Income Tax Appellate Tribunal - Hyderabad
B.Durga Prasada Arao, Gudur vs Department Of Income Tax on 21 May, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B ', HYDERABAD
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA.834 to 838/Hyd/2007
Assessment Years: 2000-01, 2001-02, 2002-03, 2003-04 & 2004-05
The ITO Ward 1, Gudur Vs Sri Balli Durga Prasada Rao,
Venkatagiri.
( PAN AJNPB 0650 R)
(Appellant) (Respondent)
Appellant by : Shri K.E. Sunil Babu
Respondent by : None
ORDER
Per Bench :
These appeals preferred by the Revenue is directed against the common order passed by the CIT(A)-Gudur dated 21.5.2007 and pertains to the assessment years 2000-01 to 2004-05.
2. The Revenue raised the following grounds in its appeals in ITA Nos.834 to 838/H/2007:
1. The CIT(A) has erred in holding that the exemption u/s 10(14) (i) of the IT Act is applicable to the allowances received by the assessee in his status as an MLA in addition to the exemption available u/s 10(17)(iii).
2. The CIT(A) ought to have appreciated that the language employed and the conditions prescribed in section 10(14) (i) clearly indicate that only those allowances which are otherwise taxable under the head 'salary' are covered by the scope of the said section. As there is no employer employee relationship between an MLA and the Govt. and consequently as the salary and allowances of an MLA are chargeable to tax under the head 'Income from other sources' the CIT(A) ought to have held that exemption u/s 10(14)(i) would not apply to the allowances received by an MLA.
3. The CIT(A) ought to have appreciated that as no enforceable obligations/duties are attached to the position of an MLA, the same cannot be considered to be an 'office' and consequently the allowances granted to an MLA would not come within the scope of 'allowances granted to meet 2 ITA No.834 to 838/H/2007 Sri Balli Durga Prasad Rao, Venkatagiri, Gudur, Nellore Distt.
expenses wholly, necessarily and exclusively in the performance of duties of as office or employment of 'profit covered by exemption u/s 10(14)(i).
4. The CIT(A) ought to have appreciated that as there is a specific exemption section i.e. section 10(17)(iii) dealing with the allowances received by an MLA, the provisions of such specific section would prevail over the provisions of general section such as section 10(14)(i).
2. At the time of hearing on 13.12.2010, none appeared on behalf of the assessees. We heard the learned departmental representative on this issue. We are of the opinion that the issue involved in these appeals are squarely covered by the order of this Tribunal dated 31.1.2006 in case in ITA No.280, 290/Hyd/2007 for the assessment years 2000-01 and 2001- 02 wherein the Tribunal held as follows:
6. We have heard both the parties and perused the records.
Two issues arises for determination, the first being as to whether section 10(14) applies in the case of a M.L.A. The second is as to whether both Sec.10(14) and section 10(17) will be applicable simultaneously in the case of M.L.A section 10(14) reads as under:
"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 specially granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed and to the extent as may be prescribed."
It could be seen from the above that it applies to 'an office or employment of profit'. The Hon'ble AP High Court in the case of Maddi Sudarsanam (174 ITR 659) has held that the language of section 10(14) would clearly show that any special allowance or benefit specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of an office or an employment of profit would be exempt. This section does not use the expression 'office of profit'. The expression used is 'office or employment of profit'. The expression 'of profit' qualifies only 'employment', and does not qualify 'office'. It was, therefore, held by the Hon'ble High Court that it is enough if a person is holding an office and for the purpose of performing the duties associated with his office, he is granted allowance or benefit specifically to meet the 2 3 ITA No.834 to 838/H/2007 Sri Balli Durga Prasad Rao, Venkatagiri, Gudur, Nellore Distt.
expenses. From the above it would appear that as an MLA is holding an office though not an office of profit, section 10(14) of the Act would apply in such a case. However, the expenses which are exempt are required to be prescribed by the competent authority and assessee is required to file evidence to show that such expenditure has actually be incurred by him. Rule 2BB(1) of the IT Rules reads as under:
"2BB: (1) For the purposes of sub clause (i) of clause (14) of section 10, prescribed allowances, by whatever name called, shall be following namely:
a) any allowance granted to meet the cost of travel on tour or on transfer
b) any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
c) any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit;
Provided that free conveyance is not provided by the employer
d) any allowance granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of the duties of an office or employment of profit;
e) any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;
f) 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 of profit.
Explanation: For the purpose of clause (a), 'allowance granted to meet the cost of travel on transfer' includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer'.
3 4 ITA No.834 to 838/H/2007Sri Balli Durga Prasad Rao, Venkatagiri, Gudur, Nellore Distt.
Thus, any expenditure falling within Rule 2BB(1) will be covered u/s 10(14) of the Act. However, in the present case, there is a clear finding by the CIT(A) in para 4(e) that the assessee has not fulfilled the condition that the entire amount of various allowances received by the assessee were actually incurred wholly, necessarily and exclusively for the purpose of his duties. No documentary evidence has been filed either before the assessing officer or during the appellate proceedings before the CIT(A) to show that the amount of expenses was actually incurred by the assessee. The rigors of section 10(14) has also not been reduced by the CBDT by issuing any beneficial circular applicable to present case. In view of the matter, we hold that the appellant is not entitled to exemption u/s 10(14)(i) of the Act of those expenses which are covered as per Rule 2BB(1) of the IT Rules.
6.1. As could be seen from section 10(14)(i) and section 10(17), the items dealt in the above sections are mutually exclusive. It can be seen that in the present case only section 10(17)(iii) is applicable. As per section 10(17)(iii), the allowance not exceeding Rs.2,000/- per month is allowable in the case of a Member of any State Legislature as notified by the Central Govt. A combined reading of sub section (i), (ii) and (iii) of section 10(17) would make it clear that this section is brought in only to deal with certain special allowances other than the normal allowances which are allowed to a Member of Parliament or a Member of State Legislative Assembly which may be covered by other sections of the Act. It is absurd to think that an allowance of Rs.2,000/- per month will also include house rent allowance, travelling and conveyance allowance etc. In this view of the matter we are of the considered opinion that in the case of a MLA of the State both sections 10(14) and 10(17) (iii) will be applicable.
6.2. In the facts of the assessee's case and in view of the foregoing discussion, we hold that the allowance received by the assessee are taxable and that only an exemption of Rs.2,000/- per month can be allowed as per section 10(17(iii) of the Act. Thus we uphold the order of the learned CIT(A) to the above extent.
3. Since the facts of the present cases are similar to that considered by the Tribunal in the above cases, we are inclined to hold that the CIT(A) is justified in following the order of this Tribunal cited supra.
4 5 ITA No.834 to 838/H/2007Sri Balli Durga Prasad Rao, Venkatagiri, Gudur, Nellore Distt.
Respectfully, following the same ratio laid down in the above order of this Tribunal, we dismiss the ground taken by the Revenue.
4. In the result, the appeals of the Revenue in ITA Nos.834 to 838/Hyd/2007 are dismissed.
Order pronounced in the open Court 24.12.2010
Sd/- sd/-
N.R.S. GANESAN CHANDRA POOJARI
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 24th December, 2010
Copy forwarded to:
1. The ITO, Ward 1-Gudur, Nellore District-524 101
2. Shri Balli Durga Prasad Rao, 8-300-301, Karnakamma St. Venkatagiri, Nellore District.
3. CIT(A)-Gudur, Nellore District.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
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