P.K. Balasubramanyan, CJ.
1. This writ petition is filed by the National Federation of Insurance Field Workers of India (Jamshedpur Division) said to be an All India Association of the Development Officers working in the office of the Life Insurance Corporation of India. Though this much is stated in the writ petition and the importance and the objectives of the association are set out, with reference to its constitution, it is not seen specifically pleaded that it is a registered or incorporated association. But since no objection on this ground was raised on behalf of the respondents, we do not think that it is necessary to further pursue the question of the maintainability of the writ petition at its instance.
2. In the writ petition, the Association has prayed for a declaration that the conveyance allowance and additional conveyance allowance paid to Development Officers of the Life Insurance Corporation of India, including the Development Officers working with the 17 Branches of Jamshedpur Division of the Life Insurance Corporation of India, are exempted under section 10(14) of the Income Tax Act, 1961 read with rule 2BB of the Income Tax Rules, 1962. A further declaration that there should be no deduction of tax at source on the amounts of conveyance allowance and additional conveyance allowance paid to the Development Officers, is also claimed. Quashing of the two letters issued in that behalf by the Assistant Commissioner of Income-tax, TDS Circle, Jamshedpur, to the Branch Manager of the Life Insurance Corporation of India is also sought for. The writ petition was filed when the Assistant Commissioner of Income-tax, TDS Circle, Jamshedpur called upon the concerned Branch Managers to deduct tax at source in respect of the conveyance allowance and the additional conveyance allowance paid to the Development Officers as enjoined by section 192 of the Income Tax Act.
3. According to the petitioner, the conveyance allowance and the additional conveyance allowance are not taxable as salary income, since in terms of section 10(14) of the Income Tax Act, the said allowances are not liable to be included in computing the total income of a previous year of any person and consequently, the tax on those amounts could not be deducted by the employer, the Life Insurance Corporation of India, in terms of section 192 of the Act. Rule 2BB of the Income Tax Rules is also relied on. The stand of the department is that the allowances in question were taxable and, in any event, in terms of section 192 of the Act, the employer as the person responsible for paying the salaries, had the obligation to deduct the income tax on the said amounts at the time of payment of such amounts. In any case, even if a portion of it was liable to be exempted or excluded while completing the assessment of a particular assessee-Development Officer, it was a matter to be decided at the time of completing the assessment and, there was no question of the Life Insurance Corporation of India not being obliged to deduct at source the tax due on these payments. We may point out that neither the Union of India, nor the income-tax department has filed a formal counter affidavit in this court, though adequate time was granted to them for filing their counter affidavits. When the matter ultimately came up, counsel for the department submitted that he was ready to argue on the relevant statutory provisions and that was how the matter was finally heard even without counter affidavits being filed by the Union of India and the income-tax department.
4. The main plank of the submission on behalf of the petitioner is that the Rajasthan High Court in the decision, LIC of India v. Union of India 2003 (22) STC 205, has declared that no tax at source was deductible by the Life Insurance Corporation of India from out of the conveyance allowance and the additional conveyance allowance paid by it to its Development Officers. According to the counsel, the department was bound by that decision irrespective of the limits on its territorial operation and it was bound to follow that decision in the entire Union so long as the same was not upset by the Supreme Court. Alternatively, learned counsel submitted that the said decision laid down the correct law and it will be proper for this court to follow the ratio of that decision and to uphold the plea of the petitioner.
