Tribunal clarifies legislative members' expense treatment under Income Tax Act

Jaswant Singh. Versus Income-Tax Officer.

Jaswant Singh. Versus Income-Tax Officer. - TTJ 096, 660, Issues:
Claim of deduction of expenses towards travelling, conveyance, and telephone for discharging duties as a member of the Legislative Assembly.

Analysis:
The assessee challenged the rejection of the deduction claim for expenses incurred while discharging duties as a member of the Legislative Assembly. The rejection was based on the application of section 57(iii) by the learned CIT(A) in a restrictive manner. The Authorised Representative argued that the rejection was unjustified as the expenses were necessary for earning income and were incidental to the earning of salary as an MLA. It was contended that such expenses were essential for discharging duties under the Constitution. Additionally, it was argued that deduction under section 57(iii) should follow the assessment of income under section 56, and the expenses should not be disallowed solely based on the individual's status as a legislative member. The Representative further pointed out that section 10(14)(i) exempts special allowances or benefits granted for meeting necessary expenses incurred in the performance of office duties, irrespective of the income source.

The Departmental Representative supported the first appellate order, claiming that the receipt in question was income. During the relevant assessment year, the assessee earned income from various allowances and claimed expenses for telephone and travelling. The Assessing Officer (AO) denied the claim, stating a lack of nexus between the expenses and the taxable income. The CIT(A) agreed that the income was assessable under "Income from other sources" and discussed the exemption of allowances received by legislative members under section 10(17). The CIT(A) concluded that no deduction was allowable under section 57 for the fixed salary and allowances received by the assessee as a member of the State legislative. The Tribunal upheld the CIT(A)'s decision but allowed the claimed allowances based on a certificate issued by the Deputy Secretary of the Legislative Assembly. The remaining amount was directed to be taxed as income from other sources under section 56.

In conclusion, the Tribunal partially allowed the appeal, upholding the rejection of certain expenses claimed by the assessee but allowing the claimed allowances based on the certificate issued by the Legislative Assembly. The decision clarified the treatment of expenses and allowances for legislative members under the Income Tax Act.