TaxTMI 
TaxTMI 
2006 (6) TMI 137
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....ilot working for Air India Limited. On 30th June, 1997, the assessee filed his income tax return for the assessment year 1997-98 declaring income of Rs. 29,45,670. This return was processed under section 143(1)(a) of the Act, and the income so returned by the assessee was duly accepted. Subsequently, however, the Assessing Officer noticed that the assessee had claimed a deduction of Rs. 3,82,184 under section 10(14) and the same was not considered by the employer at the time of deducting tax at source. In other words, this claim of deduction of Rs. 3,82,184 was over and above the exemption granted by the employer, while estimating income chargeable to tax, for the purpose of computing tax deduction at source. It was in this backdrop that the case of the assessee was reopened and. the assessee was called upon to substantiate the claim of exemption of Rs. 3,82,184. During the course of the ensuing assessment proceedings, the Assessing Officer took note of assessee's contention that the employer only provides for hotel and breakfast, during assessee's stay abroad and rest of the expenses are to be borne out of the allowances granted by the employer. It was also noted that several allo....
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....urred abroad and will have to be allowed under section 10(14)(i) of the Income-tax Act." Having so upheld the contention of the assessee in principle, however, the CIT(A) observed that the assessee has not been able to furnish the copies of bills and vouchers for the actual expenses incurred abroad on lunch, dinner and other daily expenses. As to assessee's contention that it was not possible to keep meticulous record of all such expenditure, the CIT(A) added that "I am unable to agree with the contention of the appellant for the simple reason that the expenditure has been claimed by the appellant on actual basis and therefore it is the duty of the appellant to prove the expenditure by leading necessary evidence". A copy of dinner bill showing expenditure of US $ 40 on a single dinner was rejected by the CIT(A) on the ground that it did not pertain to the relevant previous year. The CIT(A) then concluded that in the absence of any other evidence of actual expenditure, the assessee should be entitled deduction to the extent of 50% of allowances received, or Rs. 50,000 - whichever is less. I the impugned order passed by the CIT(A), thus, it has been held that the allowances are ex....
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....e, concurring with the view of my predecessor in a similar order. ..in the case of Ms. Shailaja Ramamurthy, I am of the opinion that the allowances paid outside the country, to the employees of Indian Airlines are within the scope of section 10(14)(i) and accordingly, in the absence of the evidence, 50% of the expenditure so incurred should be allowed as deduction, limited to Rs. 50,000...." 6. The revision order dated 24th May, 2002 passed by his predecessor, which has been referred to and concurred with in this order, is also relevant in this context. The said order reads as follows: "The assessee has, in this case, moved a petition under section 264 for the assessment years 1995-96 and 1996-97 with regard to claim of exemption under section 10(14)(i) of the Income-tax Act. It was contended that this claim has not been allowed by the Assessing Officer in the course of assessments. A reference in this connection was made by the authorised representative earlier on seeking clarification pertaining to the claim under section 10(14)(i). The CIT(A), while deliberating on this issue, had also opined that the allowances paid outside the country to the employees of Indian Airlines.....
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....consider whether it is open to revenue to accept a judgment in the case of one assessee, and appeal, against the identical judgment in the case of another. Their Lordships held that such a differential treatment on the same set of facts was not permissible in law, and observed that, "it is not open to revenue to accept the judgment in the case of the assessee in that case and challenge its correctness in the case of another assessee, without just cause." The same view was reiterated by the Hon'ble Supreme Court in the case of Berger Paints India Ltd. v. CIT [2004] 266 ITR 99, and followed by the Hon'ble Delhi High Court in the cases of CWT v. R.K.K.R. International (P.) Ltd. [2005] 198 CTR 567 and CIT v. NeoPoly Pack Pvt. Ltd. [2000] 245 ITR 492. When it is not possible for the revenue to challenge an order of the appellate authority in one case and when it has accepted identical order of the appellate authority in another case, it cannot at all be open to the revenue to challenge the order of the appellate authority on an issue on which relief has been given by Commissioner himself, in other cases, by way of exercising revision jurisdiction in other cases. For this reason alone, t....
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....nt case, the exemption under section 10(14)(i)has been declined only on the ground that exemption under section 10(14)(ii) is available. Therefore, even going by the logic of the Assessing Officer, exemption under section 10(14)(i) cannot be declined because, assessee, while flying on international sectors, cannot be allowed exemption under section 10(14)(ii). This stand, even after taking note of Tribunal's decision in the case of Capt. Harminder Singh, has not only been approved by another co-ordinate bench of the Tribunal in the case of Capt. V.K. Verma but has also been followed by the Commissioner in exercise of his revision jurisdiction by issuing orders under section 264 and in exercise of his supervisory jurisdiction by issuing administrative instructions. The very foundation on revenue's arguments in support of non-applicability of section 10(14)(i) is thus devoid of any legally sustainable basis. 11. The assessee, though working for an international carrier, operates on the domestic flights. The question then arises whether exemption under section 10(14)(i) is available in respect of the same allowances when the assessee has to stay in a place, outside his place of pos....
