Income Tax Appellate Tribunal - Jaipur
Rajasthan State Electricity Board vs Income-Tax Officer on 23 July, 1993
Equivalent citations: [1994]48ITD100(JP)
ORDER
M.A.A. Khan, Judicial Member
1. This appeal is directed against the order dated 29-10-1992 whereby the CIT (A), Rajasthan II, Jaipur upheld the order of the ITO (TDS) dated 28-8-1992 passed under Section 201(1)/192 of the Income-tax Act, 1961 ('the Act') requiring the assessee to deposit the amount of TDS on the amount of orderly allowance paid to its officers.
2. The relevant facts are that the assessee is a State Electricity Board (for short the Board) constituted under the provisions of Electricity (Supply) Act, 1948 (LIV of 1948) for producing distributing and supplying electric energy to the consumers in the territories of State of Rajasthan. The Board performs its said duties through a large number of technical and nontechnical personnel on its staff engaged on salary/wages basis.
3. By its order No. RSEB/Rules/F. 57(6)/D-44 dated 6-1-1979 the Board had framed a scheme of engaging persons for working as orderlies at the residences of its officers. The scheme remained in force up to 8-5-1989. On 9-5-1989 the said scheme was discontinued as per Board's order No. RSEB/Rules/F. 57(6)/D-31 dated 9-5-1989. Para Nos. 4 and 5 of the above-mentioned order, however, provided that:
4. Henceforlh the reimbursement of the amount spent by the officers for maintaining office/official decorum at their residence according to their official status by utilising the service of person/persons will be admissible on submission of prescribed certificate and subject to the financial limits as under:
(i) Superintending Engineer and equivalent and above (for utilising the services of one/or more persons) Rs. 500 p.m.
(ii) Assistant Engineer and Executive Engineer and equivalent (for utilising the service of a person) Rs. 350 p.m.
5. The Members of the Board who are at present allowed a regular class-IV employee to work as orderly for attending the telephone, etc., at their residence may also have the option of keeping a class IV employee or claiming reimbursement under the new scheme at the rate allowed to officers of the rank of superintending engineer and above.
Detailed administrative instructions/guidelines to implement this scheme of reimbursement are being issued separately.
This order would come into force with immediate effect.
Sd/- (Rajendra Jain) Secretary.
4. Thus the officers/officials of the Board, as specified in the above-mentioned para, started getting 'orderly allowance' and the 'conveyance allowance' w.e.f. 9-5-1989.
5. On 29-5-1991 the Principal Officer of the Board filed the return under Section 206 of the Act in Form No. 24 for Financial Year 1990-91. The ITO (TDS), however, noted that tax at source had not been deducted under Section 192 on the amounts paid as orderly and conveyance allowances. On being asked the Principal Officer of the Board pleaded that the said allowances were exempt from tax under Section 10(14) and, therefore, the provisions of Section 192(1) did notapply in respect thereto. The ITO (TDS), however, was of the opinion that the said allowances were in the nature of perquisites under Section 17(2) and as such made part of 'salary' and were not exempt under Section 10(14) of the Act. He, therefore, directed the Principal Officer of the Board to deposit a sum of Rs. 37,36,775 on account of TDS under Section 192(1) and Rs. 1,48,465 as interest under Section 201 (1A) thereupon. The Board appealed to the CIT (A).
6. The CIT (A) held that the orderly allowance was in the nature of perquisite in as much as it was not an actual reimbursement of the expenditure incurred. He observed that no account had been obtained from the employees and there was no evidence to prove that any expenditure on procuring the services of the orderlies had actually been incurred by the recipients of the orderly allowance. He, therefore, held that orderly allowance was not exempt under Section 10(14)(i) of the Act and the Principal Officer of the Board was required to deduct TDS under Section 192(1) thereon.
7. With regard to the nature of conveyance allowance the Id. CIT (A) held that the same was exempt under Section 10(14) as it had been wholly and exclusively incurred for the performance of the official duties. The CIT (A) thus partly allowed assessee's appeal.
