Special allowance for business expenses stays taxable unless actual spending is proved for the specified purpose.

A special allowance paid to an employee to meet commission expenses for securing business is taxable as salary income unless the employee proves that the amount was actually spent wholly and necessarily for that specific purpose. The decisive factor is not the employer's object in granting the allowance, but evidence of actual expenditure by the employee. As no proof of such spending was produced, the exemption did not apply and the allowance remained taxable.

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Issues: Whether a special allowance received by an employee to meet commission expenses for securing business is taxable as salary income where the employee fails to prove actual expenditure for that purpose.

Analysis: The allowance was specifically granted to the assessee as a special allowance for paying commission for securing business. Under the scheme of the Indian Income-tax Act, 1922, such a receipt is included in total income unless it falls within the exemption for a special allowance granted to meet expenses wholly and necessarily incurred in the performance of duties, and only to the extent actually so spent. The decisive factor is not merely the employer's object in making the payment, but proof that the employee in fact incurred the corresponding expense for the specified purpose. As no evidence was produced to show actual expenditure of the allowance for that purpose, the exemption was not attracted.

Conclusion: The special allowance of Rs. 8,400 was taxable in the hands of the assessee as salary income and the answer was against the assessee.

Ratio Decidendi: A special allowance granted to an employee to meet business-related expenses remains taxable as income unless the employee proves actual expenditure of the allowance for the specific purpose for which it was granted.

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