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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI. G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-5, Chennai in dt 23.12.2015 for the assessment year 2009-2010
ITA No.425/Mds/2016 :- 2 -: passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
2. The assessee has raised six grounds pertaining to claim of allowances paid by the employer and claimed exemption u/sec. 10(14) of the Act and the ld. Commissioner of Income Tax (Appeals) erred in upholding the order of Assessing Officer confirming the addition of allowance paid by the employer.
The Brief facts of the case the assessee is a salaried employee and 3rd Engineer in M/s. International Seaport Dredging Ltd and filed return of income for the assessment year 2009-2010 on 23.03.2009 admitting total income of �3,20,791/- and the return was processed u/s.143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s.143(2) of the Act was issued. In compliance to notice, ld. Authorised Representative of assessee appeared from time to time and produced information for verification. The ld. Assessing Officer on perusal of information found that assessee has admitted net income from salary �5,70,791/- and claimed exemption of allowance of �6,32,476/-. On perusal of form no.16 from M/s. International Seaport Dredging Ltd the gross salary is �12,03,267/- and the exemption u/s.10 of the Act limited to �15,000/- and there was wide difference of net salary offered by the assessee and form no.16 issued by the employer. The ld. Authorised
ITA No.425/Mds/2016 :- 3 -:
Representative filed letter dated 06.8.2011 and explained working strategy of assessee on ship and was paid the following allowances as per page 2 of the assessment order as under:-
‘’1.Regarding Victulaaing allowance he has stated as food expenses incurred in ship
Regarding Holiday Travel Allowance, he had stated that holiday travel allowance is nothing but the allowance paid for expenses incurred to join and leave ship to meet the ordinary daily charges incurred by an employee on account of absence from the normal place of duty.
3. Regarding Academic allowance he had stated that it is the allowance send to upgrade technical skill while discharging the duty on ship.
Regarding special allowance he had stated that it is allowance granted to an employee who is working in uncongenial, unnatural climate and the allowance are granted to employee who is working in transport system (ship) to meet his personal expenditures during his duty performed in the course of running of such transport from one place to another place.
Regarding uniform allowance, he had stated that the allowance is granted to purchase and maintenance of uniform for wear during performance of the duties.
6. Regarding medical allowance, he had stated that it was medical expense reimbursed by the employer while on duty’’.
The ld. Assessing Officer found that assessee could not substantiate with evidence of incurring such expenditure or spent for specific purpose. The contention of the assessee that expenditure was incurred and could not obtain bills and vouchers due to work place at different locations. The ld. Assessing Officer alleged extensively that the assessee has claimed
ITA No.425/Mds/2016 :- 4 -: exemption of allowances but fail to prove with bills and vouchers of third parties and disallowed �.6,07,876/- for want of evidence on incurring of expenditure and passed order u/s.143(3) dated 29.12.2011. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).
4. In the appellate proceedings, the ld. Authorised Representative of assessee argued grounds on the disallowances and substantiated with written submissions. The assessee is an employee and such allowance are provided as per terms and conditions entered due to nature of working conditions and there is a lapse on the part of the assessee is not collecting the bills and produce in assessment proceedings. The ld. Commissioner of Income Tax (Appeals) considered the submissions and the findings of the Assessing Officer and further observed in detail the provisions of Sec. 10(14) of the Act and relied on the findings of the Judicial High Court and Tribunal and concluded that assessee has failed to establish that the amount was incurred wholly, exclusively and necessarily for the purpose of performing of his duties and concurred with findings of the Assessing Officer and upheld the same. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal.
ITA No.425/Mds/2016 :- 5 -:
5. Before us, the ld. Authorised Representative of assessee reiterated the submissions and arguments made in the assessment and appellate proceedings and written submissions filed before Commissioner of Income Tax (Appeals). The ld. Authorised Representative substantiated the arguments that the assessee is a marine engineer and as per the service agreement receives certain allowances other than salary and same are exempted u/s.10(14) of the Act. The allowances are provided considering the conditions, in the present case assessee is a marine engineer on ship and away from the land for days and these allowances are exclusively to make good the working conditions of employee who is away from his family and land and the assessee mandatorly incurred expenditure to upgrade and maintain himself and failed to obtain bills for expenditure and Because of non-availability of evidence the expenditure should not be ignored and disallowed. The expenses incurred are paid by way of cash or debit or credit cards and obtaining valid vouchers from receiptants is of least importance and prays for deleting the addition and allow the appeal.
Contra, the ld. Departmental Representative relied on the orders of the lower authorities and opposed the grounds of the assessee.
ITA No.425/Mds/2016 :- 6 -:
We heard the rival submissions, perused the material on record, judicial decisions and written submissions. In the case of employees there is a contractual agreement with employer and reimbursement of expenses are fixed based on terms and conditions of the employment. The assessee is a marine engineer in M/s. International Seaport Dredging Ltd and provided allowances in addition to the basic salary such allowances are mandatorly for upbringing employees to be physically and mentally to be fit to conduct the duty with great responsibility. The ld. Assessing Officer has accepted and referred to the different type of allowances in his assessment order incurred by assessee and due to nonsatisfaction of claim for expenditure without any evidence the disallowance are considered in the assessment. The ld. Commissioner of Income Tax (Appeals) relied on the findings of the Assessing Officer and judicial decisions and provisions of Sec. 10(14) of the Act and of the opinion that allowances are to be utilized wholly and exclusively by the employee in conducting his duty and should be actually incurred for the purpose as per the provisions of Sec.10(14) as under:-
(1) 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.
(2) Any such allowance granted to the assessee either to meet his personal expenses at the place where the duties
ITA No.425/Mds/2016 :- 7 -: 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] The ld. Commissioner of Income Tax (Appeals) relied on the judicial decisions and concurred with the findings of Assessing Officer and found as per provisions of Sec. 10(14) it is the duty cast on the assessee that the expenses are actually incurred and to produce the supporting evidence of bills and vouchers. The ld. Assessing Officer has not disputed on the nature of allowance or any adverse claim of expenditure but non availability of supporting vouchers or bills. Considering the apparent facts, provisions of law and the conduct of the assessee in performance of duty, there is a presumption that assessee has incurred the expenditure in discharging the duties but the assessee could not support with any valid explanations for not filing the bills and vouchers. As per the provisions of Section 10(14) of the Act expenses are actually incurred for the purpose of employment and actual spent for the performance of duty. There is a lapse on the part of the assessee for not obtaining valid bills/vouchers for expenses which are to be submitted to employer or before Assessing Officer in assessment. We apply the benefit of doubt on the claim of ITA No.425/Mds/2016 :- 8 -: expenditure in favour of the assessee by restricting the disallowance by 50% of total allowance received by the assessee and direct the Assessing Officer to restrict the disallowance to 50% of �6,07,876/- and pass the order and the appeal of the assessee is partly allowed.
In the result, the appeal of the assessee in is partly allowed.
Order pronounced on Friday, the 6th day of May, 2016 at Chennai.