1985 (4) TMI 110 - AT - Income Tax

Summary

Issues:
1. Exemption of leave travel assistance under section 10(5) of the Income-tax Act, 1961.
2. Validity of rectification orders under section 154.

Detailed Analysis:

1. Exemption of leave travel assistance under section 10(5):
The case involved appeals by the department and cross-objections by the assessee regarding the treatment of leave travel assistance for the assessment years 1979-80 and 1980-81. The dispute arose when the Income Tax Officer (ITO) rectified the original assessments, disallowing a portion of the leave travel assistance claimed by the assessee on the grounds that it constituted taxable perquisites. The Assessing Officer (AO) argued that only actual travel expenses should be exempt under section 10(5). However, the Appellate Authority Commissioner (AAC) held that any amount received in connection with proceeding on leave should be allowed as a deduction under section 10(5) without the need to verify if the entire amount was utilized for the trip. The Tribunal examined the provisions of section 10(5)(ii) and compared it with section 10(14) to determine the scope of exemption. It was established that the exemption under section 10(5) is not limited to actual expenses incurred and extends to the entire amount received as leave travel assistance for proceeding to any place in India. The Tribunal relied on a previous decision to support this interpretation. Consequently, the rectification orders disallowing a portion of the leave travel assistance were deemed unsustainable, and the department's appeals were dismissed.

2. Validity of rectification orders under section 154:
The cross-objections by the assessee challenged the AAC's failure to address the validity of the rectification orders under section 154. It was argued that the powers under section 154 can only be exercised for obvious and patent mistakes, not debatable issues. Both the AAC and the Tribunal had taken a different view from the ITO, indicating a debatable issue where multiple opinions were possible. Therefore, the Tribunal concluded that the rectification orders were not legally sustainable. As a result, the department's appeals were dismissed, and the cross-objections by the assessee were allowed.