Amendment of Rule 11 N a welcome step to increase daily allowance - however substantial increase was desirable.

[C.A. DEV KUMAR KOTHARI]

Relevant links:

Section 35AC of the income-tax Act, 1961.

Rule 11N

Notification  no. 65/ 2009 dt. 02.09.2009 for amendment.

Rule 11N of the income-tax Rules, 1962 is relating to allowable expenses and daily allowance of Members of National Committee for Promotion of Social and Economic Welfare constituted for the purposes of S. 35AC.

National committee

National Committee for Promotion of Social and Economic Welfare is a committee as defined in S.35AC of the income Tax Act. Rules 11F, 11-O are in respect of the committee. In the Rules vide Rule 11F such committee is referred to as "national Committee".

Remuneration and allowances etc. of chairman and members:

The provisions relating to remuneration, daily allowances and expenses that can be claimed by and reimbursed to he chairman and members of the national Committee are prescribed in Rule 11N.

Amendment of Rule 11N

 Vide Income-tax (Twelfth Amendment) Rules, 2009 Notification No. 65/2009 Dated 2-9-2009  this Rule has been amended. The notification relating to this amendment reads as follows:

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely :-

1. (1) These rules may be called the Income-tax (Twelfth Amendment) Rules, 2009.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In sub-rule (2) of rule 11N of the Income-tax Rules, 1962,-

(i) in clause (i), the figure "250" shall be substituted with the figures "3000",

(ii) in clause (ii), the work, "taxi" (in notification (text is mentioned )shall be submitted with the works, "air conditioned taxi",

(iii) clause (iii) shall be deleted,

(iv) clause (iv) shall be substituted with the following, namely :-

"The out-station Chairman or Member may stay and claim reimbursement of rent in any State guest house or for single room in medium range ITDC hotel like Lodi Hotel, Qutab Hotel, Janpath Hotel, Ashoka Yatri Niwas or State Government run tourist hotels/hostels or residential accommodation provided by registered societies like India international Centre or India Habitat Centre. They would separately be entitled for reimbursement of food allowance at the rate of Rs. 500/- per day".

Anomalies in amendment:

In the notification it is stated that clause (iii) shall be deleted and  clause  (iv) and (v) shall be substituted. However, it is not stated that how the  new  substituted clause l and existing other clauses shall  be  numbered.

Suggested  drafting:

The new substituted clause could  replace the existing  clause (iii) which  is deleted by this  amendment.  Then the existing clauses (iv) and (v) could be deleted and existing clauses (vi) and (vii) could be renumbered as clauses (iv) and (v).

Caution required in drafting:

This  notification and some other recent notifications clearly suggest that any notification should be drafted with  utmost care so as to avoid confusions and further requirement of amendments. Due to careless drafting, again and again amendments have to be made.

The effect of amendment:

The effect of the amendment is that sitting fees has been increased from Rs.250 per day to Rs.3000 per day. Though the increase is twelve fold, however, it can be said that still the amount of Rs.3000 per day is not a commensurate sum for a person of the stature who hold office of chairman or member of a national Committee or sub-committee.

Allowing re-imbursement of air conditioned taxi fair is a welcome step.

Deletion of clause (iii) and providing for uniform daily allowance is a welcome step.

Increasing food allowance to Rs.500 per day in place of Rs. 72,57 or 53 when out station chairman or member opt to stay in specified guest houses, is a welcome step. However, limit of Rs.500 is still low and need upward revision.

  Amended Rule 11N will read as follows ( the old relevant words are shown with *):

Other provisions.

11N.    (1) The members of the National Committee shall not be entitled to any remuneration.

   [(2) The members and Chairman of the National Committee shall be entitled to—

           (i)  Sitting fee of Rs.3000* per day for attending a meeting of the National Committee or any Subordinate Committee set up by the Chairman of the National Committee. However, sitting fee would not be payable where applications are considered by circulation or when a member is on tour.                                    * (earlier Rs. 250 ) 

          (ii)  Reimbursement of actual expenditure incurred by way of travel by rail, road or air, for attending any meeting of the National Committee or its Subordinate Committee. The entitlement of air travel would be  restricted to the amount charged by Indian Airlines for its economy class for the members and to the amount charged for the executive class of the Indian Airlines for the Chairman. Members including Chairman may travel by any class on train. Members and Chairman would also be entitled to the reimbursement of air conditioned tax (earlier taxi) fare for reaching the venue of the meeting from their place of stay and for going back to the place of stay after the meeting.

         (iii)  Omitted.  Prior to omission  the clause provided for allowances for different cities. The total sums which could be paid by way of daily allowances for out station members , were very nominal in the range of Rs. 283 -371 per day in all. The clause is not reproduced for sake of brevity.

         (vi)  Sitting fee would not be admissible in case the National Committee takes decisions by circulation of the application alone. Actual postal charges and other expenses incurred by Members and Chairman for circulating the application would be reimbursed.

        (vii)  Reimbursement of any other expenditure with the approval of Secretary (Revenue) and the Financial Advisor, Department of Revenue, Ministry of Finance.]

(3) In granting approval to any project or scheme undertaken by a company, the National Committee shall satisfy itself that, where any expenditure is to be incurred in the acquisition or erection of a capital asset, the applicant-company has made adequate arrangements for divesting itself of the ownership of such asset without consideration in cash or otherwise immediately on completion of the eligible project, in the following manner :—

           (i)  in the case of drinking water projects, to individuals belonging to the economically weaker sections or to the local authority or the village panchayat, as the case may be;

          (ii)  in the case of dwelling units, to individuals belonging to the economically weaker sections, or to the local authority, village panchayat or an authority constituted under any law for the purpose of satisfying the need for housing accommodation or for the purpose of development or improvement of cities, towns and villages, as the National Committee may decide;

         (iii)  in the case of school buildings, to an educational institution existing solely for educational purposes and not for profit or to the State Government, local authority or a village panchayat;

         (iv)  in the case of non-conventional or renewable energy systems, to the district administration, local authority, village panchayat or to indivi-duals belonging to the economically weaker sections, or such other statutory body as the National Committee may decide;

          (v)  in the case of bridges, public highways or other roads to the Central or the State Government, local authority or such other statutory body as the National Committee may decide;

         (vi)  in the case of equipment purchased for the purpose of eligible project or scheme, to the State Government, local authority or such other statutory body as the National Committee may decide having regard to the capacity of the authority concerned to gainfully utilise such equipments;

                Note : Where before the completion of any eligible project/scheme, the company undertakes other eligible project(s)/scheme(s) and transfers the equipments to such subsequent project/scheme, the company will be required to divest itself of the ownership of the equipment only after the completion of the last eligible project/scheme.

        (vii)  in any other case, to such authority as the National Committee may decide.

(4) Immediately on completion of an eligible project/scheme, the company shall furnish details of the execution thereof to the National Committee. The National Committee shall satisfy itself that the project/scheme has been completed in accordance with the approval granted and that the company has divested itself of the assets in the manner prescribed by the National Committee. If the National Committee is not so satisfied, it may, after giving an opportunity of being heard on the proposed action, order withdrawal of the approval which shall then be deemed never to have been granted.]