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Commissioner of Income-tax, Gujarat-iii Vs. Chandulal J. Patel - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 109 of 1975
Judge
Reported in[1981]127ITR786(Guj)
ActsIncome Tax Act, 1961 - Sections 10(14) and 16
AppellantCommissioner of Income-tax, Gujarat-iii
RespondentChandulal J. Patel
Appellant Advocate G.N. Desai, Adv.
Respondent Advocate J.P. Shah, Adv.
Excerpt:
.....16 of income tax act, 1961 - whether tribunal correct in entitling assessee to deduction on account of expenses on maintenance and use of car under sections 16 (v) and 10 (14) - as per section 16 (v) amount actually expended by assessee which as per conditions of his service required to spend in performance of duties allowable for deductions - in two assessment years amount claimed was of maintenance of conveyance actually spent by assessee - by conditions of service assessee required to spend such amount out of his remuneration only - amount claimed by way of deduction for maintenance of conveyance was rightly allowable as conditions of section 16 (v) satisfied. - - 16 are satisfied. 16 were satisfied in respect of each of these two assessment years......of expenses incurred on the maintenance and use of the car under section 16(v) of the act for the assessment year 1968-69 and under section 16(v) or under section 10(14) of the act for the assessment year 1969-70 ?' 2. the facts leading to this reference are as follows : the assessment years under consideration are the assessment years 1968-69 and 1969-70. the assessee is an individual and at the relevant time he was an employee of calico mills and was provided with a car by his employer for the two year under reference. during the course of the assessment for the assessment year 1968-69, apart from the provision of car by his employer, no allowance in the nature of conveyance allowance was provided by the employer, whereas, for the assessment year 1969-70, besides providing him with a.....
Judgment:

Divan, C.J.

1. In this case, at the instance of the revenue, the following question has been referred to us for our opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was entitled to the deduction on account of expenses incurred on the maintenance and use of the car under section 16(v) of the Act for the assessment year 1968-69 and under section 16(v) or under section 10(14) of the Act for the assessment year 1969-70 ?'

2. The facts leading to this reference are as follows :

The assessment years under consideration are the assessment years 1968-69 and 1969-70. The assessee is an individual and at the relevant time he was an employee of Calico Mills and was provided with a car by his employer for the two year under reference. During the course of the assessment for the assessment year 1968-69, apart from the provision of car by his employer, no allowance in the nature of conveyance allowance was provided by the employer, whereas, for the assessment year 1969-70, besides providing him with a car for his use, the employer-company also paid to the assessee an amount of conveyance allowance of Rs. 2,400. Against the income chargeable under the head 'Salaries' at Rs. 46,356 for the assessment year 1969-70 inclusive of the perquisite value of the car in each year and the conveyance allowance for the assessment year 1969-70, the assessee claimed deduction on account of expenses incurred in the maintenance and use of the car for the purpose of conveyance at Rs. 1,586 for the assessment year 1968-69 and Rs. 1,594 for the assessment year 1969-70. The amount which he claimed represented three-fourths of the total expenditure incurred by him in the maintenance of the car in the respective years and one-fourth of the total expenses was treated by the assessee himself as meant for personal use. The ITO rejected the claim of the assessee for deduction of the expenses claimed by him as incurred wholly, necessarily and exclusively for the purpose of his duties on the ground that the deduction of expenditure incurred on the maintenance of conveyance has been specifically provided for under s. 16(iv) of the Act which requires as the condition precedent the ownership of the vehicle or conveyance by the assessee and as in this case, admittedly, the assessee was not the owner of the car in question which he was using, he was not entitled to the deduction under s. 16(iv) of the Act. The ITO also negatived the assessee's claim for deduction under s. 16(v) on the ground that this residual clause for allowance of any expenditure incurred by an employee wholly, necessarily and exclusively in the performance of his duties expressly bars a deduction of expenditure on maintenance of conveyance.

