Wednesday, June 11, 2014

Conveyance allowance received by LIC employee to develop insurance business is exempt from tax

Conveyance allowed paid by LIC to its Development Officer for performance of his duties and development of insurance business is exempt under section 10(14).


a)The assessee, a Development Officer of LIC, had received certain amount towards conveyance allowance from the LIC.

b)Though the same was part of the salary certificate but the contention of the assessee was that the said amount had been incurred in development of LIC’s business to receive the premium on account of various policies and the said amount was entirely exempt under section 10(14).

c)The AO rejected assessee's contention and made addition of impugned sum as income of the assessee. On appeal, the CIT(A) held in favour of assessee. Further, the Tribunal upheld the order of CIT(A). The aggrieved-revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)The conveyance allowance was paid to the Development Officers for meeting actual expenditure incurred by them in discharge of their field duties and, thus, necessarily and exclusively for meeting of such expenditure, the allowance was being exempt.

2)The LIC was sanctioning conveyance allowance to the Development Officers considering the expenditure incurred by them for procuring the business and it was fixed by a general formula having reference to the parameters of the business. Thus, the impugned allowances were reimbursement of the actual expenditure incurred by the Development Officers on account of conveyance in relation to the performance of their duties.

3)The said expenditure had a close nexus to the performance of the duties and development of the insurance business, inter alia, by way of meeting several persons, to enroll new life insurance agents, to meet the customers for encouraging them to take insurance policies etc. Thus, in such circumstances, expenditures had to be incurred towards conveyance. Therefore, the Tribunal was justified in upholding the exemption granted by the CIT(A). – CIT V. MADAN GOPAL BANSAL [2014] 45 301 (Rajasthan)