M. Ranga Reddy, Hyderabad, Hyderabad v. ITO, Ward-9(1), Hyderabad, Hyderabad

ITA 601/HYD/2017 | 2005-2006
Pronouncement Date: 29-11-2017 | Result: Allowed

Appeal Details

RSA Number 60122514 RSA 2017
Assessee PAN ADYPM1495Q
Bench Hyderabad
Appeal Number ITA 601/HYD/2017
Duration Of Justice 7 month(s) 26 day(s)
Appellant M. Ranga Reddy, Hyderabad, Hyderabad
Respondent ITO, Ward-9(1), Hyderabad, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 29-11-2017
Last Hearing Date 16-11-2017
First Hearing Date 16-11-2017
Assessment Year 2005-2006
Appeal Filed On 03-04-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC) HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER I.T.A. NO. 601/HYD/2017 ASSESSMENT YEAR: 2005-06 SHRI M. RANGA REDDY HYDERABAD [PAN: ADYPM1495Q] VS INCOME TAX OFFICER WARD-9(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL AR FOR REVENUE : SHRI K.J. RAO DR DATE OF HEARING : 16-11-2017 DATE OF PRONOUNCEMENT : 29-11-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-7 HYDERABAD DATED 18-03-2016 FOR THE AY. 2005-06. 2. CONDONATION: THE APPEAL WAS FILED WITH A DELAY OF 191 DAYS. THE DELAY WAS ATTRIBUTED TO THE COUNSEL WHO IT SEEMS MIS PLACED THE ORDER AND COULD NOT PREFER APPEAL IN TIME. AFFIDAV IT BY COUNSEL ADVOCATE SHRI MOHD. AFZAL WAS FILED IN SUPPORT. CONSI DERING THE AFFIDAVIT OF THE COUNSEL I HEREBY CONDONE THE DELAY AND ADMIT THE APPEAL. I.T.A. NO. 601/HYD/2017 :- 2 - : 3. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX. (APPEALS)-7 HYDERABAD IS AGAINST THE LAW WEIGHT OF EVIDENCE A ND PROBABILITIES OF CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 4 26 000/- WHICH WAS RECEIVED B Y WAY OF ALLOWANCES BY THE ASSESSEE AS A MEMBER OF LEGISLATIVE ASSEMBLY . 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE AGGREGATE ALLOWANCE OF RS.4 26 000/- WERE RECEIVED WITH A SPECIFIC PURPOSE AND INCURRED THE SAME FOR T HE PURPOSE IT WAS GRANTED THEREFORE NOT TAXABLE U/S 10(14) OF THE I T ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL IF IT IS CONSIDERED NECESSARY. 4. BRIEFLY STATED ASSESSEE IS AN INDIVIDUAL DERIVING SALARY INCOME FROM A P LEGISLATIVE ASSEMBLY AS MEMBER AND I S ENGAGED IN TRANSPORT BUSINESS AND ALSO HAS SHARE INCOME IN PARTN ERSHIP FIRMS. HE FILED HIS RETURN OF INCOME FOR THE AY. 200 5-06 ON 31-03- 2006 DECLARING TOTAL INCOME OF RS. 2 54 433/- AND AG RICULTURAL INCOME OF RS. 1 00 000/-. THE ASSESSING OFFICER (A O) COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT [ACT] BY TREATING THE INCOME FROM ALLOWANCES RECEIVED AS ML A AT RS. 4 26 000/- AND DETERMINED THE TOTAL INCOME AT RS. 6 80 430/-. 