Expense allowance exemption applies only to amounts actually spent for duties; any unspent commission balance is taxable remuneration.

Section 4(3)(vi) of the Income-tax Act, 1922 exempts only a special allowance, benefit or perquisite granted specifically to meet expenses wholly and necessarily incurred, or to be incurred, in performing the duties of an office or employment. The purpose of the grant is not decisive; the actual use of the amount controls its character. Any surplus retained after meeting the relevant expenses loses the nature of an expense allowance and becomes taxable as additional remuneration. The Finance Act, 1955 amendment reinforced this position by linking exemption to expenses actually incurred. Accordingly, exemption applied only to the extent the selling agency commission was actually and necessarily spent; the unspent balance was not exempt.

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Issues: Whether the portion of the selling agency commission representing a special allowance was exempt under section 4(3)(vi) of the Income-tax Act, 1922, and whether the exemption extended to the unspent balance of that allowance.

Analysis: The exemption under section 4(3)(vi) applies only to a special allowance, benefit or perquisite specifically granted to meet expenses wholly and necessarily incurred or to be incurred in the performance of the duties of an office or employment of profit. The purpose for which the amount is granted is not by itself decisive. Where the recipient retains a surplus after meeting the expenses, that surplus does not retain the character of an allowance for expenses and is taxable as additional remuneration. The amendment introduced by the Finance Act, 1955 also reflected that only expenses actually incurred were to be exempted.

Conclusion: The exemption was available only to the extent of the amount of the 5% commission actually and necessarily spent in the year of account for performing the duties of the selling agency; the unspent balance was not exempt.

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