COMMISSIONER OF INCOME TAX Vs. MADDI SUDARSANAM

JUDGEMENT

(1.) THIS reference relating to the income -tax asst. year 1979 -80 consists of the following two questions referred by the Tribunal at the instance of the CIT :

(2.) IT would appear that the assessee was a director of about nine companies. In some companies he was nominated by the Andhra Pradesh State Financial Corporation and in some other companies he was a director on his own. The ITO found that out of the travelling expenses and other allowances paid by the companies to the assessee whenever he attended meetings, there was a saving. The total extent of such savings was reckoned at Rs. 5,203 (Rs. 5,153 + Rs. 50). The ITO subjected this so -called surplus to tax on the alleged ground that S. 10(14) of the IT Act, 1961 (herein referred to as "the Act"), authorises levy of tax on the amount remaining unspent. It appears, this question first arose in connection with the asst. year 1973 -74 and taking the same view, the ITO included in the assessee's total income unspent travelling allowance and other allowances, acting under S. 10(14) of the Act. The first appellate authority as well as the Tribunal disagreed with the ITO in the view that he had taken and held that the amount was not taxable. It does not appear that the Tribunal's view for the asst. year 1973 -74 was contested by the Revenue by filing a reference application under S. 256 of the Act. In any event, it has not been pointed out to us that the matter concerning the asst. year 1973 -74 was the subject -matter of consideration by this Court. The Tribunal also observed in its order that the same question arose in the assessee's case for yet another assessment year and in its order in ITA No. 602/Hyd/1977 -78 dated August 25, 1978, the Tribunal had taken the view that the unspent allowances cannot be taxed as the assessee was not holding any "office of profit".

(3.) WHEN the same dispute came up before the Tribunal for the asst. year 1979 -80, which is now under consideration, the Tribunal followed its earlier view and rejected the Revenue's plea that the unspent travelling allowance and other allowances could be assessed under S. 10(14) of the Act. The Tribunal took the view that, in the facts and circumstances, it could not be said that the assessee was holding an office of profit and, consequently, there is no conferment of power to tax the unspent allowance granted specifically for a particular purpose. Sec. 10(14) of the Act provides that any special allowance or benefit specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose, would be exempt. In other words, the extent of expenses not actually incurred for the purpose would not earn exemption. In the present case, the assessee was paid travelling allowance by companies in order to enable him to attend the meetings of the board of directors. From the order it is not clear whether the sitting fees paid to the assessee by the companies were also the subject -matter of consideration, but the Tribunal refers to only "travelling allowance and other allowances". We, therefore, proceed on the assumption that there is no dispute about the assessability of the sitting fees received by the assessee. The question is whether the savings made by the assessee, out of the amounts paid towards travelling and other allowances, could be subjected to tax. The Tribunal does not state anything particular in the order relating to the assessment year under consideration. It merely refers to the order passed for the asst. year 1973 -74 which is part of the record. In the order relating to the asst. year 1973 -74, the Tribunal observed: