Skip to content


J.G. Mankad Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 18 of 1962
Judge
Reported in[1965]55ITR448(Guj)
ActsIncome Tax Act, 1922 - Sections 4(3), 7 and 7(2)
AppellantJ.G. Mankad
RespondentCommissioner of Income-tax, Gujarat
Appellant Advocate M.C. Nanavati, Adv.
Respondent Advocate J.M. Thakore, Adv. General
Cases ReferredRicketts v. Colquhoun. In
Excerpt:
.....that they do not. ..in the performance of his duties' in section 7(2) (iii) and clearly show that expenses incurred by an assessee for the purpose of travelling from his place of residence to his place of office and back cannot be said to be expenses wholly and necessarily incurred in the performance of the duties of his office, for when he is travelling he is not performing the duties of his office and the expenses are actually incurred by him partly before he enters upon the duties of his office and partly he has fulfilled them. these are two test which must be satisfied before any deduction can be claimed under section 7(2) (iii). the expenses incurred by the assessee in the present case for travelling between ahmedabad and bhavnagar do not in our opinion satisfy either test. the..........wednesday. during the year 1957-58, being the previous year for the assessment year 1958-59, the assessee incurred expenses amounting to rs. 1,434 for travelling between ahmedabad and bhavnagar. this amount of rs. 1,434 was claimed by the assessee either as an exemption under section 4(3) (vi) or as a deduction under section 7(2) (iii) in his assessment for the assessment year 1958-59. the claim was rejected by the revenue authorities and hence the present reference. 3. there were two grounds on which the assessee contented that the amount of rs. 1,434 representing the expenses incurred by the assessee for travelling between ahmedabad and bhavnagar was liable to be excluded from his assessable income. the first ground was founded on section 4(3) (vi) while for the second ground which.....
Judgment:

Bhagwati, J.

1. This is a reference under section 66(1) of the Income-tax Act at the instance of the assessee. The assessee is a chartered accountant and he resides and carries on his profession of a chartered accountant in Ahmedabad. On 25th May, 1951, the post of a part-time professor of accountancy in M. J. College of Commerce, Bhavnagar, was advertised in the Saurashtra Government Gazette and in response to the advertisement, the assessee applied for the post. The assessee was selected for the post and by a notification dated 12th July, 1951, the assessee was appointed to the post on the terms and conditions contained in the notification, which was in the following terms :

'Shri J. G. Mankad, B. Com., R. A., is appointed as part-time professor of accountancy, M. J. College of Commerce, Bhavnagar, on Rs. 400 per month (including travelling allowance and all other allowances) with effect from the date he takes over.'

2. Since the assessee was residing and practising in Ahmedabad, he had to undertake journeys from Ahmedabad to Bhavnagar for giving lectures to students in the college and he used to go once a every week so as to be in Bhavnagar on Tuesday and Wednesday. During the year 1957-58, being the previous year for the assessment year 1958-59, the assessee incurred expenses amounting to Rs. 1,434 for travelling between Ahmedabad and Bhavnagar. This amount of Rs. 1,434 was claimed by the assessee either as an exemption under section 4(3) (vi) or as a deduction under section 7(2) (iii) in his assessment for the assessment year 1958-59. The claim was rejected by the revenue authorities and hence the present reference.

3. There were two grounds on which the assessee contented that the amount of Rs. 1,434 representing the expenses incurred by the assessee for travelling between Ahmedabad and Bhavnagar was liable to be excluded from his assessable income. The first ground was founded on section 4(3) (vi) while for the second ground which was urged in the alternative was placed on section 7(2) (iii). In our opinion, neither ground can avail the assessee and the claim made by the assessee for the exclusion of the amount of Rs. 1,434 from his assessable income must fail.

