HIGH COURT OF RAJASTHAN

Commissioner of Income-tax

v.

P. N. Verma

Rajesh Balia and R. P. Vyas, JJ.

IT Reference No. 57 of `995

April 10, 2006

Section 10(14) of the Income-tax Act, 1961 - Special allowance - Assessment year 1984-85 - Assessee, a Development Officer with LIC, received additional conveyance allowance from his employer and claimed same as not taxable under section 10(14), on ground that he had received such allowance as expenditure incurred wholly, necessarily and exclusively in performance of duties of his office - Assessing Officer disallowed assessee’s claim on ground that assessee had not produced any evidence in support of fact that additional conveyance allowance received by him was actually utilized by him for purpose of his official duties - Tribunal, on basis of certificate issued by LIC came to conclusion that said amount had really been spent by assessee wholly, necessarily and exclusively for discharging his official duties and, accordingly, directed that deduction under section 10(14) allowed to assessee in respect of additional conveyance allowance - Whether finding recorded by Tribunal was finding of fact and did not give rise to any question of law - Held, yes

FACTS

The assessee, a Development Officer with the LIC, received additional conveyance allowance from his employer. The assessee claimed this amount as not taxable under section 10(14) on ground that he had received such allowance as expenditure incurred wholly, necessarily and exclusively in the performance of duties of his office. The Assessing officer disallowed the claim on the ground that the assessee had not produced any evidence in support of the fact that additional conveyance allowance received by him for the purpose of his official duties, was actually utilized by him for that purpose. The Commissioner upheld the order of the Assessing Officer.

On further appeal, the Tribunal on the basis of certificate issued by the LIC to the assessee and certain decisions, held that the additional conveyance allowance had been wholly, necessarily and exclusively spent by the assessee for the purpose of discharging his duties. Accordingly, it directed that deduction under section 10(14) be allowed to the assessee in respect of said additional conveyance allowance.

On reference:

HELD

Apparently, allowing or disallowing of additional conveyance allowance received by the assessee from the employer was not dependent on any interpretation of the statute so as to give rise to any question of law, but was dependent on the finding of facts about utilization of such allowance by the recipient. (Para 4)

It is apparent from the statement of case that the matter about the actual utilization of additional conveyance allowance received by the assessee was wholly, necessarily and exclusively for the purposes of discharging his official duties. The finding which was required to be reached on the basis of evidence was a finding of fact and did not give rise to any question of law. (Para 5)

The Tribunal was not justified in referring the question as a question of law under section 256(1) arising from the order of the Tribunal. It was nowhere the question before any authority that additional conveyance allowance received by the assessee was not to be excluded from his income under section 10(14). What was in contention was whether the condition about utilization of amount had been established by leading cogent evidence? The Assessing Officer denied the claim of the assessee by saying that no evidence had been lead in support of above. The Tribunal, on the basis of certificate issued by the LIC had come to the conclusion that amount had really been spent wholly, necessarily and exclusively for discharging his duties. (Para 6)

This finding, found on the basis of material on record could not be said to be perverse and based on irrelevant consideration and could not be considered a question of law. As a matter of fact, on the findings of fact, it was clearly a case falling within the ambit of sub-section (14) of section 10. The validity of finding of fact about utilization of amount received as special allowance had not been challenged on the ground on which a finding of fact is open to be questioned as a question of law, nor validity of such finding was subject of question referred. The expression ‘deduction by the authority of Income-tax Act’ describing the claim of the assessee is a wrong nomenclature. Section 10 does not speak about the deduction, but speaks about ‘the income which does not fall within any of clauses under section 10 to be included in computing the total income of a previous year of the assessee. (Para 7)

Section 10(14)(i) reads that any such special allowance not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purposes. (Para 8)

Therefore, two conditions required for exclusion of the amount received as special allowance during the employment are that firstly, it must not have been granted to the assessee by way of perquisite but specifically granted to meet expenses wholly, necessarily, exclusively for the purpose of official duties. Secondly, it must have been actually used by the assessee for the purpose for which it has been granted. Both the conditions required for operation of section 10(14), are the factual foundation on which section 10(14) operates. The factual foundation establishes the exclusion of special allowance received by the assessee to meet such expenses to use the allowance for discharging his duties becomes non-includable in his income. (Para 9)

It was not a case of anyone that amount was received by the assessee as perquisite. Hence, it was a common ground that if the conditions specified in section 10(14) are fulfilled, as a case of special allowance, it is to be excluded from the computation of total income of the assessee. The assessee had received the amount to meet the expenses incurred for discharging of his office (duty) was also not the issue. The only other condition that was required to be satisfied was whether the assessee had actually used special allowance wholly, exclusively and necessarily for discharging of his duty had been found by the Tribunal to be in favour of the assessee. The finding recorded in this context was finding of fact and did not give rise to any question of law. (Para 10)

Accordingly, it was held that the statement of case referred by the Tribunal did not give rise to any question of law at all, and the same was accordingly, returned. (Para 11)