Per Shri Prakash Narain, Accountant Member - The assessee is a sitting judge of the Honble High Court of Allahabad. The accounting year for the year under appeal was 1-4-1977 to 31-3-1978. Up to 16-11-1977 he was a practicing advocate of the Court. He was elevated to the Bench on 17-11-1977. During the year under appeal, therefore, there was income from profession as an advocate and salary as a judge, besides some income from interest.
2. Before the ITO, the assessee claimed that the salary received by him as a judge was not taxable under the Income-tax Act, 1961 (the Act). His plea was, however, not accepted by the ITO. He had received a salary of Rs. 12,133. The allowed deduction of Rs. 1,000 from this amount under section 16(i) of the Act. He, thus, brought to tax only the balance of Rs. 11,133.
3. The assessee appealed to the Commissioner (Appeals) the first contention before the latter was that the salary received by the assessee as a judge of the High Court was not taxable under the Act. This plea was not accepted. His second contention before the Commissioner (Appeals) was that the ITO was not legally correct in allowing only Rs. 1,000 under section 16(i). The claim of the assessee was that he was entitled to the full allowance as might be permissible under section 16(i)(b).
4. The Commissioner (Appeals) analysed the facts of the case. He found that the assessee was in receipt of the conveyance allowance of Rs. 300 per month under section 22B of the High Court Judges (Conditions of Service) Act, 1954, and, therefore, the deduction under section 16(i) had been limited to Rs. 1,000 by the ITO. He was of the view that since the ITO had not brought this conveyance allowance to tax in the assessment of the assessee, the presumption was that it had been granted to the assessee to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties of his office falling under section 10(14) of the Act. Further, following the letter F. No. 200/135/79-IT (A-1), dated 4-7-1981 (1981) 7 Taxman 35, addressed by the CBDT to FICCI, he held that the assessee was entitled to full deduction permissible under section 16(i) and that such a deduction could not be limited to Rs. 1,000. In the case of the assessee, it worked out to Rs. 2,213. The commissioner (Appeals) directed that the assessee should be allowed deduction for this amount instead of Rs. 1,000 allowed by the ITO.
5. The department is now appeal before us. Section 16(i) reads as under :
'The income chargeable under the head Salaries shall be computed after making the following deductions, namely :-
(i) in respect of expenditure incidental to the employment of the assessee, a sum calculated on the basis provided hereunder, namely :
Where the salary derived from such employment does not exceed Rs. 10,000
20 per cent of such salary;
Where the salary derived from such employment exceeds Rs. 10,000
Rs. 2,000 plus 10 percent of the amount by which such salary exceeds Rs.10,000
Rs. 3,500, whichever is less :
(i) where the assessee is in receipt of a conveyance allowance from his employer; or
(ii) where any motor-car, motor cycle, scooter or other moped is provided to the assessee by his employer for use by the assessee, otherwise than wholly and exclusively in the performance of his duties; or
(iii) where one or more motor-cars owned or hired by the employer of the assessee and the assessee is allowed the use of such motor-car or all or any such motor-cars, otherwise than wholly and exclusively in the performance of his duties,
the deduction under this clause shall not exceed one thousand rupees;'
The learned departmental representative, Shri R. K. Upadhyay, submitted before us that the section was very clear that if assessee was in receipt of a conveyance allowance from his employer, then deduction had to be limited to Rs. 1,000 only irrespective of the fact whether that allowance was or was not taxable and whether it was allowed to the assessee for his personal purpose or in the performance of his duties as Judge. On behalf of the assessee, it was contended by the learned counsel for the assessee, Shri V. B. Upadhyay, that clause, (i) of the proviso to section 16(i) had to be read in conjunction with clauses (ii) and (iii) of the proviso. According to him, if this was done, then the only conclusion that could be drawn was that the conveyance allowance contemplated in clause (i) was the one that granted to an assessee otherwise than wholly and exclusively in the performance of this duties. His further contention was that since the conveyance allowance granted to a judge related wholly and exclusively in the performance of his duties it was not open to the ITO to limit the standard deduction to Rs. 1,000 only.
