1972 (9) TMI 33 - HC - Income Tax

Assessee who is an Income-tax Officer was posted at Ernakulam. In the return of income filed by him he claimed a deduction of Rs. 300 by way of expenses under section 16(v) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). This was the amount of room rent paid by him in Ernakulam for his stay. According to him this expenditure was met wholly and exclusively in the performance of his duties - Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that a sum of Rs. 300 being the room rent paid at Ernakulam is not an allowable deduction under section 16(v) of the Income-tax Act, 1961 ?

Issues Involved:
1. Whether the room rent paid by the assessee is an allowable deduction under section 16(v) of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Allowability of Room Rent Deduction under Section 16(v) of the Income-tax Act, 1961:

The primary issue in this case is whether the sum of Rs. 300 paid as room rent by the assessee, an Income-tax Officer posted at Ernakulam, can be claimed as a deduction under section 16(v) of the Income-tax Act, 1961. The assessee argued that this expenditure was incurred wholly and exclusively in the performance of his duties due to the conditions of his service requiring him to stay at Ernakulam.

Relevant Facts:
The assessee claimed the deduction for the assessment year 1965-66, which was disallowed by the Income-tax Officer, confirmed by the Appellate Assistant Commissioner, and upheld by the Appellate Tribunal. The matter was then referred to the High Court for a decision.

Legal Provisions and Interpretation:
Section 16(v) of the Income-tax Act, 1961, allows a deduction from salary for any amount actually expended by the assessee which "by the conditions of his service, he is required to spend out of his remuneration wholly, necessarily and exclusively in the performance of his duties." The court noted that two conditions must be satisfied:
1. The expenditure must be required by the conditions of service.
2. It must be incurred wholly, necessarily, and exclusively in the performance of duties.

Assessee's Argument:
The assessee contended that although the service rules did not explicitly require him to expend room rent out of his remuneration, the obligation to stay at Ernakulam necessitated renting a room. Thus, the expenditure was directly related to the performance of his duties.

Court's Analysis:
The court emphasized that the term "in the performance of duties" is narrower than "for the purpose of the performance." It must be shown that the expenditure was incurred during the process of performing duties. The court illustrated this with examples of salaried employees who work at home and incur expenses, which cannot be claimed as deductions because these are not incurred in the performance of duties.

Reference to English Law:
The court referred to several English cases under similar provisions, such as Nolder v. Walters, Bolam v. Barlow, Lomax v. Newton, and Mckie v. Warner, which consistently held that expenses must be incurred in the actual discharge of duties to qualify for deduction. For instance, in Nolder v. Walters, it was held that expenses incurred to get to the place of employment are not deductible as they are not incurred in the performance of duties.

Conclusion:
The court concluded that the room rent paid by the assessee, even if required by the conditions of service, could not be considered as incurred "in the performance of his duties." Therefore, the deduction was not allowable under section 16(v) of the Income-tax Act, 1961.

Judgment:
The court answered the question in the affirmative, in favor of the revenue and against the assessee. The parties were directed to bear their own costs. A copy of the judgment was to be sent to the Income-tax Appellate Tribunal, Cochin Bench, under section 260(1) of the Income-tax Act, 1961.

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