1989 PLP (Trib (PTD)

Allah Ditta for Respondent. Date of hearing: 31st October, 1988. This is a Departmental appeal relating to the assessment year 1985-86. The assessee in the case is an employee of the Board of Intermediate and Secondary Education. Multan and derives income from salary. The facts of the case are that the assessee had claimed exemption for honorarium and medical allowance received from the Board of Intermediate and Secondary, Education, Multan. The I T O in his order under section 59 (1) disallowed the assessee's claim under the provisions of sub-section (3) of the said section 59 but did not indicate any reason for the disallowance. The assessee filed an appeal against the I T O's order before the A A C of Income-tax, Range-B, Multan. It was contended before the A A C that as regards the honorarium received by the assessee it was exempt under clause (41A) of the Second Schedule Part-I to the Income-tax Ordinance since the assessee was an employee of the Government of the Punjab. With regard to the medical allowance it was claimed that this was exempt under rule 17 of the Income-tax Rules.

2. In .his appellate order the A A C referred to a decision of the A A C. Faisalabad in which he had held honorarium to be exempt under clause (41A) in similar circumstances. Following the decisions of the A A C Faisalabad, therefore, the A A C. Multan directed that the honorarium be treated as exempt in the assessee's case. With regard to the question of medical allowance the A A C again referred to a decision of the A A C, Faisalabad in which the latter had directed that the appellant's claim be accepted. The A A C Multan, however, further wrote that in the Sargodha case the assessee had furnished a certificate to the effect that the amount of the "medical expenses" received by him had been totally spent during the relevant period on medical treatment. The A A C observed that no such certificate had been furnished in the instant case and he directed that the assessee be provided an opportunity to furnish a similar certificate and if such a certificate is furnished the exemption be allowed to the assessee.

3. It is contended on behalf of the Department that the A A C was not justified in allowing exemption in respect of honorarium because the assessee was not an employee of the Federal Government or the Provincial Government and it was only in the case of such Government employees that the honorarium was exempt. With regard to the A A C's decision regarding the medical expenses it is contended on behalf of Department that Rule 17 of the Income-tax Rules in fact refers to re-imbursement or payment of the medical expenses incurred by an employee and lays down that where the amount of re-imbursement or payment exceeds the actual expenses the excess is to be treated as income of the employee. It is pointed out on behalf of the Department that in the instant case no payment of actual medical expenses is involved and the assessee only received the medical allowance at a fixed rate without any reference to the, expenses incurred. It is contended that no exemption is available under the law to such a cash allowance and the AAC was, therefore, not justified in holding that if the assessee furnished a certificate regarding annual expenditure, the exemption is to be allowed. It is, on the other hand, contended on behalf of the assessee that the A A C was quite justified in treating the assessee as an employee of the Provincial Government and some case law was also cited by the learned counsel for the assessee in this regard. With regard to the provisions of rule 17 of the Income tax Rules also it is contended that the said rule is fully applicable in the assessee's case.

4. It is seen that a Single Member Bench of this Tribunal has recently considered the same issue arising in the case of some other employees of the Board of Intermediate and Secondary Education Multan in the context of identical orders passed by the A A C, Multan. The matter has for instance been dealt with in I T A No.5405/LB/86-87 (Assessment year 1985-86) dated 29-9 -1988 to quote only one of the several Single Bench decisions. In these orders of the Tribunal the assessments have been set aside on both the issues. In the light Of these decisions of the Tribunal the impugned appellate order of the A A C is modified and the assessment is set aside for de-novo consideration on the same lines as ordered in I T A No. 5405/LB/86-87 referred to above. The Departmental appeal thus succeeds to the extent and in the manner indicated above. M.B.A/578/T Order accordingly.