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TMI Blog1992 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of taxability of dearness allowance and house rent allowance. The main contention of the petitioners which are associations of employees and employees working in Simla and its suburbs, as asserted in the writ petitions, is that these allowances are neither " salary " nor " perquisites " as defined in section 17(1) and (2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and, consequently, cannot be included in the total income under the head " Salary " for the purpose of income-tax assessment. Further, they do not have "the character of income within the meaning and scheme of the Income-tax Act " and are, " therefore, not includible in total income ". Consequently, it is prayed that their employers be restrained from deducting tax at source by including these allowances. At the time when these writ petitions were filed, the petitioners were relying mainly on the decision of the Calcutta High Court in CIT v. R. R. Bajoria [1988] 169 ITR 162, of the Gujarat High Court in CIT v. S. G. Pgnatale [1980] 124 ITR 391, of the Madhya Pradesh High Court in Bishambar Dayal v. CIT [1976] 103 ITR 813 and of the Bombay High Court in CIT v. D. R. Phatak [1975] 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basic salary. Any type of remuneration of an employee by an employer is taxable under the said category. These payments in the form of allowances and special allowances accrue and are received by salaried persons by virtue of their office and employment. The term " income " is very wide in its import and all allowances received by salaried persons are taxable under the Act unless expressly exempted. In C.W.P. No. 104 of 1988 (M. L. Jain v. Central Bank of India), this court had also dealt with a similar matter, Chief justice P. C. Balakrishna Menon disposed of the said writ petition on August 13, 1990, with the following order : " The only point raised in this writ petition is about the legality of including the city compensatory allowance in the total income of the assessee for the purpose of assessment to income-tax. The question raised does not now survive in view of the amendment to section 2(24) of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Act, 1989, with retrospective effect from April 1, 1962. As per this amendment, the expression 'salary' includes also special allowances paid to a salaried person in addition to the basic salary. In the light of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat any allowance granted to the assessee to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides shall not be regarded, for the purposes of this clause, as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties." Again section 10(14) was amended by the Direct Tax Laws (Amend ment) Act, 1987, with effect from April 1, 1989, and the amended subclause reads as follows: "(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit as the Central Government may, by notification in the Official Gazette, specify, to the extent to which such expenses are actually incurred for that purpose; (ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or difficult (b) Baramour Tehsil of area allowance or Chamba District ; disturbed area allowance. (c) Lahaul and Spiti District ; (d) Kinnaur District (e) Dodra-Kawar area of Rohru Tehsil, Parganas of Pandrabis and Atharabis, Gram Panchayats of Munish, Derkalai and Kashapat of Rampur Tehsil of Simla District ; (f) Pargana of Pandrabis of Kulu District ; (g) Chhota Banhgal and Bara Banhgal area of Palampur sub-division of Kangra District ; (h) Gram Panchayat Deothi (Teklech area) and Parganas of Chhaibis, Naubis, Sarahan and Barabis of Rampur Tehsil of Simla District ; (i) Chhuhar Valley of Jogindernagar Tehsil of Mandi District ; (j) Mangal Panchayat area of Solan District ; (k) Cuter-Seraj and Malana Panchayat area of Kulu District. " --------------------------------------------------------------------------------------------------------------------------------------------------- It is pertinent to notice that Simla or its suburbs were not mentioned in the said "place". However, a subsequent notification was issued being Notification No. S.O. 259(E), dated March 27, 1990, which is as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tude allowance or uncongenial allowance, climate allowance or snow-bound area allowance or avalanche allowance. The maximum amount still remains Rs. 150 per month for all places located at a height of 1,000 metres or more above the sea level, other than places specified under items (1) and (11) where the allowance had been raised to Rs. 600 per month for places such as Kalpa, Spiti Lahul and Tisa, etc. Further, the petitioners who are in Simla town and its suburbs (Mashobra, Dhalli, Taradevi, Kasumpti, Jatog and Tulu) will be entitled to any special compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area allowance to a maximum of Rs. 650 per month. But it is clear that these allowances will be available only from the dates of the said notifications or the dates from which they come into effect. This is because it has been clearly stated in section 10(14)(i) that such allowances will not be includible in total income as may be notified by the Central Government in the Official Gazette to the extent specified and to the extent to which such expenses are actually incurred for the purpose ; and in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely incurred in the performance of the duties of an office or employment of profit ; and fourthly, the exemption is only to the extent to which such expenses are actually incurred. Consequently, it would appear to us that, for the earlier years, that is, prior to the amendment with effect from April 1, 1989 (whereafter a notification by the Central Government has become necessary), any special allowance which comes within the ambit of clause (14) of section 10 read with its Explanation may be deductible from total income even if it has the character of income. Clearly, the city compensatory allowance and capital allowance do not come within this ambit, since it is not shown that the conditions precedent aforementioned are fulfilled. These writ petitions are disposed of accordingly. However, we make no order as to costs. CWP No. 435 of 1990. -In Writ Petition No. 435 of 1990, which was ordered to be heard along with these writ petitions, a different prayer has been made. In the said writ petition, the petitioners have prayed that the notification dated March 27, 1990, applying to Shimla and its suburbs should be given effect to from February 21, 1989, when the earlier notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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