1984 PLP 169 (PTD)

MUHAMMAD ZAHOORUL HAQ, J.‑The Commissioner of Income‑tax has referred the following question under section 66 of Income‑tax Act for our decision :‑ "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the daily allowance of Rs. 170 paid to the assessee was a special allowance granted to meet expenses wholly and necessarily incurred in the performance or the duties of an office or employment of profit and hence exempt under clause (vi) of subsection (3) of section 4 of the Income‑tax Act, 1922?" The admitted position is that the respondent was a German Technician sent to Pakistan to assist Pakistan Cables Ltd. in setting up a plant. He was a non‑resident. He stayed for 44 days during the accounting year ending on 30‑6‑1969 and for another 58 days in the following year. Assessment year was 1969‑

70. The assessee had been paid his salary in Germany but he was paid a sum of Rs. 170 per day by Pakistan Cable Ltd. as day to day expenses. He was assessed to a total income of Rs. 7,480 for the first period and Rs. 9,860 for the second period by the I. T. O. However, the Appellate Assistant Commissioner allowed the appeal of the respondent and held that the payments made to the respondent were mere day to day expenses or to be specific Hotel and out of pocket expenses and not a salary and consequently the assessments were cancelled. The Income‑tax Appellate Tribunal also agreed with the view of the Appellate Assistant Commissioner, and it held that the receipt in the hands of the assessee being only to meet his Hotel and out of pocket expenses rightly qualified for exemption in terms of clause 6 of section 4 (3) of the Income‑tax Act. Therefore, they dismissed the appeal. Mr. Shaikh Haider has argued that the whole of Rs. 170 received by the assessee could not have been treated as out of pocket expenses and it was incumbent upon the assessee to prove as to what he had actually spent out of the allowance of Rs. 170 paid to him and; therefore, whatever was the balance after deducting the actual out of pocket expenses incurred could have been treated as an income of the assessee and brought to tax. The arguments of Mr. Shaikh Haider appears to be attractive but unfortunately the depart ment has not proceeded on that basis and has treated the whole allowance of Rs. 170 as the income of the assessee which could not be done even according to arguments of Mr. Shaikh Haider. Mr. A. A. Sharif has contended that the very order of the I. T. O shows that he has found, as a matter of fact, that the assessee was drawing Rs. 170 per day to meet the day to day expenses. But surprisingly in the very next sentence the I. T. O has treated the same Rs. 170 per day as the salary which was completely unfounded. The counsel also referred to the observations of the A. A. C. where it was pointed out that the I. T. O. taxed the daily allowance received by the assessee while the I. T. O. had himself admitted that it was given to meet the day today expenses. In this respect letter of M/s. Pakistan Cable Limited was referred which was to the following effect .‑ "We further confirmed that this Company has paid to Mr. Volkmar Roeddee Rs. 170 per day to meet his Hotel and pocket expenses and be has not received any salary from us." In view of the above factual position we do not find any justification for treating the out of pocket expenses allowed to the assessee for his short stay in Pakistan as his salary. We find that section 4(3) (vi) of Income‑tax Act' 1922 exempts any special allowance benefit or perquisite specifically granted to meet expenses, wholly and necessarily incurred in the performance of the duty of an office or employment of profit. In this respect I. T. Appellate Tribunal has referred to a decision of the Supreme Court of India in C. I. T., Gujrat v. Tejajee Faras Ram Khara Wald Ltd. (1968) 67 1 T R 95 where the scope of clause 6 of section 4 (3) was examined in respect of expenses incurred and it was observed that on that account an allowance granted to meet expenses to be incurred in future in the performance of the duties of an office or employment of profit is not outside the exemption claimed. In the context in which the expression "incurred" occurs it entirely means "incurred or to be incurred". In this view of the law the question referred to us is answered in the affirmative. M. B. A. Question answered in affirmative.