4. We will first examine the ground based on section 4(3) (vi). Section 4(3) (vi) exempts from inclusion in the total income of an assessee any special allowance or benefit, not being in the nature of an entertainment allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of section 7(1), specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit, to the extent of which such expenses are actually incurred for the purpose. It is clear from a plain reading of section 4(3) (vi) that an assessee in order to claim the exemption granted by it must show that a special allowance or benefit, not being in nature of an entertainment allowance or other perquisite within the meaning of section 7(1), was specifically granted to meet expenses and that such expenses were wholly and necessarily incurred in the performance of the duties of an office or employment of profit, and if these conditions are shown to exist, the special allowance or benefit would be liable to be excluded from the assessable income to the extent to which such expenses are actually incurred for the purpose. Now it is difficult to see how the assessee in the present case can at all rely on section 4(3) (vi). No special allowance or benefit was specifically granted to the assessee to meet the expenses of travelling from Ahmedabad to Bhavnagar and back. Mr. M. C. Nanavati, learned advocate appearing on behalf of the assessee, drew our attention to the notification appointing the assessee to the post of part-time professor of accountancy and contended that the salary of Rs. 400 which was given to the assessee included travelling allowances and all other allowances and that there was, therefore, a special allowance in the shape of travelling allowances which was specifically granted to the assessee to meet the expenses of travelling between Ahmedabad and Bhavnagar. Mr. M. C. Nanavati urged that the advertisement inviting applications for the post required that the applicant must be practising chartered accountant and that the Government which appointed the assessee, therefore, knew that the assessee would be a practising chartered accountant. The Government also knew, argued Mr. M. C. Nanavati, that the assessee was practising as a chartered accountant in Ahmedabad and it was for that reason that it was stated that the salary of Rs. 400 would include travelling allowance and all other allowances. This contention of Mr. M. C. Nanavati has, in our opinion, no substance at all, for it is based on a misreading and misconstruction of the notification appointing the assessee to the post of part-time professor of accountancy. It is no doubt true that the notification appointing the assessee to the post stated that the salary would be Rs. 400 including travelling allowance and all other allowance, but all that this provision meant was that the salary was inclusive of all allowances including travelling allowance and that the assessee shall not be entitled to claim any separate travelling allowance or other allowance. No amount was indicated in the notification by way of travelling allowance or by way of any other allowance and by its very nature it could not be, for what was being given to the assessee was a salary of Rs. 400 per month and not any specific amount by way of travelling or other allowance. From this provision in the notification, it is difficult to conclude that any special allowance or benefit was granted to the assessee much less specifically granted to meet the expenses of travelling between Ahmedabad and Bhavnagar, and on this ground alone the assessee must fail in his attempt to invoke the aid of section 4(3) (vi).

5. But this is not the only difficulty in the way of the assessee. It is also not possible to say that the expenses which were incurred by the assessee for travelling between Ahmedabad and Bhavnagar were expenses wholly and necessarily incurred in the performance of the duties of the office or employment of profit held by the assessee. The assessee held the office of part-time professor of accountancy in M. J. College of Commerce at Bhavnagar and the duties of this office consisted of giving lectures to the students at the college. The duties commenced when the assessee started giving lectures to the students at the college and ended for the time being of the completion of the lectures. If the assessee had to incur expenses for travelling between Ahmedabad and Bhavnagar before he could begin to perform his duties as part-time professor of accountancy and having concluded those duties desired to return to his home in Ahmedabad. The expenses of travelling between Ahmedabad and Bhavnagar could not be said to be expenses incurred by the assessee in the course of performance of the duties of the office of part-time professor of accountancy. While travelling from Ahmedabad to Bhavnagar and back, the assessee was certainly not performing the duties of the office of part-time professor of accountancy. The expenses of travelling between Ahmedabad and Bhavnagar were incurred by the assessee partly before beginning to perform his duties as part-time professor of accountancy and partly after the conclusion of his duties as part-time professor of accountancy and such expenses could not, therefore, be said to have been incurred by him in the performance of the duties of the office of part-time professor of accountancy.

6. In this view which we take, we are supported by the high authority of the decision of the House of Lords in Ricketts v. Colquhoun. In this case the assessee was a barrister residing and practising in London, and he held the Recordership of Portsmouth. He incurred certain expenses for travelling between London and Portsmouth in order to attend the Quater Sessions. These expenses were claimed by him as a deduction from the emoluments of his office as Recorder relying on rule 9 of Schedule E of the English Act. This rule was in the following terms :

'If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed.'

