1981 (11) TMI 84 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of unspent foreign tour allowances under Section 10(14) of the Income-tax Act, 1961.
2. Determination of whether the unspent amount constitutes income.

Issue-wise Detailed Analysis:

1. Taxability of Unspent Foreign Tour Allowances under Section 10(14) of the Income-tax Act, 1961:

The Income Tax Officer (ITO) brought a sum of Rs. 24,244 to tax, which was the unspent portion of foreign tour allowances granted to the assessee, the Chairman-cum-Managing Director of the Electronics Trade and Technology Development Corporation. The ITO's rationale was that under Section 10(14) of the Income-tax Act, 1961, only the portion of the allowance that was actually spent was exempt from tax. The unspent amount, therefore, was considered taxable.

The Appellate Assistant Commissioner (AAC) deleted this sum from the assessment, holding that the allowance was given to meet personal expenses necessitated by special circumstances and was not in the nature of income. The AAC reasoned that if all the expenses incurred by the assessee, both abroad and in India, were considered, there would be no savings. Hence, the unspent allowance did not constitute income.

The revenue, aggrieved by the AAC's order, contended that the unspent amount should be taxable as it was not actually used for the intended purpose. They cited legal precedents to support their argument that any surplus remaining after meeting expenses should be considered taxable income.

2. Determination of Whether the Unspent Amount Constitutes Income:

The assessee's counsel argued that the entire sum of Rs. 69,291 received from the employer was not income ab initio and thus not taxable under any head. They referred to various judgments, including the principle that the nature of a receipt for income-tax purposes is fixed when it is received. They contended that the unspent amount did not change its character to income merely because it was not spent.

The Tribunal agreed with the assessee's counsel, holding that the character of the sum of Rs. 24,244, which was part of Rs. 69,291, was not in the nature of income when received. They referred to multiple judgments, including Morley v. Tattersall and CIT v. Motor & General Finance Ltd., which supported the view that unspent amounts retained their original character and did not become income merely because they were not spent.

The Tribunal also noted that the AAC had already held that the amount was not income and that the provisions of Section 10(14) were not attracted. Therefore, the Tribunal concluded that the sum of Rs. 24,244 did not represent income that could be brought to tax under any head.

Conclusion:

The Tribunal upheld the AAC's order, confirming that the unspent foreign tour allowances did not constitute income and were not taxable. The appeal by the revenue was dismissed.