D.V. Shylendra Kumar, J.
1. The petitioners are all employees of the Life Insurance Corporation of India (for short 'the LIC') and are working as Development Officers in the various branches of the Corporation.
2. In these petitions, the petitioners have sought for quashing of a circular Ref. Mktg./ZL/26/2004 dated April 24, 2004 (copy at annexure B to the petition), issued by the first respondent--the LIC of India, Central Office, Mumbai, and for further directions to the Corporation and its branches not to deduct income-tax at source in respect of payment to the petitioners known as conveyance allowance and additional conveyance allowance, particularly for the year 2004-2005 and for other consequential relief.
3. These petitions are filed contending that the payment which the petitioners receive from the employer and which is known by the name conveyance allowance and additional conveyance allowance, is exempted from income-tax under the provisions of Clause (14) of Section 10 of the Act and to the knowledge and awareness of the employer. The circular issued by the Corporation to all its branch managers to act in any way to deduct any tax at source in respect of such income is contrary to the statutory provisions and particularly an action which is not warranted in law.
4. Sri Kiresur, learned counsel for the petitioners, submits that the question as to whether the Corporation was liable to deduct any tax at source in respect of payments made to the petitioners by way of conveyance allowance and additional conveyance allowance, in fact had been the subject-matter of a decision by the Division Bench of the Rajasthan High Court, rendered in the case of Life Insurance Corporation of India v. Union of India . Relying on this decision learned counsel submits that the Corporation is clearly under a mandate and directions not to deduct any tax at source in respect of payment made to the petitioners as conveyance allowance and additional conveyance allowance and if so, the circular at annexure B dated April 24, 2004, is clearly one not warranted in law. It is for such purpose learned counsel prays that the circular is to be quashed and the first respondent be restrained from effecting any deductions at source in respect of payments made to the petitioners and from remitting the amount to the Income-tax Department, etc.
5. A perusal of the circular at annexure B indicates that the Corporation which is quite aware of the provisions of Section 10(14) of the Act and also the judgment rendered by the Rajasthan High Court, which can be applied to all income-tax assessees within the jurisdiction of the High Court, is making efforts through the circular to ensure that persons like the petitioners, who can claim benefit under Section 10(14) of the Act, comply with the requirements of the very exemption provision so that ultimately when their tax liability is determined they are not deprived of the benefit of Section 10(14) of the Act because of factual non-compliance of the requirement of the section. In fact the benefit under the section, which reads as under :
'Section 10. Incomes not included in total income.--In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--. . .
(14)(i) any such special allowance or benefit, not being the nature of a perquisite within the meaning of Clause (2) of Section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the 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.'
6. The exemption is only in respect of such special allowance or benefit which is not otherwise a perquisite and which is specifically granted to meet the expenses necessarily and exclusively incurred in the performance of an office as may be prescribed to the extent to which such expenses are actually incurred for that purpose. The very provision indicates that exemption is applicable only to the extent of the amount paid which is for an actual expenditure incurred for a specific purpose and not any amount over and above. The circular indicates that there is divergence of opinion among different High Courts on the aspect of deduction of tax at source in respect of payment by the employer qualifying for exemption under Section 10(14) of the Act and more over the past experience of the corporation itself was that the corporation had been subjected to levy of interest and penalty for not deducting tax at source in respect of conveyance allowance and additional conveyance allowance to its employees, as the employees, viz., the Development Officers, had not availed of the benefit under Section 10(14) of the Act by properly complying with the requirements of this section or by not having claimed the same. The object of the circular, on the face of it, appears to be for avoiding repetition of such situations ; that if the employee really qualified for the exemption and to the limit prescribed in terms of Rule 2BB of the Income-tax Rules (for short, 'the Rules'), a certificate is issued in favour of such employee to that extent so that the benefit of exemption is claimed by the employee that the employee does not lose the benefit by not putting forth the claim in the proper form and by placing necessary materials in this regard.
