COMMISSIONER OF INCOME-TAX VS VANDER C.C. MALEN AND OTHERS
1999 PTD 89
[225 I T R 41 ]
[Andhra Pradesh High Court (India)]
Before M. N. Rao and T. N. C. Rangarajan, JJ
COMMISSIONER OF INCOME-TAX
Versus
VANDER C.C. MALEN and others
R.C.No.53 of 1988, decided on 13/11/1996.
Income-tax---
----Exemption---Special allowance or benefit granted to employee---Dutch nationals serving on ship berthed in Indian port---Board and lodging expenses met directly by employer---Not perquisite---Benefit specifically granted to meet expenses wholly, necessarily and exclusively incurred in performance of duties---Exempt---Indian Income Tax Act, 1961, Ss.10(14) & 17(2)(iv).
The respondent-assessees were Dutch nationals, deputed to work in India on the ship named "Jagsevak". During their stay in India, their employer met their boarding and lodging expenses directly, at Rs.200 per day. The Income-tax Officer, for the assessment year 1976-77, treated the value of the boarding and lodging in respect of each of the assessees as a perquisite, which should be included in the taxable income of each of them. The Appellate Assistant Commissioner, on appeal, deleted the sums in question from the income of the assessees, and the Tribunal, on further appeal, confirmed this. On a reference:
Held, (i) that it could not be predicated whether the assessees would have incurred the same expenditure if the employer had not provided them the boarding and lodging facility and whether the assessees had no obligation to incur that expenditure in the particular manner as part of their duties qua employees. The amount in question, therefore, did not amount to a perquisite within the meaning of section 17(2)(iv) of the Income Tax Act, 1961.
(ii) That the expenditure incurred by the employer, although not a special allowance, was undoubtedly, a benefit "specifically granted to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties" relatable to the employment of the assessees, since they were foreigners serving on a ship berthed in one of the Indian ports and it became the duty of the employer to provide boarding and lodging facilities to them. The expenditure in question, therefore, qualified for exemption under clause (14) of section 10 of the Income Tax Act.
S.R. Ashok for the Commissioner.
Nemo for the Assessee.
JUDGMENT
M. N. RAO, J.---In respect of the assessment year 1976-77, at the instance of this Court, the following question was referred by the Income-tax Appellate Tribunal for the opinion of this Court:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the boarding and lodging expenses met by the employer were granted to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties and the same was not taxable under the provisions of section 10(14) of the Income Tax Act, 1961?"
The above question comprehends three assessees, Dutch nationals, deputed to work in India at the relevant time on the ship named "Jagsevak". During their stay in India, their employer had met their boarding and lodging expenses directly as indicated below:
Mr. Vander C.C. Malen Rs.200 per day x 96 = Rs.19,200
2. Mr. L.E. Martens???? Rs.200 per day x 53 = Rs.10,600
3. Mr. Stock Leender?? Rs.200 per day x 67 = Rs.13,400."
The Income-tax Officer, with reference to the assessment year 1976-77, treated the value of the boarding and lodging in respect of each of the assessee as perquisites, which should be included in the taxable income of each of them and accordingly-he passed assessment orders bringing to tax the above said amounts. On appeal, the Assistant Commissioner of Income-tax (Appeals) based upon the orders passed by him earlier in respect of the very same assessees for the earlier assessment year held that the amounts paid by the employer directly for the facility of boarding and lodging provided to the assessees should not be treated as income of the assessees and on that view, he deleted the above amounts from the income of the assessees. The Income?tax Appellate Tribunal, in the second appeal, affirmed the view of the Appellate Assistant Commissioner and dismissed the appeals following its earlier view. At the instance of the Revenue, this Court directed the Tribunal to refer the above question for the opinion of this Court.
On the last occasion when the matter came up for hearing, we adjourned the case with a view, to enabling standing counsel for the Revenue to secure information as to what happened in the R.Cs. pertaining to the earlier, assessment years, but learned counsel could not secure the information. The registry also could not place information before us. We are, therefore, contained to dispose of the matter with reference to the facts on record and the arguments advanced by learned counsel for the Revenue. None appears for the assessees.
"Perquisite"- is defined by section 7(2) of the Income Tax Act inclusively, inter alia, as meaning:
"(2)(iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee."
The case of the Department is that since the facility enjoyed by the assessees is a perquisite within the meanings of section 17(2)(iv), the same is not liable to be exempted under section 10(14), which reads as follows:
"(14) 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 officer 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."
Section 17(2)(iv) refers to the obligation of the assessee which has been met by the employer and but for that obligation, the assessee would have incurred the expenditure himself in the same measure. We cannot predicate whether the three assessees in question would have incurred the same expenditure if the employer had not provided them the boarding and lodging facility and whether the assessees had no obligation to incur that expenditure in the particular manner as part of their duties qua employees. The amounts in question, therefore, in our view, do not amount to perquisites.
What is not a perquisite may fall under section 10(14) provided it answers the description of a special allowance or benefit given by the employer to the employee "to meet the expenditure wholly, necessarily and exclusively" in the performance of the duties. The expenditure incurred by the employer, although was not a special allowance, it, undoubtedly, is a benefit "specifically granted to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties" relatable to the employment of the assessees since, they being foreigners and serving on a ship berthed in one of the Indian ports it became the duty of the employer to provide boarding and lodging facilities to them. The expenditure in question, therefore, qualifies for exemption under clause (14) of section 10 of the -Income Tax Act. The Tribunal was right in excluding the amount in question from the total of the assessees.
The question is, therefore, answered in the affirmative, in favour of the assessees and against the Revenue. No costs.
M. B. A./1649/FC?????????????????????????????????????????????????????????????????????????????? Referred answered.