Db Income Tax Appeal v. Shri Madan Gopal Bansal

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR J U D G M E N T (1)DB Income Tax Appeal No.895/2008The Commissioner of Income Tax, Alwar Vs. Shri Madan Gopal Bansal (2)DB Income Tax Appeal No.144/2008The Commissioner of Income Tax, Alwar Vs. Shri Madan Gopal Bansal (3)DB Income Tax Appeal No.765/2008The Commissioner of Income Tax, Alwar Vs. Shri Madan Gopal Bansal DATE OF ORDER : 14/02/2014 PRESENTHON'BLE MR.JUSTICE AJAY RASTOGIHON'BLE MR.JUSTICE J.K. RANKA Mrs. Parinitoo Jain, for the appellant-revenueMr. Achintya Kaushik, for the respondent-assessee *** BY THE COURT (PER HON.RANKA,J.): 1.These Income Tax Appeals u/Sec. 260A of the IncomeTax Act, (for short, IT Act') are directed against the order of theIncome Tax Appellate Tribunal, Jaipur (for short, 'ITAT') in ITANos. 32, 33, 31/JP/2004 dt.31/74/2006 for the AssessmentYear 1998-99 to 2000-01. 2.Since the controversy involved is identical, these IncomeTax Appeals are being decided by this common order.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 circumstancesof the case and in law the Tribunal was justifiedin upholding the order of the CIT(A) by followingthe decision of the jurisdictional High Courtreported in 260 ITR 41 inspite of the fact that thedecision deals with the issue of TDS by LIC onconveyance allowance/additional conveyanceallowance and nowhere it has been held that theconveyance allowance/additional conveyanceallowance will be fully exempt from tax? (2)Whether under the facts and circumstancesof the case and in law the Tribunal was justifiedin upholding the exemption granted by the CIT(A)u/s. 10(14) on the basis of the certificate of theemployer declaring a part of conveyanceallowance/additional conveyance allowancegiven to the assessee in respect of the expensesincurred wholly, necessarily and exclusively forofficial duties?” -Question of Law framed in ITA 765/2008: “(i)Whether under the facts and circumstancesof the case and in law the Tribunal was justifiedin upholding the order of the CIT(A) by followingthe decision of the jurisdictional High Courtreported in 260 ITR 41 inspite of the fact that thedecision deals with the issue of TDS by LIC onconveyance allowance/additional conveyanceallowance and nowhere it has been held that theconveyance allowance/additional conveyanceallowance will be fully exempt from tax? 4.The brief facts, as emerging on the face of record, are thatthe respondent-assessee, is a Development Officer of LifeInsurance Corporation of India (for short, 'LIC'). Therespondent-assessee received an amount of Rs.2,60,306/- forthe Assessment Year 1998-99; Rs.1,56,057/- for theAssessment Year 1999-2000 and Rs.2,00,000/- for theAssessment Year 2000-01 towards conveyance allowance andadditional conveyance allowance from the LIC. Though thesame was part of the salary certificate but the contention of therespondent-assessee was that the said amount has beenincurred in development of LIC business to receive the premiumon account of various policies and the said amount is entirelyexempt u/s 10 (14) of the IT Act. The Assessing Officer (forshort, 'AO'), in view of the judgment of this Court (SingleBench) in the case of Shiv Raj Bhatia Vs. LIC of India (CWP-700/2000, decided on 17/04/2000), show caused therespondent-assessee as to why the said amount, which hasbeen claimed as exempt, be not added as income as therespondent-assessee was unable to prove that the said amountwas incurred exclusively for performance of duties of theemployment. However, the respondent-assessee contendedthat the very nature of the amount granted by the employernamely; LIC is for the purposes of performance of duties of theemployment and since the Development Officer is required to go from place to place to canvass the business, therefore, itwas incurred exclusively in the performance of the duties of theemployment. However, the AO, in view of the judgment of thisCourt, referred to supra, added the said amounts as income ofthe respondent-assessee in all the assessment years. 5.The matter travelled in appeal before the Commissioner ofIncome Tax (Appeals) ( for short, 'CIT(A)'), for all the threeyears who allowed the claim of the respondent-assessee as bythen, the judgment of Single Bench had been reversed by thejudgment of Division Bench of this Court in the case of Shiv RajBhatia (supra) which is reported in (2003) 260 ITR 41 andtherefore, in view of the judgment of this Court, the CIT(A)allowed the claim of the respondent-assessee. The CIT(A) wasalso of the view that in view of the fact that the certificate wasplaced on record, which was issued by the employer namely;LIC that the respondent-assessee had incurred the said amountwholly, necessarily and exclusively for the performance of theduties, therefore, in the light of Sec. 10(14) of the IT Act readwith Rule 2BB of the IT Rules, allowed such claim. 6.Dissatisfied with the order of the CIT(A), the matter wascarried in appeal by the appellant-revenue before the ITAT whoalso did not interfere with the findings of the CIT(A) anddismissed all the three appeals of the appellant-revenue. Hencethese appeals. 7.Smt. Parinitoo Jain, ld. counsel for the appellant-revenue, submitted that the respondent-assessee was unable to prove byacceptable evidence on record that a huge amount ofRs.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 theAssessment Year 2000-01 was incurred by the respondent-assessee exclusively for the purposes of duty and neitherevidence was led as to how the said amount was incurred nordetails as to how the said amount was incurred, was placed onrecord. She contended that if the respondent-assessee hadvisited various places, then certainly details must have beenkept by him and ought to have been placed on record so as tojustify the claim but since no evidence was placed, therefore,the said amount was rightly added by the AO and accordinglysubmitted that the AO had correctly added the said amount. 8.Per-contra, Mr. Achintya Kaushik, ld. counsel for therespondent-assessee, submitted that the AO has placedreliance on the judgment of the ld. Single Judge of this Court inCivil Writ Petition, referred to supra) namely; Shiv Raj Bhatiabut when the said judgment itself stood reversed, both theappellate authorities had correctly decided the matter in favourof the respondent-assessee. He further contended that theappellant-revenue had also challenged the said judgment byway of filing Special Leave to Appeal, however, the Hon'bleApex Court dismissed the same vide order dt. 09/02/2007 inCivil Appeal No(s) 25058-25059/2004. He contended that when the judgment of this Court has been affirmed by the Hon'bleApex Court, then the instant appeals, even otherwise, deserveto be dismissed. 