5. On examining the decision of the Rajasthan High Court in LIC of India v. Union of India 2003 (22) STC 205, referred to above, we find that the writ petition before the Rajasthan High Court arose out of a prayer to quash an order of assessment and the question was whether the conveyance allowance/ additional conveyance allowance paid to a Development Officer of the Life Insurance Corporation of India were liable to be exempted under section 10(14) of the Income Tax Act. The single Judge having dismissed the writ petition on the basis that the position was covered by an earlier decision of the Rajasthan High Court in CIT v. Shiv Raj Bhatia , the appeal was filed. Therein, the Devision Bench noticed that the decision relied on by the learned single Judge related to incentive bonus paid by the Life Insurance Corporation of India to its Development Officers and the position was not the same regarding the conveyance allowance/additional conveyance allowance. The Division Bench ultimately held that the Development Officers of the Life Insurance Corporation of India are entitled to claim exemption under section 10(14) of the Income Tax Act, of the conveyance allowance/additional conveyance allowance paid to them, upon satisfying the condition that such allowances have actually been spent for the purpose for which they were given, wholly, necessarily and exclusively, in the performance of duties. In our view, this position does not enable the petitioner association to get a declaration that there was no obligation on the Life Insurance Corporation of India to deduct the tax at source under section 192 of the Act on the amounts paid to the Development Officers as conveyance allowance/additional conveyance allowance. It is asserted in the writ petition that the conveyance allowance and additional conveyance allowance are paid to the Development Officers by the Life Insurance Corporation of India for meeting the actual expenses incurred by them in discharge of their field duties and thus wholly, necessarily and exclusively for meeting such expenditure. But it is seen from Annexure-1 and Annexure 1/1 communications relied on by the petitioner itself that what is ultimately liable to be exempted under section 10(14) of the Income Tax Act is a matter of assessment and it is not an automatic exemption from the liability to tax under the Act. So long as it is a matter of assessment and exemption is only to the extent the amount is wholly, necessarily and exclusively spent in the performance of duties by a Development Officer, it cannot be said that a blanket declaration can be granted by this Court, even at the threshold, that there was no liability to tax on the amounts and consequently, there was no obligation on the Life Insurance Corporation of India in terms of section 192 of the Income Tax Act to deduct the tax at source on those amounts. Section 192 of the Act imposes an obligation on any person responsible for paying any income chargeable under the head 'salaries' to deduct income tax on the amount payable at the average rate of income tax computed on the basis of rates enforced for the financial year in which payment is made on the estimated income of the assessee under the head 'salaries' for that financial year at the time of making the payment. Rule 2BB of the Income Tax Rules, 1962 prescribes the allowances for the purpose of clause (14) of section 10. Section 10 of the Act provides that in computing the total income of a previous year of any person, any income falling within any of the clauses of that section shall not be included. Clause (14) thus excluded any special allowance or benefit not being in the nature of perquisites within the meaning of clause (2) of section 17 of the Act specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose. Thus, what is the amount of conveyance allowance and the additional conveyance allowance that can be claimed to be exempted under section 10(14) of the Act would depend upon the assessee establishing the actual amount spent by him wholly, necessarily and exclusively in the performance of his duties. In J.G. Mankad v. CIT : [1965]55ITR448(Guj) , a Division Bench of the Gujarat High Court help that in order to make the deductions under section 7(2)(iii) of the Indian Income Tax Act, 1922, the expenses must be wholly and necessarily incurred in the performance of duties of the office. The expenses must also be the expenses, which the assessee is required by the conditions of his service to incur out of his remuneration. This position has been accepted in various other decisions.
Thus, it is seen to be a case where the conveyance allowance and additional conveyance allowance were to be included in the salary income of the Development Officer and he will be entitled to exemption only as provided in section 10(14) of the Act on establishing the facts required to be established to claim the benefit of that exemption.
6. It is not for the employer, here the Life Insurance Corporation of India, to decide what is the amount out of the conveyance allowance and the additional conveyance allowance, that could be claimed by an individual assessee as the expenses incurred wholly, necessarily and exclusively in the performance of his duties. That is a matter for decision by the assessing officer and it is for the individual assessee to prove before the assessing authority at the time of completion of the assessment, the amount liable to be exempted. In such a situation, it appears to us to be clear that in terms of section 192 of the Act, there is a clear obligation on the Life Insurance Corporation of India to deduct the tax due on these amounts at source leaving it to the individual assessee to claim exclusion or refund on establishing the conditions required under section 10(14) of the Act read with rule 2BB of the Rules.
7. Though various decisions were cited before us, we do not think that it is necessary to go into those decisions at this stage, since we find that this is not a fit case where in exercise of our jurisdiction under article 226 of the Constitution of India, we could or we should give a blanket declaration that the Life Insurance Corporation of India is not bound to deduct the tax at source on the amount of conveyance allowance and additional conveyance allowance paid to the Development Officers of the Corporation. The exemption from taxation of those amounts would depend upon the facts to be established by the assessee supported by the necessary evidence at the time of assessment and the exemption will be on the basis of actual expenditure incurred by him as warranted by section 10(14) of the Act. Therefore, in our view, the Income Tax Officer concerned was fully justified in directing the Life Insurance Corporation of India and its branch offices to deduct the tax at source on the conveyance allowance and additional conveyance allowance paid to the Development Officers of the Life Insurance Corporation of India leaving it to the individual assessee to raise his claim for exemption and establishing it at the time of completing the assessment against him. Therefore, the prayer for quashing the communication issued by the authority under the Income Tax Act in that behalf cannot be granted.
8. Since we have taken this view, we are not inclined to examine in detail the various decisions brought to our notice by learned counsel appearing in the case. But essentially, what we understand from those decisions is that it is a matter of establishing the claim for exemption by the individual assessee at the time of completion of the assessment and he would be entitled to exemption under section 10(14) of the Act to the extent he is able to establish that a particular amount was wholly, necessarily and exclusively spent by him in the performance of duties of his office.
9. Thus, we dismiss this writ petition without prejudice to the light of the individual assessee to raise his claim for exemption before the appropriate assessing officer at the time of assessment relating to his income. We make no order as to costs.
Petition dismissed.