1992 (10) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Whether the conveyance allowance paid by the assessee to its employees constitutes part of the salary.
2. Whether the payment received by the children of the staff members under the revised education benefit scheme constitutes part of the salary.

Summary:

Issue 1: Conveyance Allowance as Part of Salary

The assessee contended that the conveyance allowance paid to employees was to meet the expenditure incurred for commuting between their residence and office, and not as a part of salary. The assessee cited various Circulars (e.g., Circular No. 97, dt. 14th Dec., 1972, Circular No. 10, dt. 26th March, 1969) and statutory provisions (e.g., s. 10(14), s. 16(iv)) to support their claim that such allowances are not taxable as salary. The Tribunal agreed, noting that the conveyance allowance paid was not excessive or unreasonable and was meant to reimburse commuting expenses. Therefore, the assessee was under no obligation to deduct tax at source on conveyance allowance.

Issue 2: Education Benefit Scheme as Part of Salary

The assessee argued that payments under the revised education benefit scheme were scholarships for the children of employees, not salary. They cited the Bombay High Court decision in CIT vs. M.N. Nadkarni (1986) 161 ITR 544 (Bom), which held that such scholarships do not constitute perquisites under s. 17(2)(iii) of the IT Act. The Tribunal concurred, stating that these payments were not a vested right of the employees and could be rejected by the company. Even if considered as payments to employees, they would be exempt under s. 10(16) of the IT Act.

Conclusion:

The Tribunal found in favor of the assessee on both issues, ruling that the conveyance allowance and the education benefit scheme payments were not part of the salary. Consequently, the appeals were allowed, and the alternate plea raised by the assessee was not adjudicated.