9.We have considered the arguments advanced by counselfor the parties. 10.For the present purpose, it would be fruitful to quote Sec.10(14) of the IT Act, which provides ad-infra:- the judgment of this Court has been affirmed by the Hon'bleApex Court, then the instant appeals, even otherwise, deserveto be dismissed. 9.We have considered the arguments advanced by counselfor 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 themeaning of clause (2) of section 17, specificallygranted to meet expenses wholly, necessarily andexclusively incurred in the performance of theduties of an office or employment of profit, as maybe prescribed, to the extent to which suchexpenses are actually incurred for that purpose;(ii) any such allowance granted to the assesseeeither to meet his personal expenses at the placewhere the duties of his office or employment ofprofit are ordinarily performed by him or at the placewhere he ordinarily resides, or to compensate himfor the increased cost of living, as may beprescribed and to the extent as may be prescribed :Provided that nothing in sub-clause (ii) shall applyto any allowance in the nature of personalallowance granted to the assessee to remunerateor compensate him for performing duties of aspecial nature relating to his office or employmentunless such allowance is related to the place of hisposting or residence; duties of a Development Officer are provided under the relevantrules, which are extracted as follows : "Duties of Development Officers and obligations.-- A. (i) To develop and increase the production oflife insurance business in a planned way as far asmay be practicable in the area that may beallotted to work from time to time through theagents placed under his supervision by thecorporation and in consonance with the corporateobjectives of the corporation. (ii) To guide, supervise and direct the activities ofthe agents placed under his supervision by thecorporation. (iii) To introduce suitable persons to thecorporation for appointment as new agents. (iv) To act generally in such a way as to activiseexisting agents and motivate new agents so as todevelop a stable agency force. (v) To render all such services to policyholdersconducive to better policy servicing. (vi) To carry out the investigation of claims, revival of lapsed policies and liaison work in connectionwith S. S. S. business. (vii) To perform such other duties as may beentrusted to him." It is, thus, clear that the Development Officers ofthe Life Insurance Corporation are full-timeemployees of the corporation whose main task isto develop the business in life insurance. They arerequired to discharge the duties and obligationswhich, inter alia, include development of lifeinsurance business of the corporation. The very first duty enumerated for the Development Officeris to develop and increase the production of newinsurance business in the planned way, as far aspracticable in the area that may be allotted to himfrom time to time. The other duties and obligationsinclude the duty to supervise and to guide theactivities of the agents placed under thesupervision of the Development Officers; to recruitnew agents so as to develop agency force; and toact generally in such a way as to activate existingagents and to motivate new agents and to rendercertain services to policyholders. The officer isalso required to perform such duties that areentrusted and assigned to him from time to time.” first duty enumerated for the Development Officeris to develop and increase the production of newinsurance business in the planned way, as far aspracticable in the area that may be allotted to himfrom time to time. The other duties and obligationsinclude the duty to supervise and to guide theactivities of the agents placed under thesupervision of the Development Officers; to recruitnew agents so as to develop agency force; and toact generally in such a way as to activate existingagents and to motivate new agents and to rendercertain services to policyholders. The officer isalso required to perform such duties that areentrusted and assigned to him from time to time.” 12.The conveyance allowance and additional conveyanceallowance are paid to the Development Officers for meetingactual expenditure incurred by them in discharge of their fieldduties and thus necessarily and exclusively for meeting of suchexpenditure, the allowance is thus being exempt as per thenorms set out by the LIC. It appears that the LIC has worked outconveyance and additional conveyance allowance to theDevelopment Officers considering the expenditure incurred forprocuring the business and it is fixed by a general formulahaving reference to the parameters of the business and thus thepayment of conveyance and additional conveyance allowance isnothing but a reimbursement of the actual expenditure incurredby the Development Officers on account of conveyance inrelation to the performance of their duties and the said expenditure has a close nexus to the performance of the dutiesand development of the insurance business, inter-alia, by way ofmeeting several persons, to enroll new life insurance agents, tomeet the customers for encouraging them to take insurancepolicies etc.. Therefore, in such circumstances, expenditureshave to be incurred towards conveyance. Thus, in view of theabove judgment, rendered by this Court in the case of Shiv RajBhatia (supra), which has been affirmed by the Hon'ble ApexCourt (supra) the question of law is answered in favour of theassessee and against the revenue. 13.We also notice that similar view has already beenexpressed by this Court in the following cases:- (a)CIT Vs. KC Gokhani: (2001) 208 CTR 216 (Raj.) (b)CIT Vs. PN Verma (2007) 292 ITR 259 (Raj.) (c)JP Mathur Vs. CIT (2003) 133 Taxman 390 (Raj.) 14.Accordingly, the substantial question of law is answered against the appellant-revenue. Consequently, these appealsare hereby dismissed. No order as to costs. [J.K. RANKA],J. ,J. Raghu/p.9/ Certificate:All corrections made in the judgment/order have been incorporated in thejudgment/order being e-mailed.Raghu, Sr. PA.