Rajasthan H.C : the order of the CIT(A) by following the decision of the jurisdictional High Court Life Insurance Corpn. India v. Union of India [2003] 260 ITR 41 (Raj.) inspite of the fact that the decision deals with the issue of TDS by LIC on conveyance allowance/additional conveyance allowance and nowhere it has been held that the conveyance allowance/additional conveyance allowance will be fully exempt from tax

High Court Of Rajasthan

CIT, Alwar vs. Madan Gopal Bansal

Assessment Years : 1998-99 To 2000-01

Section : 10(14)

Ajay Rastogi And J. K. Ranka, JJ.

D.B. I T Appeal Nos. 144, 765 And 895 Of 2008

February 14, 2014

JUDGMENT

J.K. Ranka, J. – These Income Tax Appeals u/Sec. 260A of the Income Tax Act, (for short, IT Act’) are directed against the order of the Income Tax Appellate Tribunal, Jaipur (for short, ‘ITAT’) in ITA Nos. 32, 33, 31/JP/2004 dt.31/74/2006 for the Assessment Year 1998-99 to 2000-01.

2. Since the controversy involved is identical, these Income Tax Appeals are being decided by this common order.

3. The appeals were admitted on following questions of law:—

Question of Law framed in ITA 895/2008 & 144/2008:—

“(1) Whether under the facts and circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by following the decision of the jurisdictional High Court Life Insurance Corpn. India v. Union of India [2003] 260 ITR 41 (Raj.) inspite of the fact that the decision deals with the issue of TDS by LIC on conveyance allowance/additional conveyance allowance and nowhere it has been held that the conveyance allowance/additional conveyance allowance will be fully exempt from tax?

(2) Whether under the facts and circumstances of the case and in law the Tribunal was justified in upholding the exemption granted by the CIT(A) u/s. 10(14) on the basis of the certificate of the employer declaring a part of conveyance allowance/additional conveyance allowance given to the assessee in respect of the expenses incurred wholly, necessarily and exclusively for official duties?”

Question of Law framed in ITA 765/2008:—

“(i)Whether under the facts and circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by following the decision of the jurisdictional High Court Life Insurance Corpn. of India v. Union of India [2003] 260 ITR 41 (Raj.) inspite of the fact that the decision deals with the issue of TDS by LIC on conveyance allowance/additional conveyance allowance and nowhere it has been held that the conveyance allowance/additional conveyance allowance will be fully exempt from tax?”

4. The brief facts, as emerging on the face of record, are that the respondent-assessee, is a Development Officer of Life Insurance Corporation of India (for short, ‘LIC’). The respondent-assessee received an amount of Rs.2,60,306/- for the Assessment Year 1998-99; Rs.1,56,057/- for the Assessment Year 1999-2000 and Rs.2,00,000/- for the Assessment Year 2000-01 towards conveyance allowance and additional conveyance allowance from the LIC. Though the same was part of the salary certificate but the contention of the respondent-assessee was that the said amount has been incurred in development of LIC business to receive the premium on account of various policies and the said amount is entirely exempt u/s 10 (14) of the IT Act. The Assessing Officer (for short, ‘AO’), in view of the judgment of this Court (Single Bench) in the case of Shiv Raj Bhatia v. LIC of India [CWP-700 of 2000, decided on 17-4-2000], show caused the respondent-assessee as to why the said amount, which has been claimed as exempt, be not added as income as the respondent-assessee was unable to prove that the said amount was incurred exclusively for performance of duties of the employment. However, the respondent-assessee contended that the very nature of the amount granted by the employer namely; LIC is for the purposes of performance of duties of the employment and since the Development Officer is required to go from place to place to canvass the business, therefore, it was incurred exclusively in the performance of the duties of the employment. However, the AO, in view of the judgment of this Court, referred to supra, added the said amounts as income of the respondent-assessee in all the assessment years.

5. The matter travelled in appeal before the Commissioner of Income Tax (Appeals) (for short, ‘CIT(A)’), for all the three years who allowed the claim of the respondent-assessee as by then, the judgment of Single Bench had been reversed by the judgment of Division Bench of this Court in the case of Shiv Raj Bhatia (supra) which is Life Insurance Corpn. of India v. Union of India [2003] 260 ITR 41/129 Taxman 205 (Raj.) and therefore, in view of the judgment of this Court, the CIT(A) allowed the claim of the respondent-assessee. The CIT(A) was also of the view that in view of the fact that the certificate was placed on record, which was issued by the employer namely; LIC that the respondent-assessee had incurred the said amount wholly, necessarily and exclusively for the performance of the duties, therefore, in the light of Sec. 10(14) of the IT Act read with Rule 2BB of the IT Rules, allowed such claim.

6. Dissatisfied with the order of the CIT(A), the matter was carried in appeal by the appellant-revenue before the ITAT who also did not interfere with the findings of the CIT(A) and dismissed all the three appeals of the appellant-revenue. Hence these appeals.

