TaxTMI 
TaxTMI 
2003 (1) TMI 80
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....n these appeals. The appellant, Shivraj Bhatia, Development Officer with the Life. Insurance Corporation of India, during the assessment proceedings for the year 1986-87, claimed 40 per cent. deduction (Rs. 27,282) from a sum of Rs. 68,206 received as an incentive bonus from the Life Insurance Corporation. The Assessing Officer found that the incentive bonus being part of the salary, the deduction as claimed by the assessee, was not permissible. The Assistant Commissioner (Appeals) relying on a judgment of the Income-tax Appellate Tribunal, Chandigarh, as well as the judgment of the Income-tax Appellate Tribunal, Jaipur Bench, allowed the appeal and directed the Income-tax Officer to allow deduction as claimed by the assessee. The Revenue preferred an appeal against the said judgment before the Income-tax Appellate Tribunal, Jaipur. The Tribunal dismissed the appeal vide order dated January 19, 1990. The Revenue filed an application before the Tribunal to refer the question of law as mentioned in the application for the opinion of the High Court under section 256(1) of the Act. The Income-tax Appellate Tribunal by order dated April 15, 1991, referred the following question of law ....
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...., which indicates that the Central Board of Direct Taxes has taken a view that the additional conveyance allowance is exempt from income-tax under section 10(14), provided a certificate was appended with the return of income filed by the Development Officers to the effect that the additional conveyance allowance received by him during the previous year was actually incurred by him as expenditure for performance of his duties. It is asserted that the certificates issued by the Life Insurance Corporation to the effect that the additional conveyance allowance received by the petitioner was actually spent for performance of his duties, was filed along with the return. It is also asserted that many of the Income-tax, Tribunals in the country have taken the view that the amount of additional conveyance allowance is exempt under section 10(14) of the Act. It is further contended that the conveyance allowance and the additional conveyance allowance were received by the assessee from his employer-Life Insurance Corporation as a reimbursement for actual expenditure incurred by him on account of conveyance in relation to the performance of his duties and the said expenditure has a direct nexu....
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....ertificate is issued by the Life Insurance Corporation to the effect that additional conveyance allowance was granted to the concerned Development Officer to meet the expenses wholly, necessarily and exclusively for the performance of the duties of the office and had been actually incurred for that purpose. The said instructions are extracted as follows: "On a representation from the Life Insurance Corporation of India, the Board considered the question of taxability of the additional conveyance allowance received by the Development Officers of the Corporation with reference to section 10(14) of the Income-tax Act, 1961. It was stated by the Life Insurance Corporation that it has now devised a suitable internal system which will enable it to satisfy itself regarding the expenditure incurred by each individual Development Officer having regard to the details of his actual performance, type of vehicle used, areas of operation, etc. It has further been stated that the Life Insurance Corporation would now be in a position to append a certificate in the salary certificate to the effect that the additional conveyance allowance granted to the concerned Development Officer, was granted sp....
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....s and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the Principal Officer (DDO) was justified in not deducting tax at source from conveyance allowance and additional conveyance allowance without certifying and verifying that the amount of these allowances had been actually incurred wholly, necessarily and exclusively for the performance of the duties of office?" The said application was rejected by the order of the Income-tax Appellate Tribunal dated March 5, 1991. Thus, the Revenue preferred an application under section 256(2) of the Act before this court. The reference application has been registered as D. B. Income-tax Reference No. 34 of 1999. The said reference application is also decided today by a separate order against the Revenue. It was contended before the learned single judge that as the conveyance allowance and additional conveyance allowance are paid to the Development Officers for meeting actual expenditure incurred by them in discharge of their field duties and, thus, wholly, necessarily and exclusively for meeting such expenditure as per the norms provided under the circular of 1987, it clearly falls unde....