5. LD. CIT(A) ON APPEAL CONFIRMED THE SAME BY STATING AS UNDER: 4. THE ONLY ISSUE IN APPEAL IS REGARDING THE ADDIT ION OF RS.4.26 000/WHICH IS RECEIVED BY WAY OF ALLOWANCE B Y THE ASSESSEE AS A MEMBER OF LEGISLATIVE ASSEMBLY TAXED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HELD T HAT IN THE ABSENCE OF EMPLOYEE AND EMPLOYER RELATIONSHIP THE ASSESSEE IS ELIGIBLE ONLY FOR DEDUCTION U/S 10(17) WHICH WAS ALLOWED. THE ASSESSE E CLAIMS THAT HE IS ELIGIBLE FOR DEDUCTION U/S 10(14) AND WHOLE OF THE ALLOWANCE SHOULD IS EXEMPT. THE ASSESSEE RELIED ON THE DECISION OF HON' BLE ITAT IN CASE OF SHRI I.T.A. NO. 601/HYD/2017 :- 3 - : BIJJAM PARTHASARATHI REDDY BANAGANAPALLI KURNNOL DIST. VS ASST. COMMISSIONER OF INCOME TAX CIRCLE-I KURNOOL ITA N O.1158/HYD/06 ASST. YEAR 2001-02 &. ITA NO.1159/HYD/06 ASST. YEAR 2002- 03. AS THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE REGARDING IN CURRING OF EXPENDITURE WITH REGARD TO ALLOWANCES THE DECISION IN CASE OF SHRI. N. INDRASENA REDDY HYDERABAD VS THE INCOME-TAX OFFICE R WARD-9(1) HYDERABAD ITA NOS. 218 &. 219/HYD/2005 ASST. YEAR 2 000-01 & 2001- 02 IS APPLICABLE TO THE FACTS OF THE CASE. ACCORDIN GLY THE ADDITION MADE BY ASSESSING OFFICER IS CONFIRMED ARE THAT GROUND OF A PPEAL IS DISMISSED. 6. AT THE OUTSET BOTH THE PARTIES FAIRLY ADMITTED THAT SIMI LAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH IN ASSESSE ES OWN CASE FOR AY. 2006-07 WHEREIN THE ISSUE WAS DISCUSSED AN D DECIDED AS UNDER: 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. A.RS ARGUMEN T THAT THE ASSESSEE BEING MLA WAS PROVIDED WITH ALLOWANCES BY THE STATE LEGI SLATIVE ASSEMBLY AS REFERRED TO THE SALARY CERTIFICATE ISSUED BY THE LE GISLATURE SECRETARIAT DATED 30.10.2006 AT PAGE 55 OF THE PAPER BOOK WHERE THE CONSOLIDATED MONTHLY AMOUNT OF RS.40 000 WAS PAID INCLUDING SALARY OF RS .2500 PER MONTH. THESE ALLOWANCES ARE PAID TO MEMBERS FOR THEIR CONSTITUEN CY WORKS WHICH CONSISTS OF CONVEYANCE ALLOWANCE CONTINGENCY ALLOWANCE TELEPH ONE ALLOWANCE SECURITY CAR ALLOWANCE AND MEDICAL ALLOWANCE. GENERALLY AS A MEMBER OF LEGISLATIVE ASSEMBLY THE MEMBER INCURS EXPENDITURE AT VARIOUS TIMES IRRESPECTIVE OF PLACE AND MAINTAINING VOUCHERS AND BILLS IS A NON-REALIST IC CONSIDERING THE MOVEMENT AND TIME AND THERE IS NO DISPUTE OF INCURRING OF EX PENDITURE BY THE A.O. EXCEPT NOT PRODUCING THE EVIDENCE IN RESPECT OF CLAIM. THE ASSESSEE FILED LETTER DATED 24.12.2008 EXPLAINING THAT RS.4 80 000 WAS RECEIVED BY THE ASSESSEE AND TREATED AS RECEIPT IN THE CASH FLOW STATEMENT AND W ITHDRAWN. THE DIFFICULTY OF ASSESSEE-MLA WAS THAT HE COULD NOT OBTAIN BILLS WH ICH IS CONSIDERED MANDATORY BY THE A.O. IN THIS CONNECTION THE LD. A.R. DREW O UR ATTENTION TO PAGE 77 OF THE PAPER BOOK WHEREIN SIMILAR ISSUE WAS DISCUSSED (SHR I BIJJAM PARTHASARATHI REDDY VS. ACIT CIRCLE-1 KURNOOL) (SUPRA) BY THE C OORDINATE BENCH OF THE TRIBUNAL AND HELD AT PAGE-4 PARA-7 WHICH READ AS UN DER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. AS FOR THE CLAIM OF EXEMPTION IN RESPECT OF THE SAL ARY AND ALLOWANCES RECEIVED BY THE ASSESSEE IN HIS CAPACITY AS AN MLA WE FIND THA T THIS ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 31.1.2006 IN ITA NO. 218 AND 219/HYD/200S IN THE CASE OF N INDRASENA REDDY HYDERABAD VS. ITO A CO PY OF WHICH IS FILED BEFORE US. THE TRIBUNAL BY ITS ORDER DATED 31.1.2006 IN THAT C ASE AFTER DETAILED CONSIDERATION OF THE RELEVANT PROVISIONS OF THE ACT CONCLUDED VIDE PARA 6.1 THEREOF THAT IN THE CASE OF A MEMBER OF LEGISLATIVE ASSEMBLY OF THE STATE I.T.A. NO. 601/HYD/2017 :- 4 - : PROVISIONS OF BOTH S.10(14)(I) AND S.10( 17)(III) W ILL BE APPLICABLE. IN THE CASE OF CIT VS. MADDI SUDARSHANAM (174 ITR 659) HON'BLE ANDHRA PRADESH HIGH COURT HAS OBSERVED THAT SO AS TO BE ENTITLED TO THE BENEFIT O F EXEMPTION UNDER S.10( 14) IT IS ENOUGH IF A PERSON IS HOLDING AN OFFICE AND FOR THE PURPOSE OF PERFORMING THE DUTIES/ASSOCIATED WITH THAT OFFICE HE IS GRANTED A N ALLOWANCE OR BENEFIT SPECIFICALLY TO MEET THE EXPENSES. IN THE CASE BEFO RE US THE ASSESSING OFFICER HIMSELF HAS NOTED IN PARA 3 (F) OF THE ASSESSMENT O RDER THAT THE ASSESSEE WAS A HIGH PROFILE MLA AND A RENOWNED PERSON AND IN ORDER TO MAINTAIN DIGNITY STATUS AND LIFE STYLE OF A HIGH PROFILE MLA'S REPUTATION THE ASSESSEE SHOULD HAVE INCURRED AN AMOUNT OF RS.25 000 PER MONTH VIZ. RS.3 LAKHS P ER ANNUM. CONSIDERING TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ACCE PT THE CONTENTION OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH PERFORMANCE OF DUTIES OF HIS OFFICE AS MLA. 5.1. SIMILARLY THE ABOVE DECISION WAS CONSIDERED B Y THE TRIBUNAL IN THE CASE OF SHRI B. DURGA PRASAD EX.MLA VENKATAGIRI VS. ITO WARD-1 GUDUR NELLORE DISTRICT (ITA.NOS.826 TO 830/H/2007 DATED 28.09.201 2) AND RELIEF WAS GRANTED. THE MUMBAI BENCH OF ITAT IN THE CASE OF MADANLAL MO HANLAL NARANG VS. ACIT (2007) 104 ITD 190 (MUM.) EMPHASIZE ON THE ALLOWANC ES AND HAS OBSERVED AT PARA-7 AS UNDER: 7. THE EXPRESSION TO THE EXTENT TO WHICH SUCH EXPE NSES ARE ACTUALLY INCURRED AS FINDS PLACE IN SECTION 10(14)(I) IS NOT NEW TO THE I.T. ACT. IT WAS FIRST INTRODUCED W.E.F. 1ST APRIL 1955 IN SECTION 4(3)(VI) OF THE INDIAN I.T. ACT 1922 WHICH DEALT WITH THE EXEMPTION OF ALLOWANCE TO THE SALARIED EMP LOYEES. THIS AMENDMENT WAS MADE IN THE BACKDROP OF HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN THE CASE OF TEJAJI FRASARAM KHARAWALLA V. CIT (1948) 16 ITR 260 (BOM.) WHEREIN THEIR LORDSHIPS HAD HELD THAT EXEMPTION UNDER SECTION 4(3 )(VI) WAS AVAILABLE EVEN IF PORTION OF THE ALLOWANCE WAS NOT CONSUMED AND STOOD AS SURPLUS IN THE HANDS OF THE EMPLOYEES. SUBSEQUENTLY THOUGH THIS DECISION W AS REVERSED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. TEJAJI FRASARAM KHARAWALLA NOT BEFORE SECTION 4(3)(VI) WAS AMENDED W.E.F. 1 ST APRIL 1955 BY FINANCE ACT 1955 THIS AMENDMENT IT APPEARS RESULTED IN CONSIDERABLE APP REHENSION AMONGST THE SALARIED EMPLOYEES AS TO HOW CAN THEY BE EXPECTED T O MAINTAIN METICULOUS DETAILS AND EVIDENCE OF EXPENDITURE INCURRED BY THEM FOR TH E ACTUAL USAGE OF ALLOWANCE. TO ALLAY THESE APPREHENSIONS THE CBDT ON 1ST AUG. 1955 ISSUED A CIRCULAR WHICH IS REPRODUCED BELOW FOR READY REFERENCE: SPECIAL ALLOWANCE OR BENEFIT BEING REASONABLE AND NOT DISPROPORTIONATELY HIGH - NO DETAILS OF EXPENSES ACTUALLY INCURRED NEE D BE ASKED FOR THE PURPOSE OF GRANTING EXEMPTION UNDER SECTION 4(3)(VI ) OF 1922 ACT. THE EXEMPTION UNDER SECTION 4(3)(VI) IN RESPECT OF ANY SPECIAL ALLOWANCE OR BENEFIT WILL BE AVAILABLE FROM THE ASST.YR. 1955-56 ONLY TO THE EXTENT OF THE SANCTIONED AMOUNTS. GENERALLY SPEAKING WHERE THE SPECIFIC ALLOWANCE IS I.T.A. NO. 601/HYD/2017 :- 5 - : REASONABLE WITH REFERENCE TO THE NATURE OF THE DUTI ES PERFORMED BY THE ASSESSEE AND ARE NOT DISPROPORTIONATELY HIGH COMPAR ED TO THE SALARY RECEIVED BY HIM NO ATTEMPT WILL ORDINARILY BE MADE TO CALL FOR DETAILS OF THE EXPENSES ACTUALLY INCURRED BY HIM WITH A VIEW TO DI SENTITLING HIM TO SOME EXTENT FROM THE EXEMPTION. AN ENQUIRY WILL OF COUR SE BE JUSTIFIED AND WILL BE MADE IN CASES WHERE THE ALLOWANCES ARE PRIMA FAC IE UNREASONABLY HIGH. WE RESPECTFULLY FOLLOW THE COORDINATE BENCH DECISIO NS AND THE ISSUE IS SIMILAR IN THE PRESENT CASE. ACCORDINGLY WE DIRECT THE ASSESSI NG OFFICER TO DELETE THE ADDITION AND ALLOW THE GROUND. 7. RESPECTFULLY FOLLOWING THE SAME I HOLD THAT THE IM PUGNED ALLOWANCES ARE EXEMPT AND CONSEQUENTLY ALLOW THE GROU NDS OF APPEAL RAISED. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD DATED 29 TH NOVEMBER 2017 TNMM I.T.A. NO. 601/HYD/2017 :- 6 - : COPY TO : 1. SHRI M. RANGA REDDY C/O. MOHD. AFZAL ADVOATE 11-5-465 SHERSONS RESIDENCY FLAT NO. 402 CRIMIN AL COURT ROAD RED HILLS HYDERABAD. 2. THE INCOME TAX OFFICER WARD-9(1) HYDERABAD. 3. CIT (APPEALS)-7 HYDERABAD. 4. PR.CIT-7 HYDERABAD. 5. D.R. ITAT HYDERABAD. 6. GUARD FILE.