1948 (3) TMI 38 - HC - Income Tax

Interpretation of Income-tax Act: Special allowances for specific purposes excluded from income

The court interpreted Section 4(3)(vi) of the Indian Income-tax Act, ruling that special allowances granted for specific purposes to meet expenses ... - Issues:1. Interpretation of Section 4(3)(vi) of the Indian Income-tax Act regarding the exclusion of special allowances granted to meet expenses incurred in the performance of duties.2. Whether the entire 5% commission received by the assessee from Ciba (India), Ltd., can be excluded from income without proving actual expenditure for the specified purpose.Detailed Analysis:1. The judgment revolves around the interpretation of Section 4(3)(vi) of the Indian Income-tax Act, which pertains to excluding special allowances granted to meet expenses wholly and necessarily incurred in the performance of duties. The court analyzed the language of the section and emphasized that the purpose for which the grant is made is crucial. It was held that once it is established that the grant was for a particular purpose, the assessee is entitled to the exemption, regardless of whether the entire amount was actually spent for that purpose. The court distinguished this provision from others like Section 10(2)(xv) where actual expenditure must be proven for claiming an allowance.2. The specific issue in this case was whether the entire 5% commission received by the assessee from Ciba (India), Ltd., could be excluded from income under Section 4(3)(vi) without proving the actual expenditure. The court noted that the allowance must be granted for a specific purpose to meet expenses incurred in the performance of duties. The judges opined that the key aspect is the purpose for which the grant is made, not the actual expenditure. Therefore, the entire grant should be excluded from the total income of the assessee, irrespective of how it was utilized. The court rejected the contention that only the portion actually spent could be excluded, as it would require inserting words into the section that were not present.In conclusion, the judgment clarified that under Section 4(3)(vi) of the Indian Income-tax Act, special allowances granted to meet expenses incurred in the performance of duties should be entirely excluded from the assessee's income, based on the purpose for which the grant was made, without requiring proof of actual expenditure. The court's decision favored the assessee, allowing the full 5% commission received to be deducted as a permissible allowance.