3. The assessee preferred an appeal against the rejection of the claim regarding maintenance of the car to the AAC and the AAC accepted the contention of the assessee and allowed the claim following his order for the earlier assessment years 1962-63 to 1967-68. On appeal by the revenue to the Tribunal, the assessee relied on the order passed for assessment years 1962-63 to 1967-68 in the case of the Tribunal in another case relating to another assessee for the assessment year 1962-63 involving a similar claim. Ultimately, the Tribunal found that the question of expenses having been incurred by the assessee, by the condition of his service wholly, necessarily and exclusively in the performance of his duties was not at all in dispute. The Tribunal also rejected the contention of the revenue that the assessee had himself considered one-fourth of the total expenses as laid out for his personal use which, according to the department, showed that the expenses could not be said to be wholly, necessarily and exclusively in the performance of his duty by the assessee. Ultimately, it was held that the claim for deduction fell under s. 16(v) of the I.T. Act, 1961. In the alternative, so far as the assessment year 1969-70 was concerned, the Tribunal came to the conclusion that the claim for deduction would in any way fall under s. 10(14) of the Act, but the deduction under s. 10(14) for the assessment year 1969-70 was in the alternative to the deduction under s. 16(v) in case the case of the assessee did not fall under s. 16(v) of the Act.

4. At the relevant time, that is, in the assessment years 1968-69 and 1969-70, the provisions of s. 16 as it then stood were as follows :

'The income chargeable under the head `salaries' shall be computed after making the following deductions, namely :-

(i) any amount not exceeding five hundred rupees, expended by the assessee on the purchase of books and other publications necessary for the purpose of his duties;

(ii) in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer,

(a) in the case of an assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less; and

(b) in the case of any other assessee who is in receipt of such entertainment allowance and has been continuously in receipt of such entertainment allowance regularly from his present employer from a date before April 1, 1955, the amount of such entertainment allowance regularly received by the assessee from his present employer in any previous year ending before the April 1, 1955, or a sum equal to one-fifty of his salary (exclusive of any allowance, benefit or other perquisite) or seven thousand five hundred rupees, whichever is the least :

(iii) any amount paid by the assessee in respect of taxes on professions, trades, callings or employments levied under any State or Provincial Act :

(iv) where the assessee is not in receipt of a conveyance allowance, whether as such or as part of his salary, and owns a conveyance which is used for the purposes of his employment, such sum as the Income-tax Officer may estimate in respect of such use as representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear;

(v) any amount actually expended by the assessee, not being an amount expended on the purchase of books or other publications, or on entertainment or on the maintenance of a conveyance, which, by the conditions of his service, he is required to spend out of his remuneration wholly, necessarily and exclusively in the performance of his duties.'

There was a change in clause (iv) with effect from April 1, 1968, but for the purposes of this judgment the main requirements were, 'where the assessee is not in receipt of a conveyance allowance, whether as such or as part of his salary, and owns a conveyance which is used for the purposes of his employment, a sum representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear, calculated in respect of each calendar month or part thereof for which the conveyance has been so used during the previous year, on the basis provided hereunder.' The rest of clause (iv) is not material for the purpose of this judgment.

5. It is thus clear that in order that the case for deduction for maintenance of the car may fall under clause (iv) as it stood at the relevant time, one of the requirements was that the car in question should be owned by the assessee who was being assessed under the head 'Salaries'. The ITO and the department were, therefore, right when they held that the case for deduction of maintenance allowance claimed by the assessee in the instant case would not fall under the specific provisions of clause (iv) of s. 16 for either of the two assessment years.

