Refreshment allowance treated as taxable income under the expanded definition of income in the Income-tax Act.

A monthly cash allowance paid to an employee to meet refreshment expenses during office hours was treated as taxable income. Sections 2(24)(iiia) and 2(24)(iiib) of the Income-tax Act, inserted retrospectively from 1 April 1962, expand the definition of income to cover special allowances and benefits paid to meet expenses incurred in performing duties, as well as allowances for personal expenses or increased cost of living. On that statutory footing, the refreshment allowance fell within income and was taxable.

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Issues: Whether the monthly cash allowance granted to an employee towards refreshment expenses during office hours is taxable as income.

Analysis: Section 2(24)(iiia) and Section 2(24)(iiib) of the Income-tax Act, 1961, inserted with retrospective effect from 1 April 1962, enlarge the definition of income to include special allowances and benefits granted to meet expenses for the performance of duties and allowances given to meet personal expenses or compensate for increased cost of living. The allowance in question was a cash payment made to meet refreshment expenses during office hours and fell within the enlarged statutory concept of income.

Conclusion: The allowance towards expenditure on refreshments is income and is taxable, in favour of the Revenue and against the assessee.

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