1963 (9) TMI 64 - HC - Income Tax

Assessee denied tax exemptions for travel expenses not meeting office duty criteria.

J.G. Mankad Versus Commissioner of Income-Tax, Gujarat

The court held that the assessee's claims for exemption under Section 4(3)(vi) and deduction under Section 7(2)(iii) of the Income-tax Act were not valid. ... - Issues Involved:1. Claim for exemption under Section 4(3)(vi) of the Income-tax Act.2. Claim for deduction under Section 7(2)(iii) of the Income-tax Act.Detailed Analysis:1. Claim for Exemption under Section 4(3)(vi):The assessee, a chartered accountant residing in Ahmedabad, was appointed as a part-time professor of accountancy at M.J. College of Commerce, Bhavnagar. He incurred travel expenses amounting to Rs. 1,434 for commuting between Ahmedabad and Bhavnagar during the assessment year 1958-59. The assessee claimed this amount as an exemption under Section 4(3)(vi) of the Income-tax Act, which exempts any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite, specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit.The court examined the conditions under Section 4(3)(vi) and concluded that no special allowance or benefit was specifically granted to the assessee to meet his travel expenses. The notification appointing the assessee mentioned a salary of Rs. 400 per month, inclusive of travelling and other allowances, but did not specify any amount for travelling allowance. The court interpreted this to mean that the salary was inclusive of all allowances and did not entitle the assessee to claim any separate travelling allowance. Therefore, the court held that the assessee could not rely on Section 4(3)(vi) for exemption.Additionally, the court noted that the travel expenses were not incurred wholly and necessarily in the performance of the duties of the office. The duties of the part-time professor commenced when he started giving lectures at the college and ended upon their completion. The travel expenses were incurred because the assessee chose to live and practice in Ahmedabad and had to travel to Bhavnagar to perform his duties. Thus, the expenses were incurred partly before and partly after performing his duties, and could not be considered as expenses incurred in the performance of his duties.The court supported its view by referring to the House of Lords' decision in Ricketts v. Colquhoun, which held that travel expenses incurred by a barrister for commuting between his residence and place of office could not be deducted as they were not incurred in the course of performing the duties of the office.2. Claim for Deduction under Section 7(2)(iii):The assessee alternatively claimed the travel expenses as a deduction under Section 7(2)(iii) of the Income-tax Act. This section allows for the deduction of any sum expended by the assessee, which he is required to incur by the conditions of his service, wholly, necessarily, and exclusively in the performance of his duties.The court observed that Section 7(2)(iii) is a counterpart of Section 4(3)(vi) for cases where the income is assessable under the head 'salary'. Both sections require that the expenses must be wholly and necessarily incurred in the performance of the duties of the office. Additionally, Section 7(2)(iii) requires that the expenses must be incurred exclusively and be obligatory by the conditions of service.The court found that the travel expenses did not satisfy either of these tests. Firstly, as previously discussed, the expenses were not incurred wholly and necessarily in the performance of the duties of the office. Secondly, the conditions of the assessee's service did not obligate him to incur these travel expenses. The expenses were incurred due to the assessee's choice to live and practice in Ahmedabad. If he had chosen to reside in Bhavnagar, he would not have incurred these expenses. Therefore, the expenses were not obligatory by the conditions of his service.Conclusion:The court answered the question in the negative, holding that the assessee's claims for exemption under Section 4(3)(vi) and deduction under Section 7(2)(iii) were not valid. The assessee was ordered to pay the costs of the reference to the Commissioner.