1980 (12) TMI 105 - AT - Income Tax

Summary

Issues:
1. Interpretation of conveyance expenses as conveyance allowance under section 16(1) of the Income Tax Act.
2. Application of standard deduction under section 16(1) based on the nature of reimbursement of expenses incurred in the performance of duties.
3. Comparison between conveyance allowance and reimbursement of actual expenses for tax benefit eligibility.

Detailed Analysis:
1. The main issue in this case was the interpretation of conveyance expenses as conveyance allowance under section 16(1) of the Income Tax Act. The Revenue contended that the assessee's receipt of conveyance expenses at the rate of Rs. 1.50 per km for official duties should be considered as conveyance allowance. However, the Appellate Tribunal disagreed with this contention and upheld the decision of the AAC that the reimbursement of expenses was not conveyance allowance but rather reimbursement of actual expenses incurred by the assessee for the performance of his duties.

2. Another crucial issue was the application of standard deduction under section 16(1) based on the nature of reimbursement of expenses incurred in the performance of duties. The ITO initially allowed a standard deduction of Rs. 3,500 to the assessee but later reopened the assessment to restrict the deduction to Rs. 1,000, arguing that the reimbursement of Rs. 1.50 per km was in the nature of conveyance allowance. The AAC, however, concluded that the reimbursement was for actual expenses incurred and not a conveyance allowance, thereby directing the full relief under section 16(1) to be granted to the assessee.

3. The Tribunal also delved into the comparison between conveyance allowance and reimbursement of actual expenses for tax benefit eligibility. Referring to a government circular and a notification, the Tribunal emphasized that conveyance allowance is a lump sum payment at regular intervals, distinct from reimbursement of actual expenses incurred in the performance of duties. The Tribunal's decision was further supported by a previous judgment of the Madras Bench of Tribunal, reinforcing that if the reimbursement is for actual expenses, the standard deduction should not be restricted to Rs. 1,000, and the employee is entitled to the full deduction under section 16(1).

In conclusion, the Tribunal dismissed the Revenue's appeals, affirming that the assessee was not in receipt of conveyance allowance but rather reimbursement of actual expenses for the performance of official duties, entitling the assessee to the full deduction under section 16(1) of the Income Tax Act.