JUDGEMENT
G. Krishnamurthy, President -
(1.)THE points for consideration in the present appeals relating to the assessment years 1981-82 and 1982-83 which emanate out of the orders passed by the Commissioner of Income-tax under Section 263, are the following :
(a) Whether, in the case of the assessee, who is a Development Officer, an amount paid by the Life Insurance Corporation as additional conveyance allowance can be included in the total income, and
(b) Whether the amount paid by the Life Insurance Corporation as incentive bonus is fully taxable or whether any deduction could be allowed there out under the provisions of Section 10(14) of the Income-tax Act, 1961.
(2.)As far as the aforesaid two points are concerned, the Division Bench was of the view that there was, to some extent, a conflict between the decisions of the Calcutta Bench of the Tribunal in the case of ITO v. L.N. Goswami [1984] 8 ITD 661 and the decision of the Hyderabad Bench in the case of K. Rami Reddy v. ITO [1984] 8 ITD 633. The matter was, therefore, referred to the President for constituting a Special Bench and in pursuance thereof the appeals have come up for hearing before this Bench.
It was urged on behalf of the assessee that the emoluments received by a Development Officer cannot be classified as salary income under the Income-tax Act, because the relationship of Development Officers qua the LIC is not fully that of employer-employee because though they may not shed their relationship as LIC employees, they also render professional service to the LIC for which they are separately rewarded. This argument is not available to the assessee in Andhra Pradesh in view of the decision of the Andhra Pradesh High Court in K.A. Chowdary v. CIT [W.P. No. 7216 of 1983 decided on 10-12-1987]. This decision was rendered by the Andhra Pradesh High Court following its earlier decision on the same point in the case of M. Krishna Murthy v. CIT [1985] 152 ITR 163. Since all emoluments received by a Development Officer from the LIC have to be considered for assessment purposes under the head "Salary", additional conveyance allowance received as well as incentive bonus received form part of salary and the contention urged in this behalf of the Department, i.e., that all such emoluments form part of salary is accepted.
(3.)THE first point that arises is whether additional conveyance allowance received by the assessee of (Rs. 10,132 in the assessment year 1981-82 and Rs. 6,760 in the assessment year 1982-83) will fall to be excluded from the total income by virtue of the provisions of Section 10(14) of the Income-tax Act. THE provisions of Section 10(14) read :
any special allowance or benefit, not being in the nature of an entertainment allowance or other 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 purpose.
Explanation : For the removal of doubts, it is hereby declared that any allowance granted to the assessee to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides shall not be regarded, for the purposes of this Clause, as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties.
A basic conveyance allowance is granted to Development Officers by the LIC. It is agreed on all sides that this basic conveyance allowance does not form part of the total income. As far as additional conveyance allowance is concerned, it is paid based on a formula evolved by the LIC which has a direct relation to the volume of premium collected. THE argument of the revenue is that since this is linked with the quantum of premium collected or volume of business done, it has no nexus with the actual amount expended by way of conveyance expenditure. Reliance was placed in this regard on the decision of the Calcutta Bench of the Tribunal in the case of L.N. Goswami (supra). THE contention on behalf of the assessee is that a general formula had necessarily to be devised by an organisation like the LIC keeping in mind that there should not be any misuse of the amount paid as conveyance allowance. THErefore, such formula for payment had to be linked with the parameters of business transacted to have an effective check on exaggerated claims. Since the LIC has taken into consideration the possibility of expenditure being incurred by use of additional conveyance and laid a ceiling by linking it to the premium collected, it is submitted it has to be presumed that the entire amount had been spent only for the purpose of service rendered. In fact, that was also the view taken by several Benches of the Tribunal at Hyderabad and the note struck by the Calcutta Bench in the case of L.N. Goswaml (supra), it was stated, was the only discordant one.
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