COMMISSIONER OF INCOME TAX Vs. PHATAK D R

JUDGEMENT

(1.) THIS reference relates to a claim for exemption or deduction of the amount received by a Government servant for compensatory (city) allowance. The assessee was the ITO posted at Bombay during the previous year relevant to the asst. year 1965 66. He received compensatory (city) allowance of Rs. 741 for that year. He claimed exemption of this amount under S. 10(14) of the IT Act, 1961 (hereinafter referred to as "the Act"), or, alternatively, as a deduction under S. 16 (v) of the Act. The ITO rejected the claim of the assessee on the ground that in earlier years similar claims were rejected and such orders of the ITO were confirmed in appeal by the AAC. On an appeal by the assessee the AAC dismissed the same relying upon the orders in the earlier years. On a further appeal before the Tribunal, the Tribunal has allowed the appeal. It took the view that all the conditions required by S. 10(14) of the Act were satisfied and the amount of compensatory (city) allowance received by the assessee was, therefore, exempt under that provision. It also accepted the alternative contention of the assessee that it was a permissible deduction under S. 16 (v) of the Act. At the instance of the Revenue of following two questions are referred for our determination :

(2.) AS we are inclined to answer question No. 1 above in favour of the assessee, it is unnecessary for us to express any opinion on question No. 2 above referred to.

(3.) BEFORE the provisions of cl. (14) can be attracted, the following conditions are required to be fulfilled :