2015 (2) TMI 720 - HC - Income Tax

Value of perquisite - Conveyance allowance/additional conveyance allowance to be included in salary or not - whether incurred wholly, necessarily and exclusively for official duties ? - whether fully exempt from tax ? - additional conveyance allowance are paid to the Development Officers for meeting actual expenditure - Held that - The conveyance allowance and additional conveyance allowance are paid to the Development Officers for meeting actual expenditure incurred by them in discharge of their field duties and thus necessarily and exclusively for meeting of such expenditure, the allowance is thus being exempt as per the norms set out by the LIC. It appears that the LIC has worked out conveyance and additional conveyance allowance to the Development Officers considering the expenditure incurred for procuring the business and it is fixed by a general formula having reference to the parameters of the business and, thus, the payment of conveyance and additional conveyance allowance is nothing but a reimbursement of the actual expenditure incurred by the Development Officers on account of conveyance in relation to the performance of their duties and the said expenditure has a close nexus to the performance of the duties and development of the insurance business, inter alia, by way of meeting several persons, to enroll new life insurance agents, to meet the customers for encouraging them to take insurance policies, etc. Therefore, in such circumstances, expenditures have to be incurred towards conveyance. - Decided in favour of the assessee

Summary

Issues:
1. Interpretation of section 10(14) of the Income-tax Act regarding conveyance allowance exemption.
2. Application of the judgment in Shiv Raj Bhatia case on conveyance allowance.
3. Assessment of expenses incurred by a Development Officer for the performance of duties.

Issue 1: Interpretation of section 10(14) of the Income-tax Act regarding conveyance allowance exemption

The case involved a dispute over the exemption of conveyance allowance under section 10(14) of the Income-tax Act. The respondent, a Development Officer of LIC, claimed that the conveyance allowance received was entirely exempt under section 10(14) as it was incurred in the development of LIC's business. The Assessing Officer added the amount as income, citing the Shiv Raj Bhatia case judgment. However, the Commissioner of Income-tax (Appeals) allowed the claim, considering the reversal of the Shiv Raj Bhatia judgment by the Division Bench and the certificate from LIC stating the expenses were incurred for official duties. The Tribunal upheld the Commissioner's decision, leading to the appeal.

Issue 2: Application of the judgment in Shiv Raj Bhatia case on conveyance allowance

The primary contention revolved around whether the Tribunal was justified in upholding the exemption granted by the Commissioner of Income-tax (Appeals) under section 10(14) based on the Shiv Raj Bhatia judgment. The appellant argued that the respondent failed to provide evidence to prove the expenses were exclusively for duty purposes. In contrast, the respondent's counsel highlighted the reversal of the Shiv Raj Bhatia judgment and the dismissal of the appeal by the apex court, supporting the decision in favor of the respondent.

Issue 3: Assessment of expenses incurred by a Development Officer for the performance of duties

The court delved into the duties of Development Officers at LIC, emphasizing their role in developing and increasing life insurance business. The conveyance allowance and additional conveyance allowance were deemed as reimbursements for actual expenditures incurred during field duties, exclusively related to meeting business objectives. The court noted that the allowances had a direct nexus to duty performance, such as enrolling agents and interacting with customers. Citing previous judgments, the court concluded that the expenses incurred by Development Officers for conveyance were exempt under section 10(14), in alignment with the Shiv Raj Bhatia case and subsequent rulings.

This detailed analysis of the judgment highlights the key legal issues addressed by the Rajasthan High Court concerning the interpretation of tax laws and exemptions related to conveyance allowances for Development Officers.