7. The exemption granted under Section 10(14) of the Act is not an absolute exemption, but a conditional one subject to the qualifications mentioned in the section itself. In the first instance, the amount mentioned in this section as qualifying for the exemption is an amount, which is in the nature of income liable to tax. The exemption given is to the extent the amount is received towards an actual expenditure incurred for undertaking a journey by the employee in connection with his employment and limited to the extent provided for. This is a matter for verification on facts and is a matter which has to be looked into by the assessing authority and not others.
8. It is in this background of such earlier experiences, the decisions of the courts and concern by the Corporation that its employees availed of the benefit or exemption, the present circular appears to have been issued. The circular dated April 24, 2004, in fact, as its contents indicate that the Corporation is quite aware of the decisions of various courts on this aspect of the matter, including the decision of the Rajasthan High Court in the case of Shivraj Bhatia v. Life Insurance Corporation of India .
9. The exemption of the nature referred to in Clause (14) of Section 10 of the Act will enure to the benefit of the assessee, who is an employee only on such employee claiming such exemption and on satisfying the conditions mentioned therein and not by mere non-deduction of tax at source by the employer. The deduction of tax at source is a provisional deduction or advance payment of tax and the amount so deducted is always to be adjusted on actual liability of the assessee. The deduction (of tax) at source in itself is not determination of the tax liability. In fact the language of the circular dated April 24, 2004, indicates that the deduction is required to be made even in respect of conveyance allowance and additional conveyance allowance payable to its Development Officers in accordance with the tax laws and the provisions in the light of the circular issued by the Central Board of Direct Taxes. By issuing the circular, the Corporation is attempting to ensure that in respect of the amount qualifying for exemption a certificate to that effect is only issued to the officer eligible for it and to deduct income-tax accordingly. In fact the very circular indicates that the amount of expenditure that the officer has incurred may not be as much as the allowance and the certificate ensures to indicate the actual amount of expenditure that is incurred for the purpose of conveyance allowance and additional conveyance allowance provided to the employees in the performance of their duties.
10. The circular also indicates that to the extent the Development Officer furnishes copies of vouchers/bills for the actual expenditure incurred by him, the amount mentioned therein can be taken note of for the purpose of Section 10(14) of the Act. It is only in cases where the Development Officers having not furnished such proof of actual expenditure, a certificate in favour of the Development Officer concerned is not issued, in proof of such expenditure and while tax is deducted at source in such cases, the Development Officers concerned are notified that they can claim exemption by filing returns of their income and place the material before the authority concerned.
11. The object of such a circular on the face of it appears to be that if the employee really qualifies for the exemption to ensure that a certificate to this effect is issued in favour of the employee based on which not only the employee can claim the benefit, but also the employer is relieved of his obligation for deduction of tax at source. A circular of this nature can never be said to be to the detriment of the petitioners. If at all it only enables the petitioners to claim the benefit in terms of Clause (14) of Section 10 of the Act.
12. In this view of the matter, while I do not find any injury or affectation to the petitioners, which is required to be redressed in these petitions, I am of the view that it is not necessary to examine the legal position that has been enunciated by the Rajasthan High Court in the decision cited above for the purpose of redressing the grievance of the petitioners in these petitions, particularly in the absence of factual data. As I am of the view that the circular is not at all to the detriment of the petitioners, on the other hand it only enables them to avail of the benefit in an effective manner. I do not find any ground to interfere in these writ petitions at the instance of the petitioners, particularly for quashing the circular at annexure B. It is always open to the petitioners to urge all such contentions and claim such benefit as arc provided to them in law and if they are still not satisfied to agitate the matter before the appropriate authorities for the same.
13. In the circumstances, the interim orders granted in these petitions are vacated and the rule discharged wherever issued.
14. Accordingly, these writ petitions are dismissed, after hearing Sri Kiresur, learned counsel for the petitioners, Sri M.V. Seshachala, learned CGSC for the Income-tax Department and Sri Arun for Sri Brahmarayappa, learned counsel for LIC.