ITAT rules daily living expenses not taxable for foreign technician under Income-tax Act

The ITAT Jabalpur ruled in favor of the Czechoslovakian technician, holding that the daily living expenses received during work in India were not assessable as income under section 10(14) of the Income-tax Act. The Tribunal determined that the expenses were reimbursement for local costs and not a perquisite, citing a precedent and finding that the technician did not meet the conditions specified in the Explanation to section 10(14). Therefore, the original assessment orders were upheld, and the Commissioner's directive to include the expenses in total income was deemed unjustified.

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Issues:
Assessment of daily living expenses in total income under section 10(14) of the Income-tax Act, 1961.

Analysis:
The appeals before the Appellate Tribunal ITAT Jabalpur concerned the assessment years 1979-80 and 1980-81, involving a Czechoslovakian technician who came to India for work. The issue revolved around the inclusion of daily living expenses received by the technician in his total income. The Commissioner, under section 263 of the Act, directed the addition of the full amount of daily living expenses, which the technician contested based on section 10(14) of the Act.

The Tribunal analyzed section 10(14), which allows for the exemption of special allowances granted to meet expenses wholly, necessarily, and exclusively incurred in the performance of duties. The Tribunal considered the retrospective effect of an Explanation inserted in 1984, clarifying the scope of the provision. It was established that the living expenses paid to the technician were reimbursement for local expenses incurred during his work in India and did not qualify as a perquisite. Referring to a precedent, the Tribunal concluded that the amount in question was not assessable as it was not a perquisite or salary.

Further, the Tribunal examined the applicability of the Explanation to section 10(14) in the case. It was determined that the conditions specified in the Explanation, related to the place of ordinary work or residence, were not met by the technician during his temporary work in India. As the technician's ordinary place of work remained in Czechoslovakia, the Explanation did not apply. Consequently, the Tribunal held that the original assessment orders were not erroneous, and the Commissioner's directive to add the expenses was unjustified.

In conclusion, the Tribunal allowed the appeals, setting aside the Commissioner's order and restoring the original assessment orders.

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