THE issues before the Bench are - Whether perquisites are
excluded from purview of Sec 10(14); Whether conveyance or additional conveyance
allowance is covered by the expression 'perquisite' and the same is taxable and
Whether an employer is competent to determine the allowances, which are exempt
from tax. And the verdict goes against the assessees.
Facts of the
case
Assessees, Development Officers, are
employees of LIC of India. They were informed by their employer that TDS was to
be deducted on conveyance or additonal conveyance allowance to be paid to them.
Protesting the same the assessees went in writ. Before the Bench, the counsel
for the assessees submitted that the additional conveyance allowance did not
come within the meaning of Section 10(14)(i) of the Income Tax Act, under which
the impugned demand notices had been issued by the Revenue. The counsel also
submitted that Section 10 (14) was applicable only in respect of a perquisite
which had not been included or clarified in Section 17 (2) of the Income Tax Act
and further the value of perquisite had been defined in Rule 3 of the Income Tax
Rules. It was further submitted that each Field Officer uses the vehicle "wholly
and exclusively" for the official purpose and charges the allowance for which
certificate was produced by the employee which on verification by the employer,
the said allowance was reimbursed and as such the same was exemped as it was not
covered under Section 10 (14)(i) of the Act or the Rule 3 regarding the
valuation of the perquisite. Thus, the additional conveyance allowance which was
being paid for procuring the business for the LIC was exempted. It was contended
that no Act or Rules provided that the Assessing Officer shall have any
jurisdiction to review the decision of the LIC authorities or to scrutinize it.
Once satisfaction was recorded by the officers of the LIC, nothing in the Act or
the Rules framed thereunder; or even in the circular issued by the CBDT, even
remotely empowers the Assessing Officer to sit in appeal over the assessment
made by the Senior Officers of the LIC, which needless to say was the subjective
satisfaction of the high ranking officers made on objective material. The
sufficiency of material cannot be looked into by the Assessing Officer.
The counsel for the assessee argued
that the issue was squarely covered by the decision of the High Court, Rajasthan
in the case of LIC of India Vs. Union of India, decided on 22.01.2003,
which was upheld by the Apex Court vide order dated 09.02.2007, while dismissing
SLP filed by the Department. The Rajasthan HC had the Revenue not to insist upon
the LIC to deduct the income tax at source in respect of conveyance and
additional conveyance allowance, paid by it to development officers. The
Assessing Officer was directed to pass the fresh order in accordance with law
laid down in that case. The Counsel pleaded that similar direction may kindly be
issued to the LIC, not to deduct the tax at source as the conveyance/additional
conveyance allowance was not subjected to tax.
On
the other hand, the counsel for the department raised the preliminary objection
about locus standi of the assessee to challenge the notice issued to
LIC under Section 201 of the Income Tax Act. He also submitted that it was
always open for each of the Development Officers to approach the authority
concerned and claim refund in accordance with Section 237 of the Income Tax Act,
1961, in as much it also included tax paid on behalf of 'any person' on the
ground that the deductions being made by the LIC in respect of Additional
Conveyance Allowance was not taxable at all; and therefore, the instant writ
petition was misconceived.
The
counsel also submitted that so called 'utilization certificate' given by the
employer was nothing but only a subjective estimate of the amount that might
have been forwarded by the development officers pertaining to the business
brought by them. From a bare perusal of the circular dated 24.04.2004, it was
clear that Additional Conveyance Allowance was nothing but additional
remuneration being paid to the Development Officers pertaining to their
performance. There was no element of reimbursement. The Assessing Officer had
rightly asked the proof of having incurred the expenditure, but the same was
never produced by the Development Officers. According to the counsel, the
conveyance/additional conveyance allowance was an allowance and covered by
Section 17(2) Explanation 3 of the Act.
The
Counsel for the LIC also justified the impugned order passed by the Senior
Divisional Manager. He submitted that the LIC was deducting the tax as per the
provisions of the Income Tax Act.
Having heard the parties,
the Bench held that,
++ it
appears that the Development Officers are salaried persons. For getting the
business, they were paid conveyance/additional conveyance allowances and also
incentive bonus. It may be mentioned that the various kind of special allowance
has been prescribed under Section 10 (14) of the Act and also under Rule 2 BB of
the Income Tax Rules. According to Rule 2BB (10), transport allowance granting
to an employee to meet the expenditure for the purpose of commuting between the
place of his residence and the place of his duty, is prescribed @ Rs.800 per
month. The Rule 3 of the Income Tax Rules prescribed the value of the
perquisite. Table II of Rule 3 prescribed the value of the perquisite pertaining
to the motor car owned or hired and used by the employee for personal/official
or wholly official purpose. It is prescribed that the value of the perquisite
shall be the amount calculated in respect of only one car. Further, it is
prescribed that the employer has to maintain detail of the journey undertaken
for the official purpose which may include the date of journey, destination,
mileage and amount of the expenditure incurred thereon. The employer shall give
a certificate to this effect that the expenditure was incurred wholly and
exclusively for the purpose of the official duty;
++ it
may be mentioned that "Perquisite" is excluded from the purview of Section
10(14). 'Perquisite' is defined under Section 17(2) of the Act. The
conveyance/additional conveyance allowance is covered by the word "perquisite"
and the same is taxable.
++
compartmentalization of income under various heads and computation of the
taxable portion strictly in accordance with the formula of deductions, rebates
and allowances are to be done only as per the scheme provided under the Act. As
held by the Apex Court, the Income-tax Act, 1961 is a self contained code and
taxability of the receipt of any amount or allowance has to be determined on the
basis of the meaning given to the words or phrases given in the Act. Thus, the
Apex Court do not agree with the view taken by the High Court of Gujarat in
CIT Vs. Kiranbhai's case, 235 ITR 635. The same does not lay down the
correct principle of law;
++ by
considering the totality of the facts and circumstances of the case, it appears
that in the instant case, the employer has issued the certificate pertaining to
the conveyance allowance/additional conveyance allowance used exclusively and
wholly for the official purpose i.e. the procurement of business. The said
certificate is issued by the employer after verifying the data. When it is so,
then there is no reason for the Assessing Officer to reject the said certificate
specially when the LIC is a statutory body and no private interest is involved.
The LIC is not competent to determine the allowances which are exempted from the
tax. This task will have to be performed by the Assessing Officer;
++
thus, in view of the provisions of Income Tax Act, 1961 and its interpretation
it is clear that the conveyance/additional conveyance allowance, and incentive
bonus is taxable being perquisite as per the ratio laid down in the case of
T.K. Girarajan Vs. CIT (2013-TIOL-37-SC-IT)
and, therefore, the members of the petitioner federation
are at liberty to lodge a claim for deduction or refund before the Assessing
Officer after substantiating their claims;
++
accordingly, the letter dated 07.04.2004 has rightly been issued by the Senior
Divisional Manager, LIC for deducting the Tax at source from the amount paid
pertaining to the conveyance/additional conveyance allowances incurred in the
performance of duty as Development Officers for generating the business being a
permissible deduction as the same is exigible to tax. The members of the
petitioner's association being salaried persons on furnishing their return of
income return is assessed by the assessing authority and it is only after due
assessment he entitled for refund of the amount, if any, deducted by the
employers conveyance allowance.
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