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....sed by CIT (Appeals)- XXVII, Mumbai in the case of Neeta Kulkarni in Appeal No. CIT XXVII/ITO, Wd. 11(3)/96/2001-02. It was contended by the AR that the CIT (Appeals), in the above order, has held that the allowances paid while operating international flights are covered by exemption under section 10(14)(i) read with notification No. SO 143(E), dated 28-2-1989 subject to verification of expenses actually incurred by the assessee while operating international flights. The assessee's AR has also filed a detailed note stating that Indian Airlines, employer, provides accommodation at foreign stations to the assessee on bread and breakfast basis. These are paid in local currency at foreign stations to meet out other expenditure on meals, refreshments; tea, transportation, telephone and other incidental expenses. It was claimed that these foreign allowances are in the nature of reimbursements and have been spent while performing official duties. The AR has further relied upon Instruction No. 1107, dated 5-10-1977 and letter dated 30-3-1990 issued by the CBDT in support of his contention that these allowances are exempt under section 10(14)(i). I have considered the submissions of the AR ....
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.... 264 and administrative instructions issued by the Administrative Commissioner also shows that to the extent exemption under section 10(14)(ii) is not available in respect of the allowances, the field officers have considered the same allowances in respect of "food, beverage, telephone and transportation", as eligible for exemption under section 10(14)(i). The only reason for rejecting the exemption under section 10(14)(i) thus is availability of exemption under section 10(14)(ii) in respect of those allowances. This surviving reason for rejection of claim of exemption under section 10(14)(i), however, rests on the fallacious assumption that the provisions of section 10(14)(i) and section 10(14)(ii) do not operate in mutually exclusive fields. 14. We consider it necessary to reproduce the provisions of section 10(14) which are as follows: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included: (i) any such special allowance or benefit, not being in the nature of a perquisite with the meanings of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and e....
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....; 4. Any allowance granted Whole of India 70% of the to an employee working allowance upto in any transport system, a maximum of to meet his personal Rs. 3,000 per expenditure during month". his duty performed in the course of running of such transport, from one place to another place. provided such employee &nbs....
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....n India or is outside India, as long as allowance is granted to meet ordinary daily charges on account of absence from normal place of duty, the same is eligible for exemption under section 10(14)(i) read with rule 2BB(1)(b) - of course subject to actual use condition but that is not relevant in the present context. Therefore, the normal interpretation of this provision, as accepted by the revenue, is that if an employee is posted in Mumbai and he travels to, say, London, the allowance that the assessee is granted to meet his ordinary daily charges, such as say on meals, beverages, refreshments, toiletries etc., on account of his absence from Mumbai, the same is eligible for exemption under section 10(14)(i) read with rule 2BB(1)(b). The revenue also therefore, accepts that allowances are specifically granted to meet expenses wholly, necessarily and exclusively incurred in connection with the duties of an office, and are not in the nature of perquisite under section 17(2) of the Act, because without satisfying these conditions, the exemption under section 10(14)(i) could not have been granted at all in respect of the allowances. However, it is also important to appreciate that rule....
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....cannot be any occasion to invoke section l0(14)(ii) the scope of which is confined to expenses to meet increased cost of living, or to meet personal expenses at the place where duties of office are performed or where the assessee resides. The expression 'place where the duties of his office or employment of profit are performed' appearing in section l0(14)(ii) of the Act refers to a geographical location, i.e. city, state, or the region, where the employee is posted, as is also evident from column 3 of rule 2BB(2) which refers to geographical locations such as cities, states, altitude of the place where an employee is posted, and sea distance from Indian land i.e. continental shelf and exclusive economic zone, where the assessee is posted in offshore installations. Therefore, it is the place of posting, which can be a geographical location in the present context, which is required to be treated as the place where duties of office are to be performed. The question of expenses, to meet which the allowances are given, becomes relevant only when the pilot steps out of the aircraft and stays in a place other than the place of his posting, and, therefore, these expenses cannot be said to....
