Assessee deductor had made payments under the head “uniform allowance”; however, the deductor had neither included this allowance to the total salary payments nor had he deducted tax at source (TDS) on such income.
The assessee had disclosed in writing that out of around 790 to 800 employees at Hazira, 752 employees had taken this reimbursement on the basis of self-certification and thus, it has not been included in the gross salary chargeable to TDS under section 192 of the Act for the financial year in question presuming that since the employees had given self-certification, they might have incurred or would be incurring such expenditure. Therefore, no further check had been observed by the deductor as to whether they had actually incurred such expenditure or not, and original/genuine and real bills and vouchers to this effect were not taken at the relevant point of time during the relevant financial year.
Section 10(14)(i) of the Act provides that any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specially granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed to the extent to which such expenses are actually incurred for that purpose are not to be included in the total income of the assessee
Thus, the assessee had claimed expenditure incurred towards uniform allowance as exempt section 10(14)(i) of the Act on the basis of self-certification by the concerned employees without calling for any proof in the nature of bills, vouchers, etc. regarding such expenditure having been actually incurred and without due verification.
Section 10(14)(i) on the above point:
Section 10 of the Act provides that the total income of a previous year of any person falling in any of the clauses set out thereunder shall not be included. Sub-clause (i) of clause (14) thereof, as it stood at the relevant time, reads thus:
“(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of an office or employment of profit, as may be prescribed, to the extent to which such expenses are actually incurred for that purpose.”
Rule 2BB of the rules prescribe the allowances for the purpose of clause (14) of section 10. The allowances enumerated under sub-rule (1) thereof are prescribed for the purposes of clause (14) of section 10. The allowance prescribed by clause (f) of Rule 2BB(1) of the rules is any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.
The present case relates to uniform allowance, which as noticed earlier is exempt from tax under section 10(14)(i) of the Act read with rule 2BB(1)(f) of the rules to the extent to which such expenses are actually incurred for that purpose. Under the Act, the liability to the employer is to deduct tax at source to the extent of the taxable income of the employee. If any part of such income is exempt, there is no liability to deduct tax at source from such income. Since liability to pay tax under the Act is of the individual employee and the liability on the part of the employer is only to deduct tax at source, Circular No. 15 dated 8-5-1969 provides that self-certification on the part of the employee is sufficient for the disbursing officer for calculation of the tax-deductible at the source. While the said circular relates to conveyances, the underlying principle can well be applied even in the case of uniform allowance. Therefore, if an employee gives a certificate certifying that he had incurred certain expenditure towards uniforms and maintenance thereof, insofar as the disbursing officer is concerned, that would be adequate while calculating the tax deductible at source.
However, if no uniform was prescribed by the employer then, the payment of allowance under the head of the uniform allowance would not fall within the exemption clause of section 10(14)(i) of the Act read with rule 2BB of the rules.