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....ombay High Court reported in Life Insurance Corporation Class I Officers (Bombay) Association v. Life Insurance Corporation of India [1998] 229 ITR 510. We are in agreement with the contention of learned counsel for the appellant that it does not decide the controversy relating to additional conveyance allowance but only conveyance allowance, which was held to be not exempt under section 10(14) of the Act. It further appears that the court was concerned with the question whether conveyance allowance paid pursuant to rule 9(b) of the Life Insurance Corporation of India Class-I Officers (Revision of Terms and Conditions of Service) Rules, 1985, is such a special allowance or benefit as is envisaged under section 10(14) of the Income-tax Act. The court held that such an allowance was not covered under section 10(14) of the Act, as the mere use of the word conveyance allowance is not enough. The court noted that such an allowance is paid to the employee whether such employee is on duty or not and also the fact that such allowance is not reimbursement for expenses wholly and exclusively incurred in the performance of duty as it is payable also for the period when the person is not on du....
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....uction on the amount of the part of the incentive bonus spent by the assessee for earning of the incentive bonus?" The instant case pertains to additional conveyance allowance. Thus, apparently the said case has no application to the issue involved in the present case. It is further contended by Mr. Vineet Kothari, learned counsel appearing for the appellant-LIC, that the learned single judge did not look into the fact that there was no dispute at least to the fact that as per rule 2BB of the Income-tax Rules, 1962, framed under section 10(14) of the Income-tax Act, 1961, vide clause 10 of the Table, there is an exemption on the conveyance allowance at least to the extent of Rs. 800 per month. Learned counsel has further submitted that the additional conveyance allowance is different from the conveyance allowance. According to the corporation, the additional conveyance allowance is given to the employees as special allowance for meeting the actual expenditure incurred by them in accordance with the guidelines dated March 3, 1987, and March 18, 1991. The exemption under section 10(14) was available upon certificate of actual expenditure, given by the employer-LIC in terms of the C....
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....ature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence;" The notification dated June 9, 1989, is extracted as follows: "In exercise of the powers conferred by sub-clause (i) of clause (14) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies any allowance granted to meet the expenditure incurred on conveyance in the performance of the duties of an office or employment of profit, for the purposes of the said sub-clause for the for the assessment year 1989-90 and subsequent assessment years." There was further amendment in the Finance Act, 1995, with effect from July 1, 1995, which substituted the words "as may be prescribed" for the expression "as the Central Government may by notification, in the Official Gazette, specify". In pursuance of the aforesaid provision, rule 2BB of the Income-tax Rules was inserted by the Income-tax (Eighth Amendment) Rules, 1995, with effect from July 1, 1995. The relevant notification is extracted as follows: "2. In the Income-....
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....----------------------------------- Thus, under section 10, income falling under the clauses set out therein, are excluded in computing the total income of the previous year. Clause (14) deals with the special allowance. In order to avail of exemption under clause (14), it is required to be established that- (i) the pavment has been made by way of special allowance or benefit, which is not a perquisite within the meaning of clause (2) of section 17 (ii) it has been granted to meet expenses "wholly, necessarily and exclusively incurred" in the performance of duties of an office or employment of profit; (iii) it has been exempted to the extent such expenses are actually incur red for the purpose. Thus, for enabling an assessee to take the benefit of section 10(14), it is imperative on his part to satisfy that the special allowance, benefit or per quisite in respect of which the claim is made, has been granted to him to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of office or employment of profit. Thus, the assessee in order to claim exemption under the provision, is required to show that the amount in question was not for his own benef....
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....oration. The very first duty enumerated for the Development Officer is to develop and increase the production of new insurance business in the planned way, as far as practicable in the area that may be allotted to him from time to time. The other duties and obligations include the duty to supervise and to guide the activities of the agents placed under the supervision of the Development Officers; to recruit new agents so as to develop agency force; and to act generally in such a way as to activate existing agents and to motivate new agents and to render certain services to policyholders. The officer is also required to perform such duties that are entrusted and assigned to him from time to time. As per the practice, the Life Insurance Corporation has been giving the utilisation certificate for the purpose of income-tax as follows: "This is to certify that during the financial year......... (assessment year....... ), Shri..................... has been paid Rs......... to meet the expenses wholly, necessarily and exclusively incurred in performance of development duty and that the said amount has actually been incurred whollyfor that purpose. As such this amount is exempt from inco....