6. However, both the parties were helpful to us bringing to our notice an an instruction of the CBDT which has facilitated our job. We will like to quote it full as under :
'Instruction No. 1088 : XXIII/1/48 - Deduction of tax at source from salaries of High Court Judges - Exemption under section 10(14) of the Income-tax Act, 1961 in respect of conveyance allowance paid to High Court Judges :
Reference is invited to Circular No. 196 [F. No. 275/47/76-IT (J), dated 31-3-1976].
The department has received a reference from the High Court Judges regarding the applicability of the above circular in respect of the conveyance allowance paid to the High Court Judges under section 22B of the High Court Judges (Conditions of Service) Amendment Act. Under this provision every Judge is entitled to a conveyance allowance of Rs. 300 per month subject to the maintenance of motor-car by him.
2. It has been represented that the condition laid down in para 3 of the above Circular requiring the employee to furnish a certificate that the conveyance allowance is only a reimbursement of expenses laid out wholly, necessarily or exclusively for the performance of the duties of an office should be dispensed with.
3. The Board have considered these representations and having regard to the amount of conveyance allowance granted to the judge and the expenditure that is normally incurred in the running of a motor-car are of the view that the amount would fall within the purview of section 10(14) of the Income-tax Act, 1961 and the ITO need not be too meticulous to enquire whether conveyance expenses to the extent of the allowance have actually been incurred. The Board is further of the view that since the Judges draw their own bills there would be no necessity of asking the High Court judges to furnish a separate certificate before the Income-tax Officer that the allowance is a reimbursement of the expenditure laid out to meet expenses wholly, necessarily or exclusively incurred in the performance of duties of an office.
4. The Circular No. 196, referred to above, would stand modified to this extent. [F. NO. 200/71/76-IT (A-I)], dated 12-8-1977, from CBDT.'
7. A reading of the above instruction clearly goes to establish that the conveyance allowance paid to a judge falls within the purview of section 10(14). The ITOs were also instructed not to be too meticulous to enquire whether conveyance expenses to the extent of the allowance had actually been incurred. The furnishing of a separate certificate in this regard was also dispensed with. Once the conveyance allowance is treated as falling within section 10(14), it amounts to reimbursement of expenses wholly, necessarily and exclusively incurred in the performance of the duties of the office of a Judge and does not form part of his total income (see circular No. 196, dated 31-3-1976,  109 ITR 117. In view of the clear language of the Boards instruction, the question of applying the explanation to section 10(14) also does not arise.
8. We will now quote below the Boards letter dated 4-7-1981, addressed to FICCI, already referred to above :
'Grant of standard deduction under section 16(i) of the Income tax Act Clarification regarding
If the employee is in receipt of an allowance which partakes the character of a conveyance allowance, the standard deduction should be restricted to Rs. 1,000, whatever be the nomenclature given to the allowance. Conveyance allowance is to be distinguished from the reimbursement of the actual expenses as and when incurred in the performance of duties. Standard deduction would not be restricted to Rs. 1,000 in case of reimbursement of expenses. However, where a claim is made that a certain payment is reimbursement of expenses incurred in the performance of duties, the claim would have to be proved before the assessing authorities. It may be pointed out that full standard deduction is available from the assessment year 1982-83 even where conveyance allowance is available.
Letter No. F. No. 208/135/79-IT (A-1), dated 4-7-1981 addressed to FICCI by CBDT.'
The above letter clearly states that standard deduction should not be restricted to Rs. 1,000 in case of reimbursement of expenses. Since conveyance allowance is held to be reimbursement of expenses, the assessee will be entitled to the full standard deduction of Rs. 2,213 as rightly held by the Commissioner (Appeals).
9. Normally the above discussion would have been sufficient to dispose of the present departmental appeal. However, some controversy was raised before us on behalf of the department regarding the binding nature of the circulates an instructions issued by the CBDT. Since the learned departmental representative was serious about it, we will like to deal with it also to put to the controversy.
