MADHAVRAO J. SCINDIA VS COMMISSIONER OF INCOME-TAX, 2002 PTD-BOMBAY-HIGH-COURT-INDIA 2070 (1999)

(a) Income‑tax‑‑‑

‑‑‑‑Charge of tax‑‑‑Dividend from companies in Ceylon‑‑‑Gross dividend is chargeable to tax and not net amount after deducting tax at source and cost of foreign exchange entitlement certificate.

(b) Income‑tax‑‑‑

‑‑‑‑Exemption‑‑‑Special allowance or benefit‑‑‑Daily allowance‑‑‑Not a travel allowance ‑‑‑Assessee received daily allowance for performing duties of his office as director‑‑‑Exemption for daily allowance cannot be allowed under Expln. to S.10(14)‑‑‑Indian Income Tax Act, 1961, S.10(14), Expln.

Held, (i) that the gross dividend declared by the companies in Ceylon was chargeable to tax and not the net amount after deducting the tax at source and‑the cost of foreign exchange entitlement certificate.

Mrs. Meherbai N. Sethna v. CIT (1994) 209 ITR 453 (Bom.) fol.

(ii) That the head office of the company was situated at Bombay and the assessee was ordinarily a resident of Gwalior and as such he was coming from Gwalior for performing duties of his office as Director at Bombay. Therefore, he could not claim exemption under the Explanation to section 10(14) of the Income Tax Act, 1961, in respect of allowance received by him for performing his duties as Director in office at Bombay.

Ashok Kotangale instructed by Shobha Jagtiani for the Assessee.

B.M. Chatterjee for the Commissioner.

JUDGMENT

S.H. KAPADIA, J.‑‑‑At the instance of the assessee, the following two questions of law have been referred to this Court for opinion under section 256(1) of the Income Tax Act, 1961, in respect of the assessment year 1973‑74:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the gross dividend declared by the companies in Cylon was chargeable to tax and not the net amount after deducting the tax at source and the cost of foreign exchange entitlement certificate?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the travel allowance received by the applicant from Scandia Investment (Pvt.) Ltd. was not exempt in terms of section 10(14) of the Income Tax Act, 1961?"

As far as Question No. 1 is concerned both learned counsel for the parties state that the controversy involved in this question is squarely covered by the decision of this Court in Mrs. Meherbai N. Sethna v. CIT (1994) 209 ITR 453. Accordingly, Question No.1 is answered in the affirmative, i.e., in favour of the Revenue and against the assessee.

As regards Question No. 2 reproduced hereinabove, we mention at the very outset that on going through the order passed by the authorities below, we feel that this question pertains to daily allowance received by the assessee. In the circumstances, Question No.2 should be read as referring to daily allowance and not the travel allowance. In the present matter, the Tribunal has observed that the head office of Scandia Investment Private Limited, is situated at Bombay and the assessee is ordinarily a resident of Gwalior, and as such he was coming from Gwalior for performing duties of his office as Director at Bombay. In view of the Explanation to section 10(14), the assessee in this case cannot claim exemption in respect of allowance received by him for performing his duties as Director in office at Bombay. In the circumstances, the Tribunal was right in rejecting the assessee's claim for exemption in terms of section 10(14) of the Income Tax Act, 1961. Accordingly, Question No. 2 is answered in the affirmative, i.e., in favour of the Revenue and against the assessee.

Reference stands disposed of accordingly with no order as to costs.

M.B.A./810/FCOrder accordingly.