8. The question that arises for our consideration in this appeal is whether the orderly allowance, as was paid by the assessee-Board to its officers, is exempt under Section 10(14) and, therefore, the Principal Officer of the Board was unde no obligation to deduct tax thereupon at source as required by Section 192(1) of the Act. In this behalf Mr. C.L. Jhanwar, CA, the learned Counsel for the assessee-Board vehemently urged that the Central Government by its Notification SO 267(E) Dated 29-3-1990 had exempted such orderly allowance from tax under Section 10(14) of the Act. The learned Counsel further submitted that before disbursing toe salaries to them, the Board had duly obtained certificates from the concerned officers regarding utilising the services of the persons to help them in maintaining offices and official decorum at their respective residences. It was also submitted that the certificates so submitted by the officers before drawing their salaries were required to be considered as sufficient proof of spending the amounts of the special allowance on the utilisation of services of the helpers in the performance of their official duties. In this behalf Mr. Jhanwar referred to CBDT Circular No. 568 dated 27-7-1990 [184 ITR (St.) 166] to highlight the fact that wherever it was intended that a particular exemption/deduction be allowed on production of evidence of actual expenditure, the intention was expressed in clear and unambiguous words but that was not the case with the exemption contemplated to be granted under Section 10(14) of the Act. In this respect the difference in the language used for instructions issued in respect to exemptions/ deductions under Sections 10(13A), 80CCA. 80CCB, 80DD, 80GG and 80RR and that used for those in respect to one under Section 10(14) was highlighted and it was submitted that since production of evidence of actual expenditure on engaging the helper was not to be insisted upon the Disbursing Officer was well within his rights to regard the certificates of the officers as sufficient proof of incurring the expenditure on obtaining the services of a helper by the officers. In the end and as an alternative plea, it was also submitted by Mr. Jhanwar that in the cases of the employees to whom orderly allowance had been paid, the assessments had already been completed and finalised by disallowing their claims for exemption under Section 10(14) in respect to the orderly allowance and thus it would be quite impracticable and in a sense impossible to recover the amounts of such allowance from them. Reliance in this behalf was placed on CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP).
9. In reply the Id. DR supported the order under appeal and further submitted that since the orderly allowance granted by the Board to its officers was in the nature of a perquisite within the meaning of Clause (2) of Section 17 and also that since the concerned officers had failed to produce evidence of their having actually spent the amount of orderly allowance wholly, necessarily and exclusively in the performance of their respective offices, the Principal Officer was under a statutory obligation under Section 192 of the Act to deduct tax at source, which, he had failed to discharge.
10. After having given our thoughtful consideration to the arguments of the learned Counsel for the assessee and the Id. DR in the light of the material placed before us, we are of the opinion that no doubt the assessee has been successively and concurrently failed by the Income-tax authorities but the Tribunal should fail it now.
11. Sub-Clause (i) of Clause (14) of Section 10 as is relevant for our purpose, reads as under:
Sec. 10. In computing the total income of aprevious year of any person, any income falling within any of the following clauses shall not be included:
'(14) (i) any such special allowance or benefit, 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, as the Central Government may, by notification in the Official Gazette, specify, to the extent to which such expenses are actually incurred for that purpose;
(ii) any such allowance granted to the assessee either 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, or to compensate him for the increased cost of living as the Central Government by notification in the Official Gazette, specify, to the extent specified in the notification:
Provided that nothing in Sub-Clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence.
A study of the above provisions informs that in order to qualify for exemption under Section 10(14)(i) the special allowance
(i) should not be in the nature of a perquisite within the meaning of Clause (2) of Section 17.
(ii) should have been specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit as the Central Government may by Notification in the Official Gazette specify, and
(iii) would be exempt to the extent such expenses are actually incurred for that purpose.
Let us examine as to how far the orderly allowance in the instant case fulfils the abovementioned requirements.
12. The grant or allowance of perquisites has become a regular feature of almost all employment, especially in view of the constant rise in price index and on account of tax advantage it offers to the employee without prejudice to the interest of the employer. The basic idea underlying the concept of perquisite is that the benefit or advantage that the employer receives is personal and is unrelated to any benefit that the employer may receive from the services of the employee. 'Perquisite' thus has a normal meaning, namely, a personal advantage which would not apply to the mere reimbursement of necessary disbursement. To borrow the language of Lord Pearce in Owen v. Pook (Inspector of taxes) [1969] 74 ITR 147 (HL), 'Perquisite' denotes something that benefits a man 'by going into his own pocket'. "It would be a wholly misleading description of an office to say that I had very large 'perquisite' merely because the holder of the office had to disburse very large sums out of his own pocket and subsequently receive a reimbursement or partial reimbursement of these sums".
13. Following the principle laid down in Owen's case (supra) living allowance by a foreign technician which varied with the place where services were to be rendered by him, was considered to be in the nature of non-assessable perquisite as that was in the nature of a reimbursement of the money he would be required to spend on his stay in India rather than a personal advantage to him (124 ITR 391). Following the same principles the perquisite of providing rent-free accommodation, a statutory required perquisite under Section 17(2)(i) to the Judges of the Supreme Court, High Courts, Ministers, Officers of Parliament and the leaders of opposition was not considered assessable in their cases [vide Salaries & Allowances of Ministers Act, 1952, salaries and allowances of officers of Parliament Act, 1953, Salaries and Allowances of Leaders in Opposition Act, 1977 and High Court and Supreme Court Judges (Condition of Service) Act, 1986].
