Law:

Section:

Section 10(14), read with section 16 of the Income-tax Act, 1961 (Corresponding to section 4(3)(vi), read with section 7(2)(ii) (after Amendment in 1955) of the Indian Income-tax Act, 1922) - Special allowance - Assessment year 1957-58 - Assessee claimed deduction of his receipt from his employer -company by way of entertainment allowance - ITO rejected claim on ground that actual incurring of such expenses was not proved - AAC allowed to extent of 1/5th on salary under section 7(2)(ii) - Tribunal held that entire sum claimed was deductible - Whether there was nothing in section 7(2)(ii) of 1922 Act to show that an entertainment allowance which was not being received by assessee from before 1-4-1955 was at all qualified for being deducted from salary - Held, yes - Whether thus, any new entertainment allowance granted by employers to assessee after 1-4-1955 would not quality for such deduction from his salary - Held, yes - Whether under section 7(2)(ii) of 1922 Act, entertainment allowance should not necessarily be actually spent in performance of duties of an office, while both entitlement and quantum are restricted by new section 7(2)(ii) of 1922 Act - Held, yes FACTS For the assessment year 1957-58, the assessee claimed deduction of his receipt from his employer-company by way of entertainment allowance. The assessee was not receiving such an allowance before 1-4-1955. The ITO rejected the claim on the ground that the actual incurring of expenses over entertainment had not been proved. On appeal, the AAC accepted the claim to the extent of 1/5th of the salary under section 7(2)(ii) of 1922 Act. On further appeal, the Tribunal held that assessee was entitled to deduct the entire sum claimed. On reference : HELD Section 4(3)(vi) of 1922 Act ensures that a special allowance other than an entertainment allowance shall not be included in the total income of the person receiving it. The entitlement of the assessee that such allowance shall not be included in his total income is not subject thereunder to the restriction that the assessee should have been in receipt of such allowance from before 1-4-1955. The whole of the allowance without any limit on its quantum is…

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