778/CBDT.

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....xempt from tax u/s 10(14) of the IT Act came up for examination in the Board recently. It was noticed that some of the allowances claimed to be tax-free are really in the nature of perquisites as defined u/s 17(2) of IT Act and consequentially taxable as salary, while others being in excess of what could be reasonably considered as expenditure required to be incurred wholly, necessarily and exclus....

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....o free hotel accommodation on 'bed and break-fast basis'. It is difficult to accept that the entire amount has to be actually spelt wholly, necessarily and exclusively for the purposes of employment. Even under Rule 6D of the IT Rules, 1962, the maximum amount deductible in the assessment of employers towards daily allowance payable to employees is Rs.120 per diem only and this amount covers hotel....

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....arly within the ambit of clauses (iii) and (iv) of section 17(2) of the IT Act. It should therefore be subjected to tax as perquisite in the hands of the recipients. (d) Other allowances such as house rent allowances which have hitherto been treated as tax-free should continue to be so treated, subject to the conditions and within the limits prescribed in the IT Act/Rules. The commanders and pi....

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....owed in respect of the various allowances drawn by commanders and pilots of Air India as well. 3. It has to be made clear that the above guidelines are not absolute. Where a pilot is able to furnish evidence to prove that a larger amount than what is proposed to be treated as exempt, has actually been incurred in the course of the performance of his duty, satisfying the conditions of section 10....