Law:

Section:

Section 10(14) of the Income-tax Act, 1961 - Special allowance - Assessment year 1972-73 - Whether city compensatory allowance granted to meet personal expenses necessitated by extra high cost of living at big cities would fall within Explanation to section 10(14) and, hence not exempt from tax - Held, yes FACTS The assessee who was an ITO, received a certain sum by way of city compensatory allowance because he was posted in a city. He claimed this amount to be exempt from income-tax. The ITO did not accept it. On appeal, the AAC held that it was an allowable deduction under section 10(14) as well as under section 16(v). On revenue's appeal, the Tribunal while affirming AAC's view held that the allowance was granted to meet personal expenditure necessitated by the special circumstances in which the duty was performed, and, hence, was exempt under section 10(14) of the Act. On reference : HELD On the finding that the compensatory allowance was granted to meet the personal expenditure necessitated by the high cost of living at big cities, the Explanation added by the Finance Act of 1975 becames applicable. The emphasis in the Explanation is that the allowance should be granted to meet personal expenses at the place where the duty is to be performed. The allowance in the instant case was not granted with reference to the nature of the duties but exclusively with reference to the place of posting. It was granted to meet the personal expenses necessitated by the extra high cost of living at, inter alia, Kanpur. In view of the Explanation to section 10(14) such an allowance could not be treated as deductible under section 10(14) on the ground that it was granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties. Note : The decision was in favour of revenue. JUDGMENT Satish Chandra, CJ.-The assessee was an ITO. During the previous year relevant for the assessment year 1972-73, he was posted at Kanpur. He received Rs. 531 by way of city compensatory allowance because he was posted at Kanpur. He claimed this amount to be exempt from income-tax. The ITO concerned, however, did not accept it. The assessee appealed. The AAC…

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