10. The issue regarding the binding nature of the circulars had at first arisen before the Honble Supreme Court in the case of Navnit Lal C. Javeri v. K. K. Sen, AAC : 56ITR198(SC) . The Court observed as under :
'... It is clear that a circular of the kind which was issued by the Board would be binding on all offices and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that is was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transaction of loans, and the idea was not to affect such transaction and not to bring them within the mischief of the new provision ...' (p. 203)
The Allahabad High Court also had occasion to consider this aspect of the matter in Bela Singh Daulat Singh v. CIT : 62ITR250(All) . In this case, the Court held that the circular was not a law and the Tribunal or the High Court was not bound to take its judicial notice. These observation were, however, clarified by the Bombay High Court in Tata Iron & Steel Co Ltd. v. N. C. Upadhyaya : 96ITR1(Bom) in the following words :
'... Mr. Joshi invited our attention to a judgement of the Allahabad High Court in the case of Bela Singh Daulat Singh v. CIT : 62ITR250(All) , where the said Court observed that circulars were binding on the Income-tax Officers but not on the Courts. In that case the Court did not give effect to the circular because it had not been made a part of the case. We might mention that the judgment of the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen. AAC : 56ITR198(SC) was not cited before the Allahabad High Court and was not considered by it.' (pp. 16-17)
In the meantime, the matter again came up for consideration before the Honble Supreme Court in the case of Ellerman Lines Ltd. v. CIT : 82ITR913(SC) . The Court quoted with approved their view in the case of Navnit Lal C. Javeri (supra). The Court also observed that the direction given in the circular, considered in the case of Navnit Lal C. Javeri (supra) clearly deviated from the provision of the Act, yet it was held that the circular was binding on the ITO. The above two cases of the Supreme Court, in the cases of Navnit Lal C. Javeri (supra) and Ellerman Lines Ltd. (supra), were also noticed by the Honble Calcutta High Court in the case of CIT v. Wilh. Wilhelmsen : 115ITR10(Cal) .
11. The learned departmental representative, however, referred to the decision of the Supreme Court in Gestetner Duplicators (P.) Ltd. v. CIT : 117ITR1(SC) . In this case, a circular of the Board was relied on by the counsel for the revenue to show that commission did not partake the character of salary. The court observed that the Boards view or instructions could not detract from the legal position arising on proper construction of the expression salary which, according to the Court, also included commission paid by the assessee to its salesman. It will be pertinent to mention here that the circular under consideration of the Supreme Court was against the view canvassed by the assessee. Obviously, therefore, the revenue could not take advantage of it and the court could also not say that it was binding on the income-tax authorities. An assessee could not be deprived of its right through a circular issued by the Board which he was clearly entitled to under the express provision of the Act. On the other hand, if the Board granted some concession to the assessee through a circular or an instruction, it was binding on the income-tax authorities. This is clear from the observation of the Supreme Court itself in the case of Ellereman Lines Ltd. (Supra) to the effect that the directions given in the circular under consideration of the Court in Navnit Lal C. Javeris case (supra) clearly deviated from the provision of the Act, yet the court had held that the circular was binding on the ITO. This was also view of the Bombay High Court in Tata Iron & Steel Co. Ltd. (supra) which held :
'. . . While so holding we must, however, strike a note of caution that the binding nature of circulars issued by the Central Boards of Revenue must be confined to tax laws and that also for the purpose of giving administrative relief to the taxpayer and not for the purpose of imposing a burden on him. . .' (p. 17)
The Court also observed that a circular, which was binding on the ITOs could also be enforced by the Courts.
12. From the above discussion, it will be clear that if a circular or instruction of the Boards gives some administrative relief to the taxpayer, it is binding on the income-tax authorities and it could also be enforced by the courts. However, at the same time, if a circular or instruction imposes a burden on the taxpayer, it loses its binding nature. In the present case, the instruction and the letter, issued by the Board, have allowed administrative relief to the Judges of High Courts. They are, therefore, binding on the income-tax authorities and we will be perfectly within our jurisdiction in enforcing them.
13. In the result, the appeal is dismissed.