposes, including transport allowance but not postal allowance. Consequently, the Tribunal held that the assessee was eligible for exemption on the transport allowance but not on the postal allowance. The direction was given to allow further exemption on the transport allowance while upholding the disallowance of the postal allowance, thereby partly allowing the assessee's appeal.

Overall, the Tribunal's decision clarified the eligibility of the assessee for exemption under Section 10(14) based on the nature of allowances received, distinguishing between transport and postal allowances. The judgment highlighted the importance of specific provisions and rules in determining the applicability of exemptions under the Income Tax Act, ultimately providing a favorable outcome for the assessee regarding the transport allowance.