INCOME TAX

Circular No. 15

Dated 8/5/1969

Deductions under clause (i) as it stood prior to its substitution, and under clauses (iii) to (v) as they stood prior to their omission, by Finance Act, 1974 with effect from 1-4-1975 - Clarifications on certain issues retained in the compendium for reference purposes

clarification 1

Maintenance of conveyance - Allowance of deduction therefor when vehicle is in repair - I am directed to invite a reference to the Boards Circular No. 15 [F. No. 40/22/69-IT(A-I)], dated 8-5-1969 and to say that in the manner of standard deduction from salaries under section 16(iv), a question has arisen, viz., whether an assesse who owns a conveyance and uses it for the purposes of employment is entitled to the standard deduction for the period during which it was temporarily out of use because it was under repairs. Since during the temporary non-user of the conveyance and the assesse would have been spending on substitute conveyance and further the repair charges are not separately allowable, the Board desire that the assesse may be allowed the prescribed monthly deduction for the period of repairs. The certificate about continuous use of the vehicle for purposes of employment should cover the repairs period also.

Circular : No. 97 [F. No. 200/29/72-IT(A-I)], dated 14-12-1972.

clarification 2

Deduction to salaried employees who do not own any conveyance as also those who own a bicycle - I am directed to invite a reference to this Ministry’s Circular No. 36 [F. No. 275/42/70-ITJ], dated 25-3-1970 [printed under section 192] and to say that the two examples in Annexure II to the above circular have been further considered in the light of the intended import of clause (iv) of section 16, as substituted by the Finance Act, 1970. Salaried employees who do not own any conveyance as also those who own a bicycle or any other conveyance, not being a motor car, motor cycle, scooter or other moped, are entitled to standard deduction of Rs. 35 for each calendar month or part thereof comprised in the period of their employment during the year and in order to be eligible for this deduction it is not necessary for the employee to prove that he had actually incurred any expenditure on travelling for the purposes of his employment. The aforesaid deduction should, therefore, be taken into account in calculating tax deducted at source from the salary income of such employees.

Circular : No. 44 [F. No. 275/42/70-ITJ], dated 4-8-1970.

clarification 3

Allowance for maintenance expenditure/wear and tear of conveyance Whether available where conveyance is not registered in the name of assesse

1. Reference is invited to this Ministry’s Circular letter of even number dated March 26, 1968 [printed under section 192] regarding the procedure to be followed by disbursing officers in deducting tax at source from salaries during the financial year 1968-69.

2. In paragraph 4 in item (ix) of the above letter, it has been stated that in calculating the tax deductible at source from salaries, the salary income is to be reduced by the appropriate amount of standard deduction for maintenance expenditure and wear and tear of motor cars and other conveyances owned by the employee and used by him for the purposes of his employment. A question has arisen whether this standard deduction is allowable in a case where the employee claims to have financed the purchase of the motor car or other conveyance from his own funds but such conveyance stands registered in the name of his wife or any other person.

3. The standard deduction under section 16(iv) is admissible only where the conveyance is owned by the employee and is used for the purpose of his employment. In accordance with the provisions of the Motor Vehicles Act, 1939, the owner of a motor vehicle has to get it registered in his name within a specified period. From this it follows that where a motor vehicle is not registered in the name of the employee, he cannot be regarded to be its owner in law. In view of this position, the standard deduction for the maintenance expenditure and wear and tear of a motor vehicle can be allowed to an employee only where the vehicle is registered in his own name.

Circular : No. 10 [F. No. 12/59/69-ITCC], dated 26-3-1969.

clarification 4

Salaried taxpayers owning conveyances and using them for employment - Deduction therefor for the assessment year 1968-69

1. A reference is invited to the Press Note issued by the Ministry of Finance (Central Board of Direct Taxes) on 25-5-1968, relating to the allowance of standard deduction for maintenance expenditure and wear and tear in the case of salaried taxpayers owning conveyances and using them for the purpose of their employment.

2. In the absence of the definition of the phrase used for the purpose of employment in the Income-tax Act, 1961, a doubt has been expressed as to the meaning of this phrase and the checks which can be applied for the proper verification of the claim, by the disbursing officers.

3. For this purpose, it is hereby clarified that a declaration from the employee that the conveyance is owned by him and is being used by him for the purposes of employment may be considered adequate by the disbursing officer for the purpose of calculation of tax deductible at source under section 192.

Circular : No. 15 [F. No. 40/22/69-IT(A-I)], dated 8-5-1969.

clarification 5

Purchase of books and other publications for the employment purposes/Main- tenancy and use of own conveyance for employment purposes

1.**

**

**

2. Books - The intention is that the books and publications purchased should be of use to the employee in providing the service which he is required to give to his employer. Thus, except in the case of a journalist or a person employed on literary work, the deduction is not permissible in respect of expenditure incurred on books of literary interest or magazines, etc., which are read for the purpose of improving ones general knowledge or for entertainment. A detailed list of the books purchased, together with their prices and a certificate that the assesse had actually spent the amount claimed, should be furnished at the time of assessment. As the new provisions became effective from the assessment year 1956-57, the accounting year for which is 1955-56, it is possible that the vouchers in respect of all the purchases made after April 1, 1955 might not be available. In such cases, the production of vouchers for the assessment year 1956-57 will not be insisted upon. The deduction admissible is subject to a maximum of Rs. 500 per year.

3. Conveyance - Every salaried employee who maintains and makes use of a conveyance of his own for the purposes of his official work will be entitled to a deduction from his salary for the financial year 1955-56 (liable to be taxed in the assessment year 1956-57) of a reasonable proportion of the running expenditure and of the normal wear and tear which can be attributed to the use of the conveyance for the purposes of his employment as distinct from his private and personal use. For making a reasonable estimate of the amount to be allowed, the Income-tax Officer will require the following information :

     a.   the total expenditure incurred in running the conveyance during the relevant year;

     b.   the date of purchase, the original cost and the period for which it was in the employees use during the year; and

     c.   the status of the employee and the nature of duties of the employee necessitating the use of the conveyance and indicating the extent of such use for purposes of employment.

Where adequate details in respect of item (a) are not available, the employee should furnish a certificate to the effect that the total cost of running and maintaining the car was not less than a specified amount.

The employee should also furnish a certificate indicating what proportion of the expenditure on the maintenance and use of the car was for purpose of employment. (Care should naturally be taken to see that excessive and unreasonable claims are not made). For this purpose, trips between the residence and office or regular place of work, to and fro, will be regarded as being for the purposes of employment.

Journeys in ones own conveyance for which travelling allowance is charged will not qualify for the concession. Similarly, no deduction will be allowable, if the employee is in receipt of a conveyance allowance, or is provided with free transport, at employers cost.

4. No abatement in respect of this concession will be permissible at the time when tax is deducted from salary at source from month to month. The assesses claim in this behalf will be considered only at the time of assessment.

Circular : No. 23(LVIII-8), dated 9-7-1956 [relevant extracts] as corrected by Circular No. 37(LVIII-10), dated 21-9-1956.