1984 (1) TMI 108 - AT - Income Tax

Summary

Issues:
1. Whether the additional conveyance allowance granted to the assessee is exempt from taxation under section 10(14) of the Income-tax Act, 1961.
2. Whether the additional conveyance allowance was wholly, necessarily, and exclusively incurred in the performance of the duties of the assessee as a development officer.
3. Whether the AAC was justified in deleting the addition made by the ITO regarding the additional conveyance allowance.

Detailed Analysis:
1. The appeal involved a dispute over the department's objection to the deletion of the amount of Rs. 8,546 added by the ITO to the total income of the assessee for the assessment year 1978-79. The assessee, a salaried employee, claimed exemption for both fixed monthly conveyance allowance and additional conveyance allowance. The AAC deleted the addition of Rs. 8,546, stating it was linked to extra touring by a development officer. The department argued that the additional conveyance allowance was an incentive for bringing in additional business and not exempt under section 10(14) of the Act. The assessee contended that the allowance was for expenses incurred in the performance of duties.

2. The dispute centered on whether the additional conveyance allowance met the criteria of section 10(14) for exemption. The employer's circular specified conveyance allowances based on performance appraisal, with additional conveyance allowance granted if the appraisal exceeded the minimum scale. The Tribunal found that the additional conveyance allowance was performance-based and not specifically granted to meet traveling expenses. It concluded that the allowance did not qualify for exemption under section 10(14) as it was an incentive for business generation, not solely for meeting expenses in the performance of duties.

3. The Tribunal held that the additional conveyance allowance granted to the assessee was not exempt under section 10(14) and was subject to taxation. It set aside the AAC's order and restored that of the ITO, thereby allowing the department's appeal and dismissing the assessee's cross-objection. The Tribunal emphasized that the allowance was not solely for traveling expenses and did not meet the criteria for exemption. The decision highlighted the performance-based nature of the additional conveyance allowance and its purpose as an incentive for development officers, rather than a reimbursement for incurred expenses.

This detailed analysis outlines the key issues raised in the judgment, the arguments presented by both parties, and the Tribunal's decision based on the interpretation of relevant provisions of the Income-tax Act, 1961.