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Issues: Taxation of Daily Allowance; Entitlement to full deduction; Entertaining additional ground; Applicability of retrospective amendment; Interpretation of s. 10(14) regarding special allowance.
The judgment by the Appellate Tribunal ITAT Ahmedabad-A involved the taxation of a Daily Allowance received by a foreign technician. The technician was entitled to a daily allowance of Rs. 310 during his stay in India as per an agreement between the Indian company and his foreign employer. The total allowance received was Rs. 39,680 for the period from 24th Nov., 1978 to 31st March, 1979. The technician claimed a deduction under section 10(14) of the Act, which was rejected by the Income Tax Officer (ITO). The first issue addressed was whether the technician was entitled to enhance his claim for a full deduction as an additional ground in the appeal. The Appellate Assistant Commissioner (AAC) entertained the additional ground and granted the full deduction as claimed by the technician. The Revenue Department was aggrieved by this decision and argued that the additional ground should not have been entertained, citing a Supreme Court decision. However, the Tribunal held that all necessary facts were available on record, allowing the AAC to consider the additional ground. The next issue was the actual deduction to be allowed on merits. The Departmental Representative (D.R.) relied on an Explanation to section 9(1)(ii) of the Act, stating that income payable for services rendered in India shall be regarded as income earned in India. The D.R. argued that the allowance received was income and liable to tax. The technician argued that the retrospective amendment was not applicable to his accounting year ending on 31st March, 1979, citing relevant court decisions. Regarding the applicability of section 10(14) of the Act, the technician argued that the living allowance received was not a perquisite and therefore not salary. It was also contended that the technician was an employee of the foreign company, continued to be so while in India, and received salary in foreign currency. The terms of the agreement indicated that the amount was variable, further supporting the argument that it was not salary. The Tribunal agreed with these contentions, concluding that the maintenance allowance could not be added to the technician's income, and thus, rejected the appeal.
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