6. However, the question is whether the case would fall under s. 16(v) of the Act. Section 16 itself provides for deductions under various heads and under clause (v), what has been provided for are three specific types of expenditures mentioned as not being available for deduction because of the wording of clause (v) of s. 16. Examining the scheme of s. 16 as a whole and considering all the provision together, it is obvious that what has been taken out of the operation of clause (v) are the specific instances covered by cls. (i) and (iv) of s. 16, as it stood at the relevant time. It is true that there is no reference to cls. (i), (ii) and (iv) when the instance of expenditures not available for deduction ar set out in clause (v) of s. 16 but when one examines the relevant phraseology of clause (v) of s. 16, namely, 'not being an amount expended on the purchase of books or other publication, or on entertainment or on the maintenance of a conveyance', the words are, in our opinion, referable to the specific types of expenses which are dealt with as expenditure available for deduction under the three cls. (i), (ii) and (iv). Clause (i), as can be seen from the provisions of clause (i) set out hereinabove, refers to the amount expended by an assessee on the purchase of books and other publications, though there are other condition for eligibility for deduction under clause (i). Similarly, clause (ii) deals with a case of allowance in the nature of entertainment allowance but the deductibility under this head depends upon the specific conditions set out in clause (ii). Similarly, clause (iv) deals with expenditure for maintenance of a conveyance but there are other conditions laid down in clause (iv) before the expenditure incurred by an assessee for maintenance of a conveyance can be available for deduction under clause (iv). By using a sort of short-hand, what the Legislature has taken out of the operation of clause (v) are the specific types of expenditure covered by cls. (i), (ii) and (iv) of s. 16. It is, therefore, clear that if the claim for deduction in respect of maintenance of a conveyance does not fall within the terms of clause (iv), it may not by available for deduction as expenditure for the maintenance of a conveyance falling within s. 16(iv). However, if that amount is actually expended by the assessee and he was, by the conditions of his service, required to spend that amount out of his remuneration as wholly, necessarily and exclusively in the performance of his duties, then the expenditure which falls out and is not covered by s. 16(iv) may still amount to expenditure falling within s. 16(v). That is the only way the section can be interpreted so as to harmonise all the different clauses and so as to provide for a complete logical picture of deductions available to an assessee when he is being assessed under the head 'Salaries' so far as the provisions of s. 16 are concerned. The clause is in the nature of a residuary clause and, therefore, those cases which are not specifically falling within the three cls. (i), (ii) and (iv) of s. 16 would fall within clause (v) if the other conditions required by clause (v) of s. 16 are satisfied. By interpreting this clause (v) in this manner, no violence is done to the language and the full purpose of the residuary clause is being served. Instead of referring specifically to cls. (i), (ii) and (iv), what the Legislature has done is to use a short-hand for referring to the type of expenditure which are deductible under cls. (i), (ii) and (iv) of s. 16 when the Legislature used the words 'not being an amount expended on the purchase of books or other publications, or on entertainment or on the maintenance of a conveyance' in clause (v) of s. 16.

7. On the facts found by the Tribunal, it is clear that in each of these two years the amount claimed by was of maintenance of a conveyance was actually spent by the assessee and that by the conditions of his service, the assessee was required to spend these amounts out of his remuneration wholly, necessarily and exclusively in the performance of his duties. In view of this finding of fact, it is clear that in each of these two years under consideration, the amount claimed for the respective year by way of deduction for maintenance of conveyance was rightly allowable because all the conditions of clause (v) of s. 16 were satisfied in respect of each of these two assessment years.

8. Since this is the conclusion that we have arrived at, it is not necessary for us to go into the provisions of s. 10(14) so far as the assessment year 1969-70 is concerned because, as pointed out earlier, in the course of that year an amount of Rs. 2,400 was paid to the assessee by his employer as conveyance allowance over and above the use of the car which was placed at his disposal. Since we have arrived at the conclusion that even for the assessment year 1969-70 the case of the assessee would fall under s. 16(v) so far as expenses incurred by him for the maintenance of his car were concerned, it is not necessary to go into the question of s. 10(14).

9. Under these circumstances, the Tribunal was right in coming to the conclusion that the assessee was entitled to deduction on account of expenses incurred on the maintenance and use of the car under s. 16(v) of the Act for the assessment year 1968-69 and also for the assessment year 1969-70. We answer the question accordingly, in the affirmative, at least so far as the provisions of s. 16(v) for each of the two years are concerned. The Commissioner will pay the costs of this reference to the assessee.


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