Law:

Section:

Section 4, read with sections 2(24), 2(45), 15 and 16(v), of the Income-tax Act, 1961 - Income - Chargeable as - Whether city compensatory allowance granted to a Government servant is not income and, therefore, does not come within charging sections - Held, yes Facts For the assessment years 1970-71 to 1972-73, the assessee, a member of the Indian Revenue Service, claimed that the amount received by him as city compensatory allowance (CCA) was not to be included in the total income of the assessee. The ITO, however, disallowed the assessee's claim but the AAC, on appeal, accepted the same. The Tribunal considered the scheme of the Act, as also the fundamental rules governing the services of the assessee under which the said allowance was paid and held that the said CCA did not confer any advantage to the assessee and could not be charged to tax under sections 4 and 5. The Tribunal also considered the sections relating to computation of income and in particular sections 10, 14, 15, 16 and 17, and held that the said allowance did not come within the charging section and could not be treated as income under section 2(24) and 2(45). It was further held that the said allowance also did not come within the ambit of sections 15 and 17 and, therefore, it was not necessary to consider the provisions of section 16(v) in connection therewith. On reference : Held Any allowance to meet personal expenditure necessitated by exceptional circumstances in which duty is to be performed is included within the definition of the expression CCA. Rule 44 of the fundamental rules governing the service of the assessee provides that subject to any restrictions which the Secretary of State in Council may by order impose upon powers of the Governor General in Council or the Governor in Council as the case may be, the amount of compensatory allowance should be so regulated that the allowance is not on the whole a source of profit to the recipient. The local Government may grant such allowances to any Government servant under its control and may make rule prescribing the amounts and the consideration under which they may be drawn. Different types of CCA are contemplated under Supplementary…

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