14. In the instant case the specified officers in the employment of the Board were having the facility of regular IVth class employees at their residences under Board Order No. RSEB/Rules/F-57(6)/D.44 dated 6-1-1989. They used to help the officers to keep the office rooms in their residences neat and clean, to carry out the bundle of the files to the residences of the officers and vice versa, to maintain secrecy and security of the records under possession at the residences, to attend to telephones and its allied information regarding complaints, trips etc., to call on emergency the technical persons and officers for visiting the required places and do the needful there etc. etc. Thus the IVth class employees engaged by the Board to work at the residences of the officers were to discharge official duties and the facility so provided to the officers at their residences did not involve a personal advantage to them so as to fall within the meaning of assessable perquisite.
15. Now to cut short the expenses the Board discontinued the scheme of engaging Orderlies to work at Officers' residences and instead, chose to reimburse the officers for the expenses to be spent by them from their pockets for availing the services of such persons at their residences in the discharge of their official duties there. It is not the case of Revenue that the officers were no longer required to utilise and use a part of their residences as offices and perform official duties of the nature enumerated above there. Since the officers were required in the nature of work of their office to do official duties at their residences too and for doing that if they incurred expenditure on availing the services of some helpers and got reimbursed by their employer for such expenditure, the receipt of the amount of reimbursement, by whatever name called, would not amount to 'perquisite' in their hands within the meaning of the term defined in Section 17(2) of the Act. We accordingly hold that the orderly allowance had specifically been granted to the officers to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of their offices. Thus first requirement of Section 10(14)(i) is fully satisfied in the instant case.
16. Now coming to the next requirement, it may be appreciated that as seen above, the orderly allowance had been specifically granted to the officers to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of their respective offices. That had been clarified by the officers in their certificates submitted by them before receiving their salaries and their employer i.e., the Board had felt satisfied of their statements made in the certificates. The 1TO brought no material on record to disbelieve the statements of the officers and to reject the satisfaction of their employer over the truth in their statements.
17. The next part of this requirement is the necessity of a notification by the Central Govt. to treat the Orderly Allowance as having been granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit for the purposes of Sub-Clause (i) of Clause (14) of Section (10). In this behalf SO 267(E) dated 29-3-1990 may usefully be reproduced here:
In exercise of the powers conferred by Sub-Clause (i) of Clause (14) of Section 10 of the IT Act, 1961, the Central Govt. hereby specifies the following special allowances, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profits, for the purposes of the said Sub-Clause, namely:
(a) any allowance (by whatever name called) granted to meet the expenditure incurred on helper where such helper is engaged for the performance of the duties of an office or employment of profit;
(b) any allowance granted for encouraging the academic, research and other professional pursuits;
(c) any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment.
18. We have already held that the Orderly allowance had been specifically granted to the officers to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of their respective offices. By the notification under reference the Central Government had specified such allowance in (a) above for the purposes of Sub-Clause (i) of Clause (14) of Section 10. We, therefore, hold that the second requirement for applicability of Section 10(14)(i) is also fulfilled in the instant case.
19. The last requirement is in respect to the nature, degree or standard of proof of actually incurring the amounts of the orderly allowances received by the officers, wholly, necessarily and exclusively for the purposes of performance of the duties of their respective offices. In this behalf we find that the concerned officers had submitted their certificates wherein they had certified that they had incurred expenses, to the extent of the orderly allowance to be received by them, wholly, necessarily and exclusively on the helpers engaged by them to assist them in the discharge of the duties of their respective offices at their residences. We have expressed ourselves above over the probative value of such certificates. The question, however, is if this sort of proof only was sufficient to discharge the burden of claiming entitlement to exemption under Section 10(14)(i) by the assessee.
20. On going through CBDT Circular No. 568 dated 27-7-1990, we are satisfied that whereas the Board had required of the disbursing authorities to satisfy themselves by insisting on production of evidence of making actual payment/expenditure, exemption in respect of which is claimed under Sections 10(13A), 80CCA, 80CCB, 80DD, 80GG and 80RR of the Act, no such insistence was stressed by the Board in respect to a claim for exemption under Section 10(14)(i) of the Act. The Principal Officer of the Board could not have, therefore, legally and as a matter of right, insisted on production of detailed account of the expenditure incurred by the officers on engaging a helper at their residences to assist them in the discharge of the duties of their respective offices there. In our opinion, therefore, disbursing authorities of the Board, responsible for paying incomes chargeable under the head 'salaries' had discharged their responsibility under Section 192(1) in accordance with the legislative intention behind Section 10(14)(i) and Board's guidelines issued in respect thereto. The orderly allowance paid to the officers, being not in the nature of assessable perquisite the said authorities were justified in not having deducted any tax in respect thereto while disbursing salaries to such officers. The direction issued by the ITO (TDS) for deposit of amount of TDS at Rs. 37,36,775 with interest thereon at Rs. 1,48,465 thus totalling to Rs. 38,85,240 (at the time of making the order by him) as approved of by the CIT (Appeals) are inherently bad in law and the same are hereby cancelled.
21. In view of the above, we see no necessity to express our opinion on the merits of Mr. Jhanwar's alternative arguments.
22. In the result the appeal succeeds and is hereby allowed.