Uniform Allowance Taxable?
THE assessee paid Wear-Allowance to the employees and the same was claimed exempt u/s 10(14) of the Income-tax Act. Therefore, the allowances paid to the employees were not included in salary for the purpose of deduction of tax at source u/s 192. The Assessing Officer was of the opinion that the Wear-Allowance is not exempt u/s 10(14) and therefore, ought to have been included in the salary for the purpose of deduction of tax at source. On appeal, the CIT(A) sustained the order of the Assessing Officer.
In a cases decided last week, the Ahmedabad Bench of ITAT observed,
For the purpose of getting exemption of any allowance u/s 10(14), two conditions must be satisfied.
1. That the allowance has been given to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office;
2. The expenditure must be actually incurred because the exemption is limited to the extent of expenses actually incurred.
In this case, the assessee is unable to satisfy any of the conditions. When there was no dress code and the employees were free to wear any dress, how the wear-allowance can be said to be granted to meet the expenses wholly, necessarily and exclusively in the performance of duties of an office.
The assessee's appeal was rejected.
In the Central Excise Department, Inspectors, Superintendents, Assistant Commissioners and Deputy Commissioners are paid a uniform allowance, but we rarely see them in uniform. Uniform is adorned only by protocol officers. Now are these officers liable to pay income tax on the uniform allowance?