Special (Duty) Allowance treated as taxable salary where exemption and casual receipt tests were not proved.

Special (Duty) Allowance was held taxable as part of salary because section 2(24) includes special allowances and allowances for personal expenses or increased cost of living. Exemption under section 10(14) was unavailable since no notification covering the allowance was shown, and the assessee did not discharge the burden of proving entitlement to exemption. The allowance was also not established as a casual and non-recurring receipt under section 10(3), nor as a compensatory allowance under the service rules or notifications relied upon. The Revenue's appeal therefore succeeded.

---

---

Issues: Whether the Special (Duty) Allowance was exempt from tax under the Income-tax Act, whether it could be treated as a casual and non-recurring receipt under section 10(3), and whether it was a compensatory allowance outside the taxable salary field.

Analysis: The definition of income under section 2(24) is inclusive and specifically covers special allowances and allowances granted either to meet personal expenses or to compensate for increased cost of living. Exemption under section 10(14) is available only when the allowance falls within the statutory description and is specified by the Central Government by notification in the Official Gazette to the extent stated in that notification. No such notification covering the Special (Duty) Allowance was shown. The burden to establish entitlement to exemption lay on the assessee, and no material was produced to discharge it. The allowance was also not shown to be both casual and non-recurring so as to fall under section 10(3). It was further held not to be a compensatory allowance within the relevant service rules or notifications relied upon.

Conclusion: The Special (Duty) Allowance was taxable income and formed part of salary, and the Revenue's appeal succeeded.

---