1978 (7) TMI 143 - AT - Income Tax

Summary

Issues:
- Allowability of deduction under section 16(1) of the Income Tax Act for the assessment years 1974-75 and 1975-76.

Analysis:
The appeals before the Appellate Tribunal ITAT Hyderabad-A involved the deduction allowable to the assessee under section 16(1) of the Income Tax Act for the assessment years 1974-75 and 1975-76. The dispute centered around whether the assessee, a medical representative, was entitled to claim a deduction under section 16(1) for the daily allowances received from the employer, M/s. Parke Davis, Bombay. The Income Tax Officer (ITO) initially rejected the claim without reasons, but the Assistant Commissioner of Income Tax (AAC) later allowed the deduction, concluding that the assessee was not in receipt of conveyance allowance as per section 16(1) of the Act. The Revenue challenged the AAC's decision through appeals.

The departmental representative argued that the daily allowance paid by the employer was intended to cover conveyance, lunch, and other expenses, implying the assessee received conveyance allowance. The representative contended that the ITO was justified in restricting the deduction to Rs. 1,000 for the assessment year 1975-76. On the other hand, the assessee's counsel argued that there was no specific allocation for conveyance expenses within the daily allowance, and without verification of actual expenditure by the ITO, it was improper to assume the assessee received conveyance allowance.

After considering the submissions, the Tribunal focused on whether the assessee received conveyance allowance as per section 16(1) of the Act. The employer clarified that the daily allowance was for conveyance, lunch, and incidental expenses, but there was no specific allocation for conveyance within the allowance. The Tribunal held that the allowance was a working allowance, not specifically for conveyance expenses. It emphasized that the deduction limitation under section 16(1) applies to individuals receiving conveyance allowance, which was not the case here. The Tribunal concluded that the assessee was entitled to the deduction under section 16(1) as he did not receive conveyance allowance, upholding the AAC's decision.

In conclusion, the Tribunal dismissed the departmental appeals, affirming that the assessee was not in receipt of conveyance allowance and therefore entitled to the deduction under section 16(1) for the relevant assessment years.