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....uch employee is not in receipt of daily allowance". For all these reasons, the provisions of section 10(14)(ii) and also of rule 2BB(2)(iv) are not applicable on the facts of this case. 21. The line of distinction between an allowance to meet expenses wholly, necessarily and exclusively for the performance of duties, though prima facie of a personal nature, and an allowance to meet personal expenses simplicitor is very significant. Take for example, an allowance to meet the costs of transfer, packing or transportation of personal effects on transfer of an employee. Such an allowance, on the face of it, appears to be an allowance to meet personal expenses of an employee but since his transfer is in connection with the duties of an office, the same is treated as having been granted to meet the expenses to meet expenses wholly, necessarily and exclusively incurred in connection with the duties of an office and an "allowance granted to meet the cost of travel on tour or transfer" appearing in rule 2BB(1)(a) and Explanation to the said rule categorically so clarifies in contrast to this example, let us take the case of Remote Locality Allowance paid to an employee who is posted in Ni....
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....by the Tribunal that the allowances in question are not covered by the provisions of section 10(14)(i) read with Notification No. SO 143(E) which is in pari mateira with rule 2BB(1)(a) and (b), but that is no longer the case as revenue itself has allowed exemption under section 10(14)(1) read with rule 2BB(1)(b) in respect of identical allowances. To that extent, the legal position, on the facts of the case before us and in the light of developments which have been taken note of hereinabove, is that the exemption under section 10(14)(i) is also available for allowances granted to the assessee in respect of tours of the assessee to domestic destinations as well, and that section 10(14)(ii) cannot be said to have any application in respect of such allowances. 22. For the reasons set out above, we are of the considered view that in principle, provisions of section 10(14)(i) will apply to the allowances received by the assessee for tours to places inside as also outside India, and the assessee will accordingly, be eligible for exemption under section 10(14)(i) read with rule 2BB(1)(b) in respect of such allowances. 23. The next question then arises as to what is the extent to whi....
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....T(A) has also held that the appellant has not produced evidence regarding actual use of the allowances for the purpose for which the same were granted. Unlike the requirements of section 10(14)(ii) which provide for exemption of a prescribed, allowance to the extent 'prescribed', under section 10(14)(i) exemption is indeed confined to the extent to which an exempt allowance is actually spent for the purposes for which such allowance is granted. In other words, 'actual use' of an allowance is one of the conditions precedent for exemption under section 10(14)(i). This is in sharp contrast with the exemption provisions of section 10(14)(ii) under which even the quantum of exemption is to be prescribed by the Rules. Having taken note of this significant distinction, however, we much also appreciate the background on which this actual use condition was brought in the statute and true connotations thereof in the context of section 10(14)(i). 7. The expression 'to the extent to which such expenses are actually incurred', as finds place in section 10(14)(i), is not new to the Income-tax Act. It was first introduced, with effect from 1st April, 1955, in section 4(3)(vi) of the Indian Inc....
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....essees. 8. The above circular was undoubtedly issued under the Income-tax Act, 1922 but then all the circulars issued under section 1922 Act do not cease to hold good in law section 297(2)(k) specifically provides that notwithstanding the repeal of Income-tax Act, 1922, amongst other things, any instructions issued under any provisions of the repealed Act shall, so far as not inconsistent with the corresponding provisions of Income-tax Act, 1961, deemed to have been issued under the corresponding provisions of the new Act, and shall continue to remain in force accordingly. In other words, to the extent the legal provisions of 1922 Act and 1961 Act are in pari materia, circulars and instructions issued under the 1922 Act will also hold good. The circular in view of the provisions of section 297(2)(k) it still holds good and continued to be in force. The expression used i.e. 'to the extent to which such expenses are actually incurred' being absolutely identical in both the Acts, the provisions of the above circular, in our humble understanding, apply under the 1961 Act as well. 9. In the light of the aforesaid circular it is not open to the revenue to call for the details of ex....
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....sp; US $ 60 Japan US $ 75 Kenya US $ 50 Korea US $ 70 Kuwait US $ 74 Malaysia US $ 50 Mauritius US $ 50 Russian Federation US $ 75 Switzerland US $ 58 UAE US $ 61 UK  ....
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....accept the contention of the assessee. We direct the Assessing Officer to accordingly grant exemption under section 10(14)(i) to the allowances, by adopting daily rates so fixed by the Government of India as the maximum permissible rate eligible for exemption under section 10(14)(i) without productions of evidence of actual expenditure, out of the consolidated flying allowances received by the assessee. In case, however, the allowance actually received by the assessee for a particular day is less than the daily allowances fixed by the Government of India, the exemption will be restricted to the actual allowance received by the assessee. 27. In order that the above directions can be given effect by the Assessing Officer, the assessee shall provide for the details of stay abroad in connection with the performance of duties of his office, and compute the exempt portion of daily allowance at the rates specified in the Government circular referred to above. Upon furnishing of these details by the assessee, the Assessing Officer shall grant exemption under section 10(14)(i) in respect of the allowances in the terms indicated above. 28. We now come to the quantum of allowance to be ....