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TMI Blog1989 (3) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hyderabad Bench in the case of K. Rami Reddy v. ITO [1984] 8 ITD 633. The matter was, therefore, referred to the President for constituting a Special Bench and in pursuance thereof the appeals have come up for hearing before this Bench. 3. It was urged on behalf of the assessee that the emoluments received by a Development Officer cannot be classified as salary income under the Income-tax Act, because the relationship of Development Officers qua the LIC is not fully that of employer-employee because though they may not shed their relationship as LIC employees, they also render professional service to the LIC for which they are separately rewarded. This argument is not available to the assessee in Andhra Pradesh in view of the decision of the Andhra Pradesh High Court in K.A. Chowdary v. CIT [W.P. No. 7216 of 1983 decided on 10-12-1987]. This decision was rendered by the Andhra Pradesh High Court following its earlier decision on the same point in the case of M. Krishna Murthy v. CIT [1985] 152 ITR 163. Since all emoluments received by a Development Officer from the LIC have to be considered for assessment purposes under the head "Salary", additional conveyance allowance recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive check on exaggerated claims. Since the LIC has taken into consideration the possibility of expenditure being incurred by use of additional conveyance and laid a ceiling by linking it to the premium collected, it is submitted it has to be presumed that the entire amount had been spent only for the purpose of service rendered. In fact, that was also the view taken by several Benches of the Tribunal at Hyderabad, and the note struck by the Calcutta Bench in the case of L.N. Goswami, it was stated, was the only discordant one. 5. Yet another contention put forth on behalf of the revenue was that since a standard deduction is permitted under section 16(1) of the Act. that was supposed to cover conveyance expenditure and, therefore, no further allowance under the head "Conveyance" is permissible. On behalf of the assessee, this contention was sought to be counted by submitting that the standard deduction was allowed to cover various types of expenditure that a salaried employee might have to incur in the course of his duties and there was no warrant for reading into the provision any prohibition for considering as an exclusion from the total income, conveyance allowance received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g regard to the premium secured etc. In such cases, a pie-to-pie reconciliation is not possible and the requirement of the Act that the exemption should be to I he extent to which expenses are actually incurred has to be construed on a practicable and reasonable basis. A statutory corporation having permitted additional conveyance allowance based on its past experience and probabilities, the inference will follow that the expenses were necessary and would have been actually incurred. The Calcutta Bench of the Tribunal took the view that the conveyance allowance paid to Development Officers having touring duties was at a lower rate in some cases, and the emphasis was on the performance of the Development Officer and there was no connection or nexus with the travels undertaken by the Development Officer. A Development Officer having touring duties will be entitled to specific travelling expenses for the tours performed outside his Head Quarters, by using the conveyance. Therefore, in our view, the inference does not follow that the additional conveyance allowance paid has no nexus with the travels undertaken by the Development Officer. We are inclined to take the view that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no gainsaying of the fact that there was some expenditure incurred, a deduction has to be allowed which necessarily has to be on estimate basis. In Hyderabad, the percentage of deduction allowed in such cases has generally been 40% which was based upon an earlier Circular of the Board dealing with allowance of deduction to LIC agents. It was supposed that the expenditure to be incurred out of incentive bonus would be the same as the expenditure allowed to an agent to earn the commission. One such case was that of Sri J. Muralidhar Rao [Income-tax Appeal No. 218/Hyd/1983 dated 30-9-1983]. There the Tribunal observed as under: "The first appellate authority after considering the relevant facts and circumstances and considering a similar decision of this Tribunal in another case, fixed an amount of 40% of such bonus as probable expenditure incurred in gifts, travelling expenses to meet the agents, their training, conferences, expenditure relating to prospective policy holders on contract, servicing the policy-holders or their survivors etc." An application for reference was filed against the decision of the Tribunal allowing deduction to the extent of 40% was rejected by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of overlapping though might exist does not affect our decision regarding the allowances of expenditure to the extent of 40% out of incentive bonus apart from treating additional conveyance allowance as excludible from the total income as having been spent wholly, exclusively and necessarily in the performance of duties. 11. Hence, in the present case, deductions are permissible of 40% of the incentive bonus which came to Rs. 1,092 for the assessment year 1981-82 and Rs. 932 for the assessment year 1982-83. 12. In view of our aforesaid finding, the orders of the Commissioner of Income-tax under section 263 would stand set aside and the assessments as made by the ITO would stand restored. The result is the appeals are allowed. Per Shri T.V. Rajagopala Rao, Judicial Member: 13. Wherever there is overlapping found and the expenditure covered by additional conveyance allowance finds its way into the deduction granted from the incentive bonus, the fact finding authorities on consideration of facts and circumstances of each case may grant any lower percentage subject to a maximum of 40% as deduction from the incentive bonus. With this rider I am in entire agreement with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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