7. Smt. Parinitoo Jain, ld. counsel for the appellant-revenue, submitted that the respondent-assessee was unable to prove by acceptable evidence on record that a huge amount of Rs.2,60,306/- for the Assessment Year 1998-99; Rs.1,56,057/-for the Assessment Year 1999-2000 and Rs.2,00,000/- for the Assessment Year 2000-01 was incurred by the respondent-assessee exclusively for the purposes of duty and neither evidence was led as to how the said amount was incurred nor details as to how the said amount was incurred, was placed on record. She contended that if the respondent-assessee had visited various places, then certainly details must have been kept by him and ought to have been placed on record so as to justify the claim but since no evidence was placed, therefore, the said amount was rightly added by the AO and accordingly submitted that the AO had correctly added the said amount.

8. Per-contra, Mr. Achintya Kaushik, ld. counsel for the respondent-assessee, submitted that the AO has placed reliance on the judgment of the ld. Single Judge of this Court in Civil Writ Petition, referred to supra) namely; Shiv Raj Bhatia but when the said judgment itself stood reversed, both the appellate authorities had correctly decided the matter in favour of the respondent-assessee. He further contended that the appellant-revenue had also challenged the said judgment by way of filing Special Leave to Appeal, however, the Hon’ble Apex Court dismissed the same vide order dt. 09/02/2007 in Civil Appeal No(s) 25058-25059/2004. He contended that when the judgment of this Court has been affirmed by the Hon’ble Apex Court, then the instant appeals, even otherwise, deserve to be dismissed.

9. We have considered the arguments advanced by counsel for the parties.

10. For the present purpose, it would be fruitful to quote Sec. 10(14) of the IT Act, which provides ad-infra:-

“10(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 may be prescribed, 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 may be prescribed and to the extent as may be prescribed : 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;”

11. We may also state that the LIC is a statutory body. The duties of a Development Officer are provided under the relevant rules, which are extracted as follows :

“Duties of Development Officers and obligations.—

A. (i)To develop and increase the production of life insurance business in a planned way as far as may be practicable in the area that may be allotted to work from time to time through the agents placed under his supervision by the corporation and in consonance with the corporate objectives of the corporation.

(ii)To guide, supervise and direct the activities of the agents placed under his supervision by the corporation.

(iii)To introduce suitable persons to the corporation for appointment as new agents.

(iv)To act generally in such a way as to activise existing agents and motivate new agents so as to develop a stable agency force.

(v)To render all such services to policyholders conducive to better policy servicing.

(vi)To carry out the investigation of claims, revival of lapsed policies and liaison work in connection with S. S. S. business.

(vii)To perform such other duties as may be entrusted to him.

It is, thus, clear that the Development Officers of the Life Insurance Corporation are full-time employees of the corporation whose main task is to develop the business in life insurance. They are required to discharge the duties and obligations which, inter alia, include development of life insurance business of the corporation. The very first duty enumerated for the Development Officer is to develop and increase the production of new insurance business in the planned way, as far as practicable in the area that may be allotted to him from time to time. The other duties and obligations include the duty to supervise and to guide the activities of the agents placed under the supervision of the Development Officers; to recruit new agents so as to develop agency force; and to act generally in such a way as to activate existing agents and to motivate new agents and to render certain services to policyholders. The officer is also required to perform such duties that are entrusted and assigned to him from time to time.”

12. The conveyance allowance and additional conveyance allowance are paid to the Development Officers for meeting actual expenditure incurred by them in discharge of their field duties and thus necessarily and exclusively for meeting of such expenditure, the allowance is thus being exempt as per the norms set out by the LIC. It appears that the LIC has worked out conveyance and additional conveyance allowance to the Development Officers considering the expenditure incurred for procuring the business and it is fixed by a general formula having reference to the parameters of the business and thus the payment of conveyance and additional conveyance allowance is nothing but a reimbursement of the actual expenditure incurred by the Development Officers on account of conveyance in relation to the performance of their duties and the said expenditure has a close nexus to the performance of the duties and development of the insurance business, inter-alia, by way of meeting several persons, to enroll new life insurance agents, to meet the customers for encouraging them to take insurance policies etc.. Therefore, in such circumstances, expenditures have to be incurred towards conveyance. Thus, in view of the above judgment, rendered by this Court in the case of Shiv Raj Bhatia (supra), which has been affirmed by the Hon’ble Apex Court (supra) the question of law is answered in favour of the assessee and against the revenue.

13. We also notice that similar view has already been expressed by this Court in the following cases:—

(a) CIT v. KC Gokhani [IT Appeal Nos. 36 & 37 of 2004, dated 25-1-2007]

(b) CIT v. PN Verma [2007] 292 ITR 259/[2008] 166 Taxman 351 (Raj.)

(c) JP Mathur v. CIT [2003] 133 Taxman 390 (Raj.)

14. Accordingly, the substantial question of law is answered against the appellant-revenue. Consequently, these appeals are hereby dismissed. No order as to costs.

[Citation : 366 ITR 319]