7. The claim was disallowed by Mr. Justice Rowlatt and, on appeal being taken to the Court of Appeal, it was also disallowed by a majority of the Lord Justices constituting the Court of Appeal. The matter was carried further to the House of Lords and the House of Lords also disallowed the claim. Viscount Cave L. C. observed as follows :

'Having given the best consideration that I can to the question, I agree with the Commissioners and with the courts below in holding that they do not. In order that travelling expenses may be deductible under this rule from an assessment under Schedule E, they must be expenses which the holder of an office is necessarily obliged to incur, - that is to say, obliged by the very fact that he holds the office, and has to perform its duties, - and they must be incurred in, that is, in the course of, the performance of those duties. The expenses in question in this case do not appear to me to satisfy either test. They are incurred, not because the appellant holds the office of Recorder of Portsmouth, but because, living and practising away from Portsmouth, he must travel to that place before he can begin to perform his duties as Recorder, and, having concluded those duties, desires to return to his home. They are incurred, not in the course of performing those duties, but partly before he enters upon them, and partly after he has fulfilled them.'

8. These observations, no doubt made in relation to rule 9 of Schedule E of the English Act, considerably helps in arriving at a true meaning of the words 'wholly and necessarily incurred in the performance of duties of an office or employment of profit' in section 4(3) (vi) and also as we shall point out a little latter, the wholly words 'wholly, necessarily..... in the performance of his duties' in section 7(2) (iii) and clearly show that expenses incurred by an assessee for the purpose of travelling from his place of residence to his place of office and back cannot be said to be expenses wholly and necessarily incurred in the performance of the duties of his office, for when he is travelling he is not performing the duties of his office and the expenses are actually incurred by him partly before he enters upon the duties of his office and partly he has fulfilled them. In this view of the matter we are of the opinion that the expenses incurred by the assessee in the present case for travelling between Ahmedabad and Bhavnagar could not be said to be expenses wholly and necessarily incurred in the performance of the duties of the office of part-time professor of accountancy held by the assessee and section 4(3) (vi) cannot, therefore, be successfully invoked by the assessee in support of his claim for exemption.

9. The next ground relied upon by the assessee was based on section 7(2) (iii). We may point out that in so far as any office or employment of profit may be such that its income is assessable under section 7 under the head 'salary', section 7(2) (iii) is a counterpart of section 4(3) (vi). Where a special allowance is specifically granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit, such allowance, such allowance, to the extent to which it is actually spent, is covered by section 4(3) (vi). If on the other hand no special allowance is granted but the assessee is required by the conditions of his service to meet such expenses out of his remuneration, the sum so expended is deductible from his assessable income under section 7(2) (iii). But in both cases the expenses must be expenses which are wholly and necessarily incurred in the performance of the duties of the office. Of course in section 7(2) (iii) there is an additional requirement introduced by the word 'exclusively', but need not trouble us, for quite irrespective of the question whether this requirement is intended to add anything to what is already covered by the words used or it is introduced merely with a view to heighten the effect of the words used, it is clear that the expenses in order to merit deduction under section 7(2) (iii) must be expenses of which it can be said at least that they are wholly and necessarily incurred in the performance of the duties of the office. The expenses must also be expenses which the assessee is required by the conditions of his service to incur out of his remuneration. These are two test which must be satisfied before any deduction can be claimed under section 7(2) (iii). The expenses incurred by the assessee in the present case for travelling between Ahmedabad and Bhavnagar do not in our opinion satisfy either test. The first test is obviously not satisfied, because, as we said above while dealing with the ground based on section 4(3) (vi), the expenses of travelling between Ahmedabad and Bhavnagar could not be said to be expenses incurred by the assessee wholly and necessarily in the performance of the duties of the office of part-time professor of accountancy held by the assessee, for they were incurred partly before the assessee commenced to perform such duties and partly after he concluded them. The second test is also not satisfied because it could not be said that the assessee was obliged by the conditions of his service to incur the expenses of travelling between Ahmedabad and Bhavnagar. The expense of travelling between Ahmedabad and Bhavnagar were incurred by the assessee not because the assessee held the office of part-time professor of accountancy but because he lived and practised his profession in Ahmedabad which was a matter of his own choice. The assessee was not obliged to incur the expenses of travelling between Ahmedabad and Bhavnagar by the very fact that he held the office of part-time professor of accountancy and had to perform his duties. If the assessee had shifted to Bhavnagar, he would have had to incur these expenses and it could not, therefore, be said that these expenses were expenses which the assessee was obliged to incur by the conditions of his service. The claim of the assessee to have the amount of Rs. 1,434 deducted under section 7(2) (iii) must therefore fail.

10. Our answer to the question referred to us will, therefore, be in the negative. The assessee will pay the costs of the reference to the Commissioner.

11. Question answered in the negative.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //