Sri T Trimurthulu., Kakinada v. The ITO, Ward-1., Kakinada

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.7 TO 11/VIZAG/2009 ASSESSMENT YEARS : 2000-01 TO 2004-05 SHRI N MOOLA REDDY RAMAVARAM ITO WARD-1 KAKINADA (APPELLANT) VS. (RESPONDENT) PAN NO.AENPN 6883 R ITA NOS.630 TO 634/VIZAG/2008 ASSESSMENT YEARS : 2000-01 TO 2004-05 T. TRIMURTHULU VENKATAYAPELAM ITO WARD-1 KAKINADA (APPELLANT) VS. (RESPONDENT) PAN NO.AMNPP 7000Q APPELLANT BY: SHRI C.R. HEMANTH KUMAR CA RESPONDENT BY: SHRI G.S.S. GOPINATH DR ORDER PER BENCH:- THESE APPEALS ARE PREFERRED BY THE ASSESSEES AGAI NST THE RESPECTIVE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YE AR 2000-01 TO 2004-05. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER. 2. THE FIRST COMMON ISSUE RELATES TO THE DISALLOWAN CE OF CERTAIN SPECIAL ALLOWANCES GIVEN TO THE ASSESSEES AS AN MLA. THIS ISSUE HAS BEEN EXAMINED BY US IN APPEAL NOS. 381 TO 385 OF 08 IN THE CASE M . VENKATA SUBBHAIAH PESARLANKA IN DETAIL IN WHICH WE HAVE TAKEN A VIEW THAT THE CONVEYANCE ALLOWANCE AND THE CLERICAL ALLOWANCE ARE TO BE ALLO WED TO BE EXEMPTED FROM TOTAL INCOME OF THE ASSESSEES U/S 10(14) OF THE ACT BUT SUBJECT TO RULE 6BB OF THE I.T. RULES. THE RELEVANT OBSERVATIONS OF THE TR IBUNALS ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 2 2. THE SOLE CONTROVERSY AROSE IN THESE APPEALS IS WITH REGARD TO THE TAXABILITY OF THE SALARY AND DIFFERENT ALLOWANC ES UNDER VARIOUS HEADS RECEIVED BY THE MLAS (MEMBER OF LEGISLATIVE A SSEMBLIES). THE FACTS AVAILABLE ON RECORD ARE THAT THE ASSESSEES HA VE RECEIVED THE SALARY AND CONSTITUENCY ALLOWANCE CONVEYANCE ALLOW ANCE TELEPHONE ALLOWANCE CLERICAL ALLOWANCE MEDICAL ALLOWANCE AN D CONTINGENCY ALLOWANCE. THE ASSESSING OFFICER TAXED THE SALARY AND OTHER ALLOWANCES EXCEPT THE DAILY ALLOWANCE OVER AND ABOV E RS.24 000/- IN ALL WHICH WERE EXCLUDED U/S 10(17) OF THE INCOME TA X ACT (HEREIN AFTER CALLED AS AN ACT) UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT ONCE THE INCOME UNDER THE HEAD SAL ARY AND OTHER ALLOWANCES ARE TO BE ASSESSED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES THE NECESSARY EXPENDITURES INCURRED IN EARNING THAT INCOME IS TO BE ALLOWED AND ONLY A NET PROFIT IS TO BE TAXED AND NOT THE ENTIRE RECEIPT. 3. THE CIT(A) EXAMINED THE ISSUE IN THE LIGHT OF VA RIOUS JUDGEMENTS BUT WAS NOT CONVINCED WITH THE CONTENTIO NS OF THE ASSESSEES AND HE CONFIRMED THE DISALLOWANCE AFTER H AVING OBSERVED THAT THE APPELLANT HAS FAILED TO ESTABLISH ANY NEXU S THAT SUCH EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF MAKING OF EARNING SUCH INCOME. 4. NOW THE ASSESSEE IS BEFORE US. DURING THE COURS E OF HEARING OF THE APPEAL THE LD. COUNSEL FOR THE ASSESSEE HAS IN VITED OUR ATTENTION TO THE FACT THAT AN MLA WHO IS ELECTED BY THE PUBLI C HAS GOT A BOUNDEN DUTY TO MOVE FROM PLACE TO PLACE IN HIS CONSTITUENC Y ENQUIRE THE DIFFICULTIES OF THE PEOPLE IN ORDER TO RECOMMEND TH E NECESSARY HELP OR BENEFITS TO BE DONE TO THE PUBLIC IN HIS CONSTITUEN CY TO THE GOVERNMENT. IN THIS PROCESS HE HAD TO INCUR LOT O F EXPENDITURE ON ACCOUNT OF MOVING FROM ONE PLACE TO ANOTHER AND ALS O SPEAKING WITH VARIOUS IMPORTANT VILLAGE HEADS GOVERNMENT OFFICER S IN HIS CONSTITUENCY. HE HAD TO INCUR TELEPHONE EXPENSES CONVEYANCE 3 EXPENSES AND ALSO IN ORDER TO MAKE CORRESPONDENCE W ITH GOVERNMENT OFFICERS IN HIGH POSITIONS THE MLA ALSO NEEDS A CL ERICAL ASSISTANCE FOR HIS WORK. IN VIEW OF THESE FACTS THAT THE ASSESSEE HAD TO NECESSARILY INCUR SO MUCH OF EXPENDITURE AND THE GOVERNMENT IS GRANTING VARIOUS ALLOWANCES TO MEET SUCH EXPENDITURE BY FIXING CERTA IN LIMITS. IT MEANS THAT GOVERNMENT WHILE GRANTING FIXED ALLOWANCES ITS ELF IS AWARE THAT IMMEDIATE EXPENDITURE THAT ONE HAS TO INCUR FOR THE SAID PURPOSES THAT WERE MENTIONED ABOVE. IN FACT IN MOST OF THE CASE S SUCH ALLOWANCES GRANTED BY THE GOVERNMENT ARE NOT SUFFICIENT TO MEE T THE SAID EXPENSES AND SOMETIMES OWN FUNDS BESIDES VARIOUS AL LOWANCES GRANTED BY THE GOVERNMENT TO BE UTILIZED TO KEEP UP THE REPUTATION AND FUTURE POSITION IN THE CONSTITUENCY OF AN MLA. IT MEANS THAT THE ASSESSEE HAD TO INCUR AND HAS INCURRED SO MUCH OF E XPENDITURE AND SUCH EXPENDITURE WAS BEING REIMBURSED IN THE FORM O F ALLOWANCE BY THE GOVERNMENT. 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT UNDER THE IDENTICAL CIRCUMSTANCES WHEN REIMBURSEMENT TOW ARDS MEDICAL EXPENDITURE TO AN MLA WAS BROUGHT TO TAX BY TREATIN G IT AS A PERQUISITE BY THE ASSESSING AUTHORITY THE HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. SHIVCHARAN MATHUR 13 DTR (RAJ) 64 H AS HELD THAT THE MLA HAVING BEEN ELECTED AND NOT EMPLOYED U/S 15 IS NOT ATTRACTED IN RESPECT OF REMUNERATION RECEIVED BY HIM AND AS A NE CESSARY COROLLARY APPLICABILITY OF SECTION 17(2) CLAUSE 4 IS ALSO RUL ED OUT IN RESPECT OF REIMBURSEMENT OF MEDICAL EXPENSES. IT WAS SUBMITTED THAT THE ENTIRE ALLOWANCES THAT WERE GRANTED TO THE ASSESSEES HAVE BEEN SPENT AND SINCE ONLY PROFIT OR SURPLUS IS TO BE BROUGHT TO TA X UNDER THE HEAD INCOME FROM BUSINESS/PROFIT OR UNDER THE HEAD INCOM E FROM OTHER SOURCES THE SURPLUS OUT OF THE ALLOWANCES ONLY SHO ULD BE TAXED. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED A RELIANCE UPON THE VARIOUS ORDERS PASSED BY THE TRIBUNAL ON T HE IMPUGNED ISSUE AND ALSO OF THE HIGH COURT WHICH ARE AS UNDER: 4 1) SHRI BIJJAM PARTHASARATHI REDDY VS. ACIT ITA NO.115 8/HYD/06 & 1159/HYD/06 DECIDED ON 28.2.2008. 2) SHRI N. INDRASENA REDDY VS. ITO ITA NO.218 & 219/H YD/05 DECIDED ON 31.1.2006. 3) SHRI P. KISTA REDDY VS. DCIT ITA NO.377 & 378/HYD/2 008 DECIDED ON 23.7.2009. 4) SHRI Y. YELLA REDDY VS. ITO 754 TO 758/HYD/2008 DEC IDED ON 4.7.2008. 5) SHRI R. RAVINDRANATH REDDY VS. ITO 1136 TO 1139/HYD /2008 DECIDED ON 23.7.2009 6) JASWANT SINGH VS. ITO ITA NO.731/INDORE/2002 96 TTJ 660 7) CIT VS. MADDI SUDARSANAM 174 ITR 659 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT IN THE AFORESAID ORDERS THE TRIBUNAL HAS REPEATEDLY HELD FOLLOWING THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MADDI SUDARSANAM (SUPRA) THAT THE MLA HAS TO NECESSARILY MAINTAIN HIS OFFICE AND ONLY FOR THAT PURPOSE THE ALLOWANCE HAS BEEN G RANTED TO HIM FOR THE DAY TO DAY EXPENSES THAT WOULD CERTAINLY OCCUR FOR ANY LEGISLATURE. IT WAS ACCORDINGLY HELD THAT HE IS ENTITLED TO BENEF IT OF EXEMPTION U/S 10(14) OF THE I.T. ACT. 8. THE LD. D.R. ON THE OTHER HAND HAS EMPHATICALLY ARGUED THAT ONLY THOSE ALLOWANCE GIVEN TO THE MLAS ARE EXEMPTED WHICH ARE SPECIFICALLY MENTIONED IN SECTION 10(17) OF THE ACT . ACCORDING TO THE SECTION 10(17) OF THE ACT DAILY ALLOWANCES RECEIVE D BY THE MLAS ARE TO BE EXEMPTED FROM THE INCOME OF THE ASSESSEES. LATE R ON THE AMENDMENT WAS MADE BY THE FINANCE ACT 2006 W.E.F. 1.4.2007 ACCORDING TO WHICH CONSTITUENCY ALLOWANCE RECEIVED BY THE MLAS WAS ALSO EXEMPTED. MEANING THEREBY THE LEGISLATURE IS QUITE CONSCIOUS ABOUT THE ALLOWANCES WITH REGARD TO WHICH EXEMPTION IS TO BE GRANTED. INITIALLY THEY ALLOWED THE EXEMPTION OF THE DAILY A LLOWANCES AND OTHER ALLOWANCES NOT EXCEEDING RS.2000/- P.M. TO THE MLAS BUT AFTER RECEIVING REPRESENTATION FROM VARIOUS STATE GOVERNM ENTS THE PARLIAMENT HAS MADE THE NECESSARY AMENDMENTS BY INS ERTING CLAUSE 3 W.E.F. 1.4.2007 AND GRANTED THE EXEMPTION OF THE CO NSTITUENCY ALLOWANCE GIVEN TO THE MLAS LIKE THE MPS. WHEN SPE CIFIC PROVISION IS THERE TO GRANT THE EXEMPTION OF PARTICULAR TYPE OF ALLOWANCES THE 5 GENERAL PROVISION OF SECTION 10(14) CANNOT BE INVOK ED. ACCORDINGLY HE PLACED HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND VARIOUS ORDERS/ JUDGEMENTS REFERRED TO BY THE ASSESSEES. WE HAVE CAREFULLY EXAMINED TH E VARIOUS ORDERS OF THE TRIBUNAL PASSED ON THIS SUBJECT AND WE FIND THA T DIFFERENT BENCHES OF THE TRIBUNAL HAVE HELD IN ONE VOICE THAT THE SAL ARY GIVEN TO THE MLAS CANNOT BE ASSESSED UNDER THE HEAD SALARY. IT IS RATHER AN INCOME FROM OTHER SOURCES. THE ISSUE REGARDING NAT URE OF RECEIPT WAS EXAMINED BY THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHARAN MATHUR (SUPRA) AND HAS CATEGORICALLY HEL D THAT THE FUNDAMENTAL REQUIREMENT FOR ATTRACTING SECTION 15 I S THAT THERE SHOULD BE A RELATIONSHIP OF EMPLOYER AND EMPLOYEE WHETHER IN EXISTENCE OR IN THE PAST. OBVIOUSLY AND NECESSARILY IN THE VERY NA TURE OF THINGS FOR BRINGING ABOUT SUCH RELATIONSHIP THE ASSESSEE BEI NG THE PERSON CONCERNED EMPLOYED BY THE EMPLOYER AND HAS A NECES SARY COROLLARY THE EMPLOYER SHOULD HAVE RIGHT TO DISCHARGE OR TERM INATE THE EMPLOYEE. THE BASIC INGREDIENT IS MISSING IN THE C ASE OF MLAS AND MPS AS THEY ARE NOT EMPLOYED BY ANYBODY RATHER THEY ARE ELECTED BY THE PUBLIC FORMING THEIR ELECTION CONSTITUENCIES AN D IN CONSEQUENT UPON SUCH ELECTION THAT THEY ACQUIRE CONSTITUENCY P OSITION AND DISCHARGE CONSTITUENCY FUNCTIONS AND OBLIGATIONS. MAY BE THAT THEY RECEIVE REMUNERATIONS AFTER SWEARING IN BUT THAT CA NNOT BE SAID TO BE THE SALARY WITHIN THE MEANING OF SECTION 15. THERE FORE THE REMUNERATIONS RECEIVED BY THE MLAS & MPS CANNOT BE TAXED UNDER THE HEAD INCOME FROM SALARY BUT CAN ONLY BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE THERE IS NO CONTROV ERSY IN THIS REGARD AND FOLLOWING THE AFORESAID ORDERS WE HOLD THAT IN THE INSTANT CASE THE REVENUE HAS RIGHTLY TREATED THE REMUNERATION RE CEIVED BY THE ASSESSEE MLAS UNDER THE HEAD INCOME FROM OTHER SOU RCES. 10. WITH REGARD TO ANOTHER ISSUE WHETHER THE PROVIS IONS OF SECTION 10(14) OF THE ACT CAN BE INVOKED FOR OTHER ALLOWANC ES GIVEN TO THE 6 MLAS IN THE INSTANT CASE WE FIND THAT THE VARIOUS BENCHES OF THE TRIBUNALS IN THE AFORESAID CASES HAVE CATEGORICALLY HELD IN ONE STREAM THAT ASSESSEE IS ENTITLED TO THE BENEFIT OF EXEMPTI ON U/S 10(14) OF THE I.T. ACT FOLLOWING THE JUDGEMENTS OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. MADDI SUDARSANAM (SUPRA) IN WHICH I T HAS BEEN HELD THAT SECTION 10(14) PROVIDES THAT ANY SPECIAL ALLOW ANCE OR BENEFIT SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY NECES SARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF THE DUTI ES OF AN OFFICE OR EMPLOYMENT OF PROFIT TO THE EXTENT TO WHICH SUCH E XPENSES ARE ACTUALLY INCURRED FOR THAT PURPOSE WOULD BE EXEMPT . THEIR LORDSHIP FURTHER IN THAT CASE HELD THAT THE EXTENT OF EXPENS ES NOT ACTUALLY INCURRED FOR THE PURPOSE WOULD NOT EARN EXEMPTION. THE LANGUAGE OF SECTION 10(14) WOULD CLEARLY SHOW THAT ANY SPECIAL ALLOWANCE OR BENEFIT SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY NECES SARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF DUTIES O F AN OFFICE OR AN EMPLOYMENT OF PROFIT WOULD BE EXEMPT. THE SECTIO N 10(14) DOES NOT USE THE EXPRESSION OFFICE OF PROFIT. THE EXPRESS ION USED IS OFFICE OR EMPLOYMENT OF PROFIT. THE EXPRESSION OF PROFIT QUALIFIES ONLY EMPLOYMENT AND DOES NOT QUALIFY OFFICE. IT IS E NOUGH IF A PERSON IS HOLDING AN OFFICE AND FOR THE PURPOSE OF PERFORMING THE DUTIES ASSOCIATED WITH HIS OFFICE IS GRANTED AN ALLOWANCE OR BENEFIT SPECIFICALLY TO MEET THE EXPENSES. IN THE CASE OF AN MLA HE MA Y NOT BE HOLDING AN EMPLOYMENT OF PROFIT BUT HE IS CERTAINLY HOLDING AN OFFICE OF MLA AND AS SUCH WHATEVER ALLOWANCES OR BENEFIT GRANTED TO IT TO MEET THE PARTICULAR EXPENSES HE IS ENTITLED FOR EXEMPTION U PTO THE APPLICABILITY OF SECTION 10(14) OF THE I.T. ACT TO THE ALLOWANCES GRANTED TO THE ASSESSEE MLAS. THERE IS NO DIFFERENCE IN ANY OF TH E AFORESAID ORDERS OF THE TRIBUNALS WITH REGARD TO APPLICABILITY OF SE CTION 10(14) OF THE ACT. 11. THE ONLY DIFFERENCE OF THE OPINION IS WITH REGA RD TO THE ALLOWABILITY OF THE EXPENSES. IN THE CASE OF SHRI N . INDRASENA REDDY (SUPRA) THE TRIBUNAL HAS HELD THAT THE MLA IS HOLD ING AN OFFICE THOUGH NOT IN OFFICE OF PROFIT AND SECTION 10(14) OF THE A CT WOULD APPLY TO HIS 7 CASE. HOWEVER THE EXPENSES WHICH ARE EXEMPT ARE R EQUIRED TO BE PRESCRIBED BY THE COMPETENT AUTHORITIES AND THE ASS ESSEE IS REQUIRED TO FILE THE EVIDENCE THAT SUCH EXPENDITURE HAS ACTU ALLY BEEN INCURRED BY HIM AND FOR THAT PURPOSE THE ALLOWANCES AND ITS EXPENSES ARE TO BE GOVERNED BY RULE 2BB (1) OF THE I.T. RULES. IN ORDER TO ESTABLISH THAT THE ALLOWANCES GRANTED TO THE ASSESSEES WERE SPENT FOR A PARTICULAR PURPOSE TO WHICH IT WAS GRANTED THE ASSESSEE IS RE QUIRED TO FILE SOME EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFIC ER. IN THAT CASE SINCE THE ASSESSEE DID NOT FILE ANY DOCUMENTARY EVI DENCE IN SUPPORT OF THE EXPENDITURE INCURRED THE TRIBUNAL HELD THAT AS SESSEE WAS NOT ENTITLED TO THE EXEMPTION U/S 10(14) OF THE ACT OF THOSE EXPENSES WHICH ARE COVERED AS PER RULE 2BB(1) OF THE I.T. RUL ES. THIS ORDER WAS FOLLOWED BY ANOTHER BENCH IN THE CASE OF SHRI B. PA RTHASARATHI REDDY VS. ACIT (SUPRA) BUT WHILE ALLOWING THE ENTIRE CLAI M THE BENCH HAS NOT DISCUSSED THE PROVISIONS OF RULE 2BB AS DISCUSSED B Y THE TRIBUNAL IN ITS EARLIER ORDER IN THE CASE OF N. INDRASENA REDDY AND THE TRIBUNAL HAS DIRECTED THE A.O. TO ALLOW DEDUCTIONS IN RESPECT OF THE ALL ALLOWANCES GIVEN TO THE ASSESSEES. THEREAFTER OTHER ORDER OF THE SAME BENCH WAS PASSED IN THE CASE OF SHRI P. KISTA REDDY (SUPRA) I N WHICH THE TRIBUNAL HAS FOLLOWED THE ORDER OF ITS BENCH IN THE CASE OF B. PARTHASARATHI REDDY AND ALLOWED THE ENTIRE CLAIM OF ALLOWANCES GI VEN TO THE ASSESSEES WITHOUT REALIZING AS TO WHY THE PROVISION S OF RULE 2BB ARE NOT APPLICABLE WHILE GRANTING THE EXEMPTION U/S 10( 14). THE SIMILAR WAS THE POSITION IN THE CASE OF R. RAVINDRANATH RED DY IN WHICH THE SMC BENCH HAS ALSO FOLLOWED THE CASE OF B. PARTHASA RATHI REDDY. WHEREAS THE OTHER SMC BENCH OF THE TRIBUNAL IN THE CASE OF Y. YELLA REDDY VS. ITO (SUPRA) HAS DIRECTED THE A.O. TO VERI FY THE GENUINENESS OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IN CONNE CTION WITH THE PERFORMANCE OF DUTIES OF HIS OFFICE AS MLA AND TO A LLOW DEDUCTIONS OF EXPENDITURE AFTER DUE VERIFICATIONS. 12. NOW THE QUESTION POSED BEFORE US IN THE LIGHT O F THESE AFORESAID ORDERS OF THE TRIBUNAL WHETHER THE COMPLIANCE OF RU LE 2BB IS IMPOSED 8 WHILE ALLOWING AN EXEMPTION U/S 10(14) OF THE I.T. ACT. IN THIS REGARD WE EXTRACT THE PROVISIONS OF RULE 2BB AS UNDER:- 2BB (1) FOR THE PURPOSES OF SUB-CLAUSE (I) OF CLAU SE (14) OF SECTION 10 PRESCRIBED ALLOWANCES BY WHATEVER NAME CALLED SHALL BE THE FOLLOWING NAMELY:- (A) ANY ALLOWANCE GRANTED TO MEET THE COST OF TRAVEL ON TOUR OR ON TRANSFER. (B) ANY ALLOWANCE WHETHER GRANTED ON TOUR OR FOR THE PERIOD OF JOURNEY IN CONNECTION WITH TRANSFER TO MEET THE OR DINARY DAILY CHARGES INCURRED BY AN EMPLOYEE ON ACCOUNT OF ABSEN CE FROM HIS NORMAL PLACE OF DUTY; (C) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCUR RED ON CONVEYANCE IN PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT: PROVIDED THAT FREE CONVEYANCE IS NOT PROVIDED BY THE EMPLOYER. (D) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCUR RED ON A HELPER WHERE SUCH HELPER IS ENGAGED FOR THE PERFORM ANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT; (E) ANY ALLOWANCE GRANTED FOR ENCOURAGING THE ACADEMIC RESEARCH AND TRAINING PURSUITS IN EDUCATIONAL AND RESEARCH I NSTITUTIONS. (F) ANY ALLOWANCES GRANTED TO MEET THE EXPENDITURE INCU RRED ON THE PURCHASE OR MAINTENANCE OF UNIFORM FOR WEAR DUR ING THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMEN T OF PROFIT. EXPLANATION: FOR THE PURPOSE OF CLAUSE (A) ALLOWA NCE GRANTED TO MEET THE COST OF TRAVEL ON TRANSFER INCLUDES ANY S UM PAID IN CONNECTION WITH TRANSFER PACKING AND TRANSPORTATIO N OF PERSONAL EFFECTS ON SUCH TRANSFER. 13. IN ORDER TO ASCERTAIN WHETHER THE SPECIAL ALLOWA NCES OR THE BENEFITS OTHER THAN THE PERQUISITES FORMS PART OF THE TOTAL INCOME DEFINED IN SECTION 2(24) OF THE ACT WE HAVE TO CAR EFULLY EXAMINE THE PROVISIONS OF SEC. 2(24) OF THE ACT. SEC. 2(24) OF THE ACT DEFINES THE INCOME OF THE ASSESSEE AND IT INCLUDES DIFFERENT TY PE OF RECEIPTS. AS PER CLAUSE (IIIA) OF THIS DEFINITION INCOME INCLUD ES ANY SPECIAL ALLOWANCE OR BENEFIT OTHER THAN THE PERQUISITES INC LUDED UNDER SUB- CLAUSE (III) OF THIS SUB-SECTION SPECIFICALLY GRANT ED TO THE ASSESSEE TO MEET EXPENSES WHOLLY NECESSARILY AND EXCLUSIVELY F OR THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT. IN ORDER TO BRING THE SPECIAL ALLOWANCES WITHIN THE FOLD OF INCOME T HE SUB CLAUSE (IIIA) WAS INSERTED BY THE DIRECT TAX LAWS AMENDMENT ACT 1989 9 RETROSPECTIVELY W.E.F. 1 ST APRIL 1962. THIS ALLOWANCES WHICH THE LEGISLATURE ENTITLED TO SHOWER THE BENEFICIAL TREAT MENT MAY BE SEEN IN SECTION 10(14). THUS ALL THOSE SPECIAL ALLOWANCES OTHER THAN THOSE SPECIFICALLY EXEMPT WOULD BE TAXED AS AN INCOME OF THE ASSESSEES. WE HAVE ALSO EXAMINED THE PROVISIONS OF SECTION 10(14) AND RULE 2BB OF THE I.T. RULES AND WE FIND THAT RULE 2BB IS SUPPLEME NT TO SECTION 10(14) OF THE ACT AND IT PUTS A CAP ON THE QUANTUM OF THE ALLOWANCE OR BENEFIT GRANTED TO THE ASSESSEES. IN SECTION 10(14) A GENERAL REFERENCE WAS MADE WITH REGARD TO THE SPECIAL ALLOW ANCES BUT THE NATURE OF THE ALLOWANCES WERE NOT SPELLED OUT IN TH AT SECTION. THIS LEFT OVER WORK IS DONE BY RULE 2BB IN WHICH THE SPECIAL ALLOWANCES WERE IDENTIFIED AND THEIR QUANTUM OF EXEMPTION FROM TAX WAS ALSO FIXED TO THE EXTENT AS NOTIFIED IN THE NOTIFICATION. THESE EXEMPTIONS IS IN RESPECT OF AFORESAID SPECIAL ALLOWANCES TO THE EXTE NT TO WHICH THE SAID EXPENSES ARE ACTUALLY INCURRED IN THAT PURPOSE. 14. THE SUB CLAUSE 1 OF SECTION 10(14) GRANTS EXEMP TION IN RESPECT OF ANY SPECIAL ALLOWANCE OR BENEFIT NOT BEING THE NATURE OF PERQUISITE WITHIN THE MEANING OF CLAUSE (2) OF SECTION 17 SPE CIFICALLY GRANTED TO MEET THE EXPENSES WHOLLY NECESSARILY AND EXCLUSIVE LY INCURRED IN THE PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT AS MAY BE PRESCRIBED TO THE EXTENT TO WHICH SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOSE. THE SUB CLAUSE (II) GRANTS EXEMP TION IN RESPECT OF ANY ALLOWANCE GRANTED TO THE ASSESSEES EITHER TO ME ET HIS PERSONAL EXPENSES AT THE PLACE WHERE THE DUTIES OF HIS OFFIC E OR EMPLOYMENT OF PROFIT OR ORDINARILY PERFORMED BY HIM OR THE PLACE WHERE HE ORDINARILY RESIDES OR TO COMPENSATE THE ASSESSEES FOR THE INCR EASED COST OF LIVING. THE ALLOWANCES SHALL BE ONE WHICH IS PRESCRIBED AND THE EXEMPTION SHALL BE TO THE EXTENT AS MAY BE PRESCRIBED. RULE 2BB HAS PRESCRIBED THE ALLOWANCE AS WELL THE AMOUNT EXEMPT U/S 10(14)( II). FROM 1 ST APRIL 1989 TO 30 TH JUNE 1995 THE SAID ALLOWANCES HAD TO BE ONE SPECIFIED BY THE CENTRAL GOVERNMENT AND QUANTUM OF EXEMPTION WAS TO THE EXTENT SPECIFIED IN THE CONCERNED NOTIFICATI ON. SECTION 14 DEALS WITH 2 TYPES OF ALLOWANCES (1) SUCH ALLOWANCES OR B ENEFIT NOT BEING THE 10 NATURE OF THE PERQUISITE WITHIN THE MEANING OF CLAU SE (2) OF SECTION 17 SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY NECES SARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF THE DUTI ES OF AN OFFICE OR AN EMPLOYMENT OF PROFIT AS MAY BE PRESCRIBED TO THE EX TENT TO WHICH SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOSE. (2 ) ANY SUCH ALLOWANCES GRANTED TO THE ASSESSEES EITHER TO MEET HIS PERSONAL EXPENSES AT THE PLACE WHERE THE DUTIES OF HIS OFFIC E OR EMPLOYMENT OF PROFIT ARE ORDINARILY PERFORMED BY HIM OR AT THE PL ACE WHERE HE ORDINARILY RESIDES OR TO COMPENSATE HIM FOR THE INC REASED COST OF LIVING. THE SPECIAL ALLOWANCES OR THE BENEFITS PRESCRIBED I N CLAUSE 1 ARE TO BE GOVERNED BY SUB RULE 1 OF RULE 2BB IN WHICH THE SPE CIAL ALLOWANCES WERE IDENTIFIED AND ARE ALSO ALLOWED TO BE EXEMPTED TO THE EXTENT TO MEET THE EXPENDITURES INCURRED FOR THAT PURPOSE. W HEREAS SUB CLAUSE (2) OF CLAUSE 14 OF SECTION 10 IS GOVERNED BY SUB R ULE (2) OF RULE 2BB IN WHICH THE ALLOWANCES WERE ALSO IDENTIFIED BUT THEY WERE ALLOWED TO BE EXEMPTED UPTO A PARTICULAR LIMIT. AS PER SUB RULE (2) THE EXEMPTION OF ALLOWANCE IS LIMITED IRRESPECTIVE OF THE FACT THAT THE ENTIRE ALLOWANCE WAS SPENT OR NOT FOR THE PURPOSE TO WHICH IT WAS GR ANTED. 15. IN THE CASE OF COAL MINES OFFICERS ASSOCIATION O F INDIA VS. UOI AND OTHERS 181 ITR 346 MP IT WAS HELD THAT ANY PART ICULAR ALLOWANCE UNLESS IT IS NOTIFIED BY THE CENTRAL GOVERNMENT FOR ITS EXEMPTION U/S 10(14) READ WITH RULE 2BB IT CANNOT BE ALLOWED TO B E EXEMPTED. MEANING THEREBY THAT THE ALLOWANCE SHALL BE ONE WHI CH IS PRESCRIBED AND THE EXEMPTION SHALL BE TO THE EXTENT AS MAY BE PRESCRIBED. RULE 2BB HAS PRESCRIBED THE ALLOWANCES AS WELL AS THE AM OUNT EXEMPT UNDER SECTION 10(14)(II) [FROM 1 ST APRIL 1989 TO 30 TH JUNE 1995 THE SAID ALLOWANCE HAD TO BE ONE SPECIFIED BY THE CENTR AL GOVT. AND THE QUANTUM OF EXEMPTION WAS TO THE EXTENT SPECIFIED IN THE CONCERNED NOTIFICATION.] IT HAS ALSO BEEN CLARIFIED THROUGH VA RIOUS JUDICIAL PRONOUNCEMENTS THAT IN ORDER TO AVAIL THE EXEMPTION UNDER THIS CLAUSE THE ASSESSEE HAS TO PROVE THAT THE EXPENDITURE IN R ESPECT OF WHICH SPECIAL ALLOWANCE OR BENEFIT WAS GRANTED HAS BEEN INCURRED WHOLLY NECESSARILY AND EXCLUSIVELY IN THE PERFORMANCE OF H IS DUTIES OF AN OFFICE 11 OR EMPLOYMENT OF PROFIT. THE REQUIREMENT OF `WHOLL Y NECESSARILY AND EXCLUSIVELY IS CUMULATIVE AND NOT ALTERNATIVE. AS SESSEE MUST ESTABLISH THAT HE IS REQUIRED TO SPEND SUCH SPECIAL ALLOWANCE OR BENEFIT NOT ONLY WHOLLY BUT ALSO NECESSARILY AND EXCLUSIVELY IN THE PERFORMANCE OF HIS DUTIES. IN THE CASE OF J.G. MANKED VS. CIT 55ITR 448 (GUJ.) ASSESSEE WHO WAS PRACTICING CHARTERED ACCOUNTANT WA S APPOINTED AS A PART TIME PROFESSOR IN A COLLEGE SITUATED AT ANOTHE R PLACE. HE WAS PAID A CERTAIN MONTHLY SALARY INCLUDING TRAVELLING ALLOW ANCES AND ALL OTHER ALLOWANCES. THE GUJARAT HIGH COURT HELD THAT ASSES SEE WAS NOT ENTITLED TO CLAIM EXEMPTION U/S 4(3)(VI) OF 1922 AC T (CORRESPONDING TO SECTION 10(14) OF THE I.T. ACT 1961) AS IT FELT T HAT THE SAID TRAVELLING ALLOWANCE WAS NOT A SPECIAL ALLOWANCE OR BENEFIT GR ANTED TO THE ASSESSEES MUCH LESS SPECIFICALLY GRANTED TO MEET T HE EXPENSES OF TRAVELLING. 16. WE THEREFORE OF THE VIEW THAT WHILE DEALING WIT H THE ISSUE OF SPECIAL ALLOWANCES GIVEN TO THE ASSESSEES ONE HAS T O EXAMINE THE PROVISION OF SECTION 2(24) & 10(14) OF THE I.T. ACT AND RULE 2BB OF THE I.T. RULES. AS PER SECTION 2(24) ALL ALLOWANCES FOR MS PART OF THE INCOME OF THE ASSESSEES. SECTION 10(14) DEALS WITH THE EXEMPTION OF CERTAIN SPECIAL ALLOWANCES AND RULE 2BB IDENTIFY TH E ALLOWANCES AND THEIR LIMIT OF EXEMPTION FROM TAX. 17. SO FAR AS PROOF OF ACTUAL EXPENDITURE OF THE AL LOWANCES ARE CONCERNED WE HAVE EXAMINED THE VARIOUS JUDGEMENTS INCLUDING THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. TEJAJI FARASHRAN KARAWALA LTD. 67 ITR 1995 (SC) IN WHICH IT HAS BEEN OBSERVED THAT TO QUALIFY THE EXEMPTION THE ALLOWANCE MUST BE GRANTED TO MEET EXPENSES INCURRED OR TO BE INCURRED WHOLLY AND NEC ESSARILY IN THE PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT. THE PURPOSE FOR WHICH THE ALLOWANCE IS GRANTED IS ALONE NOT DETERMINATIVE OF CLAIM OF EXEMPTION. THE INTENTION OF THE FRAMER S OF THE ACT WAS TO GRANT EXEMPTION IN RESPECT OF AMOUNTS RECEIVED BY T HE ASSESSEES NOT FOR HIS OWN BENEFIT BUT FOR THE SPECIFIED PURPOSE O F MEETING THE 12 EXPENSES WHOLLY AND NECESSARILY TO INCUR OR TO BE I NCURRED FOR THE PERFORMANCE OF THE DUTIES. THEREFORE THE ALLOWANC ES GRANTED TO MEET THE EXPENSES WHOLLY AND NECESSARILY INCURRED OR TO BE INCURRED FOR THE PERFORMANCE OF THE DUTIES OF THE OFFICE OR EMPLOYME NT OF THE GRANTEE ALONE QUALIFIES FOR EXEMPTION UNDER THE ACT AND ANY SURPLUS REMAINING IN THE HANDS OF THE GRANTEE AFTER MEETING THE EXPEN SES DOES NOT BEAR THE CHARACTER OF THE ALLOWANCES FOR THE MEETING EXP ENSES BUT FOR PERFORMING THEIR DUTIES OF THE OFFICE FOR EMPLOYMEN T. THIS WOULD BE SO EVEN IF THE EMPLOYER HAS DISABLED HIMSELF FROM DEMA NDING REFUND OF THE AMOUNT NOT EXPENDED FOR MEETING THE EXPENSES IN CURRED OR TO BE INCURRED IN THE PERFORMANCE OF DUTIES OF OFFICE OR EMPLOYMENT OF PROFIT AND THE SURPLUS REMAINING IN THE HANDS OF THE GRANT EE ACQUIRES FOR THE PURPOSE OF INCOME TAX ACT THE CHARACTER OF THE ADDI TIONAL REMUNERATION. MEANING THEREBY THE ONUS IS UPON TH E ASSESSEE TO PLACE RELEVANT EVIDENCE IN ORDER TO PROVE THAT THE ALLOWANCES GIVEN TO HIM ARE SPENT FOR THE PURPOSE TO WHICH IT WAS GRANT ED. 18. TURNING TO THE FACTS OF THE CASE WE FIND THAT THE ASSESSEE WAS GRANTED THE CONSTITUENCY ALLOWANCE CONVEYANCE ALLO WANCE TELEPHONE ALLOWANCE CLERICAL ALLOWANCE MEDICAL ALLOWANCE AN D CONTINGENCY ALLOWANCE BESIDES SALARY. DURING THE RELEVANT ASSE SSMENT YEAR AS PER SECTION 10(17) THE MLAS ARE ENTITLED FOR EXEMPTION OF THE DAILY ALLOWANCES AND ALL OTHER ALLOWANCES NOT EXCEEDING R S.2000/- P.M. THOUGH W.E.F 1.4.2007 MLAS ARE ALSO ENTITLED FOR EX EMPTION OF ANY CONSTITUENCY ALLOWANCE RECEIVED BY THEM BY VIRTUE O F AN AMENDMENT IN SECTION 10(17) BUT IT WAS WITH THE PROSPECTIVE E FFECT AND IN THE IMPUGNED ASSESSMENT YEARS THE ASSESSEE CANNOT TAKE THE BENEFIT OF IT AND ALL OTHER ALLOWANCES ARE LIMITED TO RS.2000/- P .M. ONLY. THOUGH IN SECTION 10(17) THE LEGISLATURE HAS RESTRICTED THE E XEMPTION OF ALL OTHER ALLOWANCES UPTO RS.2000/- P.M. YET THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS IT HAS BEEN HELD THAT THE MLAS ARE E NTITLED TO TAKE THE BENEFIT OF SECTION 10(14) ALSO. WE THEREFORE O F THE VIEW THAT ACCORDING TO THE RULE 2BB READ WITH SECTION 10(14) OF THE ACT ONLY THE CONVEYANCE ALLOWANCE OR THE CLERICAL ALLOWANCE ARE REQUIRED TO BE 13 EXEMPTED SUBJECT TO PROOF THAT IT WAS INCURRED IN PERFORMANCE OF DUTIES OF AN OFFICE. SO FAR AS THE TELEPHONE ALLOW ANCE AND CONSTITUENCY ALLOWANCE ARE CONCERNED WE DO NOT FIN D ANY SPECIFIC CLAUSE IN RULE 2BB(1) OF THE I.T. RULES. THUS THES E ALLOWANCES CANNOT BE ALLOWED U/S 10(14) OF THE I.T. ACT. WITH REGARD TO THE MEDICAL ALLOWANCES THE COMPLETE FACTS ARE NOT AVAILABLE ON RECORD WHETHER IT WAS A REIMBURSEMENT OR IT WAS AN ALLOWANCE LIKE OTH ER ALLOWANCES GRANTED TO THE MLA. IF IT IS A REIMBURSEMENT OF TH E MEDICAL EXPENDITURE IT CAN BE ALLOWED IN THE LIGHT OF THE JUDGEMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHA RAN MATHUR (SUPRA). OTHERWISE NO DEDUCTION CAN BE ALLOWED AS IT DOES NOT FIND PLACE IN RULE 2BB(1) OF THE IT RULES. 19. WE DO NOT AGREE WITH THE PROPOSITION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ALL TYPE OF ALLOWANCES GRANTED TO THE ASSESSEE ARE ELIGIBLE FOR EXEMPTION U/S 10(14) OF ACT. IF THAT B E THE CASE THERE WAS NO NEED OF PROVIDING A SEPARATE SUB SECTION 17 IN S ECTION 10 FOR ALLOWING CERTAIN OTHER ALLOWANCES; LIKE DAILY ALLOW ANCE TO MLAS FOR ITS EXEMPTION FROM THE TOTAL INCOME OF THE ASSESSEE. M EANING THEREBY BOTH THE PROVISIONS RELATING TO THE EXEMPTION OF TH E ALLOWANCES I.E. 10(14) & 10(17) ARE TO BE READ TOGETHER AND IN CASE OF MLAS & MPS THEY ARE ENTITLED FOR THE EXEMPTION OF ALLOWANCES U NDER BOTH THE CLAUSES SIMULTANEOUSLY. IN THE CASE OF SECTION 10(1 7) THE MLAS & MPS ARE GRANTED A LUMPSUM EXEMPTION OF PARTICULAR ALLOW ANCE WITHOUT PRODUCING ANY EVIDENCE WITH REGARD TO ITS EXPENDITU RE WHEREAS U/S 10(14) THE ALLOWANCES ARE ONLY ALLOWED TO BE EXEMP TED SUBJECT TO PROOF THAT IT WAS INCURRED TO MEET A PARTICULAR PUR POSE. 20. WE HAVE ALSO GONE THROUGH THE HISTORY OF PROVIS IONS OF SECTION 10(17) OF THE ACT AND WE FIND THAT AT THE TIME OF E NACTMENT OF THE INCOME TAX ACT 1961 ONLY DAILY ALLOWANCES RECEIVED BY THE MPS OR THE MLAS OR ANY MEMBER OF THE COMMITTEE THERE OF AR E EXEMPTED FROM THE TOTAL INCOME. THE SCOPE OF THE EXEMPTION WAS WIDENED TIME TO TIME AND BY TAXATION LAWS AMENDMENT AND MISCELLA NEOUS 14 PROVISIONS ACT 1986 W.E.F. 1 ST APRIL 1986 THE AMENDMENT WAS MADE AND BESIDES THE DAILY ALLOWANCES ALL OTHER ALLOWAN CES UPTO RS.1250/- P.M. IN AGGREGATE IN THE CASE OF MP AND RS.600/- P. M. IN THE CASE OF MLA WERE EXEMPTED FROM TAX. FURTHER AMENDMENT WAS MADE IN THIS CLAUSE BY THE FINANCE ACT 1997 AND THE AMOUNT OF R S.600/- P.M. IN CASE OF MLAS WAS INCREASED TO RS.2000/- P.M. THERE AFTER FURTHER AMENDMENT WAS ALSO MADE BY THE FINANCE ACT 2006 AN D LIKE THE MPS THE CONSTITUENCY ALLOWANCE RECEIVED BY THE MLAS WAS ALSO MADE EXEMPTIVE FROM THE TOTAL INCOME OF THE ASSESSEES. AMENDMENT BY FINANCE ACT 2006 WAS BROUGHT IN ORDER TO BRING THE UNIFORMITY OF CONSTITUENCY ALLOWANCES ALLOWED BY DIFFERENT STATES THROUGH THEIR INDEPENDENT NOTIFICATIONS WITH RESPECT TO OTHER ALL OWANCES BY AMENDING CLAUSE 3 OF SECTION 10(17) AND THE LEGISLA TURE HAS ALLOWED THE EXEMPTION OF THE ENTIRE CONSTITUENCY ALLOWANCE GRANTED TO MLAS. 21. FROM A CAREFUL STUDY OF THE AMENDMENTS BROUGHT TIME TO TIME IN SECTION 10(17) OF THE ACT WE ARE OF THE VIEW TH AT LEGISLATURE HAS BEEN QUITE CONSCIOUS ABOUT THE ALLOWANCES GRANTED T O THE MLAS OR THE MPS AND TIME TO TIME THEY ARE BRINGING ENACTMENTS T O GRANT EXEMPTION OF PARTICULAR TYPE OF ALLOWANCES FROM THE TOTAL INC OME OF THE MLAS OR MPS. HAD IT BEEN A CASE THAT FOR ALL ALLOWANCES SE CTION 10(14) CAN BE INVOKED SUBJECT TO PROOF OF THE EXPENDITURE TO BE I NCURRED IN RESPECT OF THAT PURPOSE TO WHICH THE ALLOWANCES ARE GIVEN THE RE WOULD BE NO NEED TO MAKE A NECESSARY AMENDMENT TIME TO TIME IN SECTION 10(17). WE THEREFORE OF THE VIEW THAT WHILE DEALING WITH T HE ISSUE OF SPECIAL ALLOWANCES GRANTED TO THE MLAS OR MPS ONE HAS TO KE EP IN MIND BOTH THE PROVISIONS OF SECTION 10(17) AND 10(14) OF THE ACT AND ONLY THOSE ALLOWANCES ARE TO BE EXEMPTED FROM THE TOTAL INCOME OF THE ASSESSEES WHICH ARE SPECIFIED IN THESE SECTIONS OR RULE 2BB O F THE I.T. RULES. UNDER SECTION 10(17) THE LEGISLATURE HAS PRESCRIBE D A PARTICULAR LIMIT UPTO WHICH THE ALLOWANCES ARE TO BE EXEMPTED FROM T HE TOTAL INCOME OF THE ASSESSEES BUT SECTION 10(14) IS TO BE READ W ITH RULE 2BB OF THE I.T. RULES AND ONLY THOSE ALLOWANCES ARE TO BE ALLOW ED TO BE EXEMPTED FROM THE TOTAL INCOME OF THE ASSESSEES WHICH ARE SP ECIFICALLY 15 MENTIONED IN RULE 2BB SUBJECT TO PROOF OF ITS BEING SPENT FOR THE PURPOSE TO WHICH IT IS RECEIVED OR GRANTED. WE THE REFORE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF A.O. WITH A DIRECTION TO RE-EXAMINE THE ISSUE AND GRANT AN EXEM PTION OF THE CONVEYANCE ALLOWANCE AND THE CLERICAL ALLOWANCE AFT ER MAKING NECESSARY VERIFICATION OF THE EXPENDITURE INCURRED FOR THE SAID PURPOSE. REST OF THE ALLOWANCES I.E. TELEPHONE ALLOWANCE CO NSTITUENCY ALLOWANCE AND CONTINGENCY ALLOWANCE DO NOT FALL EIT HER IN THE PURVIEW OF SECTION 10(14) OR 10(17) AND THEY CANNOT BE ALLO WED TO BE EXEMPTED FROM THE TOTAL INCOME OF THE ASSESSEES. S O FAR AS MEDICAL ALLOWANCES ARE CONCERNED THE A.O. SHOULD VERIFY TH E NATURE OF THESE ALLOWANCES. IF IT IS A REIMBURSEMENT OF THE MEDICAL EXPENSES INCURRED BY THE MLA IT MAY BE ALLOWED IN THE LIGHT OF THE J UDGEMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHA RAN MATHUR. OTHERWISE NO EXEMPTION CAN BE ALLOWED AS IT DOES N OT FALL EITHER IN THE PURVIEW OF SECTION 10(14) AND 10(17) OF THE I.T . ACT. ACCORDINGLY THESE APPEALS ARE DISPOSED OFF. 3 WE THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF TH E A.O. WITH A DIRECTION TO RE-ADJUDICATE THE ISSUE OF SPECIAL ALLOWANCES I.E. CLERICAL ALLOWANCE AND THE CONVEYANCE ALLOWANCE AFTER MAKING NECESSARY VERIFIC ATIONS AS PER RULE 6BB OF THE I.T. RULES. REST OF THE ALLOWANCES I.E. CONSTIT UENCY ALLOWANCE AND TELEPHONE ALLOWANCE CONTINGENCY ALLOWANCE ETC. WIL L NOT TO BE ALLOWED TO BE EXEMPTED U/S 10(14) OF THE ACT. 4. THE NEXT COMMON ISSUE RELATES TO THE ADDITIO N MADE BY THE AO REPRESENTING YEAR WISE CREDITS APPEARING IN THE BAN K ACCOUNT OF BOTH THE ASSESSEES. BEFORE THE AO BOTH THE ASSESSEES CLAIM ED THAT THE EARLIER WITHDRAWALS WERE DEPOSITED SUBSEQUENTLY AND HENCE O NLY THE PEAK DEPOSIT HAS TO BE ADDED. HOWEVER IT WAS NOT CONVINCING TO THE TAX AUTHORITIES. THE LD CIT(A) HAS NOTICED THAT THE ASSESSEE HAS CLAIMED THAT THE VARIOUS CREDITS REFLECT AMOUNT RECEIVED FROM THE MEMBERS OF THE PUB LIC IN HIS CONSTITUENCY FOR UTILIZATION TOWARDS PUBLIC WELFARE AND DEVELOPM ENT PURPOSES. IN THAT 16 CASE THERE IS NO POSSIBILITY TO REDEPOSIT THE SAME SINCE THE WITHDRAWAL SHOULD HAVE BEEN MADE FOR PUBLIC WELFARE PURPOSES. THE LD CIT(A) HAS ALSO NOTICED THAT THE CONTENTION OF THE ASSESSEE IS NOT SUPPORTE D BY ANY DOCUMENTARY EVIDENCES. THE ASSESSEE SHRI TRIMURTHULU HAS ALSO CLAIMED THE AVAILABILITY OF AGRICULTURAL INCOME BUT YET AGAIN THE SAID CONTENT ION WAS NOT SUBSTANTIATED. IN THESE CIRCUMSTANCES THE LD CIT(A) CONFIRMED THE YEAR WISE UNEXPLAINED CREDITS FOUND IN THE BANK. ON A CAREFUL READING OF THE ORDER OF THE LD CIT(A) WE ARE OF THE VIEW THAT THE LD CIT(A) HAS CLEARLY B ROUGHT OUT THE CONTRADICTORY CLAIMS AND HAS ALSO OBSERVED THAT THE SAID CLAIMS HAVE NOT BEEN SUBSTANTIATED. IN THESE FACTUAL CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) ON THIS ISSU E AND ACCORDINGLY UPHOLD THE SAME. 5. THE NEXT COMMON ISSUE RELATES TO THE ADDITI ON OF EXPENDITURE RELATING TO THE GENERAL ELECTION EXPENSES INCURRED BY THESE TWO ASSESSEES IN THEIR RESPECTIVE HANDS. THE LD CIT(A) CONFIRMED THE ADDI TION WITH THE FOLLOWING OBSERVATIONS IN BOTH THE HANDS. AFTER CONSIDERING SUCH CONTENTION MADE ON BEHALF O F THE APPELLANT IT MAY BE STATED THAT ANY CONTENTION MADE OR EXPLANATI ON FURNISHED IN CONNECTION WITH ANY ISSUE RELATING TO THE DETERMINA TION OF INCOME OF AN ASSESSEE IT IS INCUMBENT THAT CREDIBLE EVIDENCE NE ED TO BE FILED ALONG WITH ANY EXPLANATION WITHOUT WHICH THE CORRECTNESS AND V ERACITY OF SUCH CONTENTION CANNOT BE ACCEPTED IN ITS FACE THEREBY INEVITABLY LEADING TO DRAWING OF ADVERSE INFERENCE. THE APPELLANT HAVING NOT LAID ANY EVIDENCE WHATSOEVER DURING THE ASSESSMENT PROCEEDINGS THE ACTION OF THE ASSESSING OFFICER IN TREATING THE ELECTION RELATED EXPENDITUR E OF (RS.1 31 097/- IN THE HANDS OF SHRI T.TRIMURTHULU - RS.2 35 250/- IN THE HANDS OF SHRI N.MOOLA REDDY) AS UNEXPLAINED U/S 69C OF THE ACT IS HEREBY UPHELD. WE NOTICE THAT BOTH THE ASSESSEES HAVE FAILED TO AD DUCE ANY EVIDENCE IN SUPPORT THEIR RESPECTIVE CLAIM AND HENCE THEIR CLAI M WAS NOT AMENABLE FOR VERIFICATION. IN THAT CASE THE LD CIT(A) HAD NO O THER OPTION BUT TO CONFIRM THE ADDITION MADE. BEFORE US ALSO THE ASSESSEES H AVE FAILED TO FURNISH ANY 17 EVIDENCE IN SUPPORT THEIR CONTENTIONS. IN THESE CIR CUMSTANCES WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LD CIT (A) ON THIS ISSUE. 6. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29-4-2010 SD/- SD/- (SUNIL KUMAR YADAV) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATED 29 TH APRIL 2010 COPY TO 1 SHRI N. MOOLA REDDY C/O KVS ANJANEYA MURTHY ITP 15-7B-7A VENKATARATNAPURAM KAKINADA 533 001 2 SHRI T.TRIMURTHULU C/O KVS ANJANEYA MURTHY ITP 15-7B-7A VENKATARATNAPURAM KAKINADA 533 001 3 THE ITO WARD-1 KAKINADA 4 THE CIT RAJAHMUNDRY 5 THE CIT(A) RAJAHMUNDRY 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM