INCOME TAX OFFICER Vs. H S CHITTARANJAN
INCOME TAX APPELLATE TRIBUNAL
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Abdul Razack, Judicial Member -
(1.) THE present appeal has been filed by the Assessing Officer being aggrieved against the order dated 11-7-1991 of the DCIT (Appeals) holding that the Special (Duty) allowance (For short "SDA") is not a part of salary. In order to decide the controversy in this appeal appreciation of the facts giving rise to this appeal are to be noted and they are as under:
(2.) The assessment of the assessee was completed under Section 143(1) of the IT Act, 1961 and the SDA received by the assessee amounting to Rs. 12,407 was added to the returned income on the ground that it was not exempt. Being aggrieved by this order the assessee submitted a petition under Section 154 of the Act on 26-2-1991 which was rejected by the Assessing Officer on the ground that the SDA was neither exempt under Section 10(14) of the Act nor it was an income of a casual and nonrecurring nature. Not being satisfied with the order passed by the Assessing Officer the matter was carried before the DCIT (Appeals) by way of first appeal. It was contended before the DCIT (Appeals) that the SDA was granted to the civilian employees of the Central Government serving in the States and Union Territories of the North Eastern Region as per notification of the Government of India, Ministry of Finance, Department of expenditure in Office Memorandum No. 20014/3/1983-E-IV dated 14-12-1983. It was also contended that the allowance was in pursuance of the recommendation of a committee appointed by the Government of India to review the existing allowance and facilities admissible to the various categories of civilian Central Government employees in recognition of the need for attracting and retaining services of competent officers for service in the North Eastern Region comprising the States of Assam, Meghalaya, Manipur, Nagaland and Tripura and the then Union Territories of Arunachal Pradesh and Mizoram. The SDA was initially given to Central Government employees who have all India transfer liabilities at the rate of 25 per cent of the basic pay subject at a ceiling of Rs. 400 on being posted to any such area in the North Eastern Region. Initially this allowance was not available to those Government employees who were exempted from payment of Income-tax but since then it has been extended to that category of Central Government employees as well. Though the allowance was given for a limited period of three years upto 30-1-1986 but was extended for further periods by subsequent notification. It is available to the Central Government civilian employees during the period of duty and not available during leave. It was further contended before the DCIT(Appeals) that the SDA fulfilled all the criteria of a compensatory allowance defined under Rule 9(5) of the Fundamental Rules i.e., to say, it is an allowance granted to a person posted on duty in certain areas as compensation for expenses of unavoidable nature which are incurred in performance of duty and, therefore, SDA was neither a sumptuary allowance nor part of pay and, therefore, it cannot be treated as income. It was also contended before the DCIT(Appeals) that the SDA at the most could be treated as a casual and non-recurring receipt being exempt under Section 10(3) of the Act. The DCIT(Appeals) agreed with the submissions made before him and directed the Assessing Officer to delete the said addition. The Assessing Officer not being satisfied with this conclusion of the DCIT(Appeals) has filed the second appeal before us.
Mrs. R. Das, Senior Departmental Representative assisted by Smt. S. Jhingran, made submissions on behalf of the Assessing Officer. It was contended by her that the SDA was income as defined in Section 2(24)(iiia)/(iiib) of the IT Act, 1961 and the DCIT(Appeals) failed to appreciate this clear definition of income as provided in Section 2(24) of the Act. The SDA also cannot be considered as a casual and non-recurring nature so as to be exempted under Section 10(3) of the Act. The assessee claimed this SDA as being exempt under Section 10(14) of the Act whereas income of such a nature can only be exempted under the said provisions provided that the amount is specified as exempt by the Central Government through notification in the Official Gazette. It was contended by the Departmental Representative that there has been no such notification by the Central Government and published in the Official Gazette specifying the extent of the amount of such allowance being exempt under Section 10(14). The DCIT(Appeals) has failed to consider and appreciate the provisions of Section 10(14) in proper perspective and has unjustifiably given relief to the assessee directing the Assessing Officer to delete the SDA from the purview of taxation and holding that the SDA was not part of salary. It is the case of Departmental Representative that the SDA also cannot be considered as a compensatory allowance to come within the benefit provided by the Central Government in notification No. SO. 144(E) dated 21-12-1989 as amended by notification No. SO 259(E) dated 27-3-1990, a copy of which has been filed before us for our perusal. The Departmental Representative, therefore, pleaded that the DCIT(Appeals) committed a grave error in allowing the appeal of the assessee and, therefore, the impugned order deserves to be reversed.
(3.) THE assessee's counsel, Shri A.B. Das, reiterated the submissions made before the DCIT(Appeals) and relied upon the reasons and conclusion given by him in the impugned order and urged that the Departmental appeal be dismissed.;
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