1. The assessee has been a Captain in Ratnakar Shipping Company Ltd. On account of devaluation of Indian rupee in June 1966, the employees on the ship going into foreign ports were getting less money in foreign currency due to devaluation. The employees' union made representation.
It appears ultimately the Indian National Shipowners' Association representing the Indian shipowners, negotiated an agreement with the unions for devaluation compensation to be paid to both the officers and crew. This was to be paid only for the period, the vessel was away from the Indian shores, i.e., it was payable as from the day the vessel sailed from the last Indian port up to the time the vessel returned to the first Indian port. The letter dated 8-7-1982 of the Maritime Union of India, addressed to the assessee, reads as under : We would refer to your enquiry regarding devaluation compensation which was paid to the floating staff officers by Indian Shipping Companies. The relevant facts about this allowance are as under : The rupee was devalued in June 1966 vis-a-vis the hard currencies with the result the floating staff officers and crew on our ships calling foreign ports found it difficult to meet their expenses at those ports. This was due to their wage structure being in Indian rupees and they were getting less , money in foreign currencies abroad due to devaluation. This matter was taken up by this union on behalf of the officers. As the demands were fully justified, the Indian National Shipowners' Association, representing the Indian Shipowners, negotiated an agreement with both the unions for devaluation compensation to be paid to both the officers and crew.
This was to be paid only for the period the vessel was away from the Indian shores, i.e., it was payable as from the day the vessel sailed from the last Indian port up to the time the vessel returned to the first Indian port. As far as the officers are concerned, the devaluation compensation was agreed to be paid to them with effect from 6-6-1966 which was subsequently increased as from 1-1-1975. The relevant data in this regard is shown in the attached annexure. This allowance ceased to be payable to the officers as from 1-7-1977.
In view of the above agreement, the assessee was paid a sum of Rs. 2,469 as devaluation allowance during this year. The ITO assessed the same as salary. On appeal, the AAC held that the devaluation allowance of Rs. 2,469 received by the assessee was in the nature of reimbursement of expenses and not income. Thus, he deleted the sum of Rs. 2,469. The present appeal has been filed against this order.
2. The learned departmental representative strongly urged that the sum of Rs. 2,469 received as develuation allowance was taxable. It has been paid to the assessee by virtue of this employment, it is not an expenditure incurred for the purposes of the services on duty in the course of his employment. It is on account of devaluation of the Indian rupee. The assessee has been paid as he was getting lesser money in the foreign currency. The departmental representative urged that the AAC was not justified in deleting the sum of Rs. 2,469.
3. The learned counsel for the assessee strongly urged that what has been paid as devaluation allowance is only reimbursement of the expenses incurred by the assessee on account of devaluation. It cannot be treated as salary, it is not a perquisite. The devaluation compensation paid to the assessee is exempt from tax. He supported the orders of the AAC.4. We have considered the rival submissions. The devaluation compensation has been paid on account of devaluation of Indian rupee as the rupee value was less in foreign currency. This devaluation allowance was paid for the period when the vessels were away from the Indian shores. The question for consideration is whether this sum of Rs. 2,469 paid as devaluation is taxable. In our view, the devaluation allowance has not been paid for meeting the expenses incurred by the assessee in the performance of his duties. It has been paid to meet the extra expenditure for himself and family on account of the lesser rupee value in foreign currency due to devaluation. The payment of devaluation allowance was for his benefit but not for meeting the expenses incurred in the performance of the duties. In our view, the amount received by the assessee was a part of the salary.
5. In Corry v. Robinson  18 TC 411 (CA) in addition to salary the assessee received 'colonial allowance' to meet the increased cost of living abroad. In that case the point was whether 'colonial allowance' was liable to tax. It was held that the amount paid for extra cost of living was assessable. In Fergusson v. Noble  7 TC 176, the assessee was paid cash allowance for clothing. The question was whether this allowance was liable to tax. It was held that it was part of the salary and was assessable.
6. In CIT v. J. Jenkin Thomas  101 ITR 511 (Mad.), the question was whether the subsistence allowance paid to the foreign technicians was liable to tax. The Madras High Court held that the subsistence allowance paid to the foreign technicians who were working at Neyveli Lignite Corporation was taxable as the said payment was not for meeting the expenses incurred in the performance of duties, but was for their own benefit. The decision in the case of Owen v. Pook (Inspector of Taxes)  74 ITR 147 (HL), relied on by the assessee, has been considered in this case. In fact in that case the assessee incurred the expenses in the performance of duties of his office. Hence, it was held that the amount received for the travelling allowance cannot be treated as emoluments. That case has no application to the facts of the instant case.
7. In our view, the ratio laid down in the above cases squarely apply.
The devaluation allowance paid to the assessee was not for meeting the expenditure in the performance of duties by the assessee. It was an allowance paid for meeting the extra expenditure due to devaluation of Indian rupee. This is only to benefit him on account of lesser rupee value in foreign currency due to devaluation. It is similar to clothing allowance, colonial allowance and subsistence allowance in Fergusson's case (supra), Corry's case (supra) and J. Jenkin's Thomas case (supra), respectively, referred to above. The devaluation allowance is only part of the salary and it is taxable. It is not a perquisite as con tended by the learned counsel for the assessee. The decision of the Bombay High Court in CIT v. D.R. Phatak  99 ITR 14 is also distinguishable.
That case related to the compensatory (city) allowance. It was held that what was incurred by the assessee as compensatory (city) allowance was much less than what he ordinarily spends by reason of his posting at a particular place and it is exempt under Section 10(14) of the Income-tax Act, 1961 ('the Act'). In fact Section 10(14) is not applicable in the instant case as this is not a case of allowance special granted to meet expenses wholly and exclusively incurred in the performance of the duties of an office. In fact it is not the assessee's case also that he comes under Section 10(14). Hence, that decision has no application. Thus, on a careful consideration of the entire facts, we are of the view that the devaluation allowance of Rs. 2,469 received by the assessee is taxable. The AAC is wrong in holding that the sum of Rs. 2,469 is not taxable. We set aside the order of the AAC and restore the order of the ITO.