Law: Income Tax Act, 1922

Section: 4,4(3)(vi)

Income-tax Act (XI of 1922)---- S. 4(3) (vi)-Special allowance for day to day expenses-Tenability-­Exemption from-Assessee or foreigner non-resident technician sent to Pakistan to assist a company to set up a plant-Paid salary in Germany but receiving a sum of Rs. 170 per day during his short stay in Pakistan to meet day to slay expenses-Treating such out of pocket expenses as his salary, held, not justified-Amount was given to assesses to meet day to day expenses wholly and necessarily incurred in performance of duty of art officer or employment of profit and was rightly qualified for exemption in terms of S, 4 (3) of Act. C.I. T, Gujrat v. Tejajee Faras Ram Khara wala Ltd. (1968) 67 I T R 95 fol. JUDGMENT MUHAMMAD ZAHOORUL HAQ, J.-The Commissioner of Income-tax has referred the following question under section 66 of Income-tax Act for our decision :- "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the daily allowance of Rs. 170 paid to the assessee was a special allowance granted to meet expenses wholly and necessarily incurred in the performance or the duties of an office or employment of profit and hence exempt under clause (vi) of subsection (3) of section 4 of the Income-tax Act, 1922?" The admitted position is that the respondent was a German Technician sent to Pakistan to assist Pakistan Cables Ltd. in setting up a plant. He was a non-resident. He stayed for 44 days during the accounting year ending on 30-6-1969 and for another 58 days in the following year. Assessment year was 1969-70. The assessee had been paid his salary in Germany but he was paid a sum of Rs. 170 per day by Pakistan Cable Ltd. as day to day expenses. He was assessed to a total income of Rs. 7,480 for the first period and Rs. 9,860 for the second period by the I. T. O. However, the Appellate Assistant Commissioner allowed the appeal of the respondent and held that the payments made to the respondent were mere day to day expenses or to be specific Hotel and out of pocket expenses and not a salary and consequently the assessments were cancelled. The Income-tax Appellate Tribunal also agreed with the view of the Appellate Assistant…

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