ORDER
K.S. Viswanathan, Accountant Member
1. We find it convenient to dispose of these three appeals by a common order. The only issue in these appeals is whether the assessee is entitled to the full standard deduction under Section 16(i).
2. The assessee, an individual, has been appointed as the Managing Director of Sponge Iron India Ltd. According to terms of appointment he will be entitled to free use of company’s car for official purposes. He will also be entitled to the facility of company’s car for private use in accordance with the existing orders of the Ministry of Finance. According to this instruction of the Ministry, the car facility can be used for private purposes on making certain payments. The non-duty use should not exceed 500 kms. Journeys between the residence to office and vice versa have been treated as duty runs. Since the question hinges at the use of the car between the residence and office, we will give the instruction regarding the Staff Car :
The undersigned is directed to refer to the Ministry of Finance, Department of Expenditure O.M. No. F2 (18)/PC/64 dated 20-11-64 and the Bureau of Public Enterprises O.M. No. 2 (142)/68-BPE(GM) dated 6-9-68 wherein the procedure regarding car facility allowed to executives of the public sector enterprises even for private purposes has been spelt out. It will be noted therefrom that the Chief Executives and full-time Functional Directors of the public enterprises, who are appointed by the Government are allowed the use of Company’s car for private purposes. The non-duty journeys should not exceed 500 Kms per month. The journey between residence to office being treated as duty run. The exclusive use of the staff car cannot be extended to other senior managers/executives of the public enterprises whose appoinment is made by the Board of Directors themselves. Charges for private use in excess of 500 Kms are required to be recovered at the appropriate Km. rates fixed in each public enterprise. A log book is also required to be maintained indicating the journeys on official duties as well as the journeys undertaken by the concerned executive for private purposes. The public enterprises are also required to frame their staff car rules as close to the recent Government instructions as possible. Economy in the use of staff-car has to be exercised particularly in view of the present levels of oil prices and the need for conservation of petrol in the context of high prices.
3. For the three assessment years we are concerned with, the assessee claimed full standard deduction. The Income-tax Officer restricted the deduction to a thousand rupees only on the ground that the assessee has been provided with a car for his personal uses. On appeal it was submitted to the Appellate Assistant Commissioner that he was paying Rs. 100 per month for the use of vehicle up to a distance of 500 Kms. and, therefore, the proviso to Section 16 will not apply. The Appellate Assistant Commissioner did not accept this submission. The normal payment of Rs. 100 per month cannot be treated as payment on par with, say, hiring of a taxi. Since the vehicle has been provided to the appellant for use otherwise than wholly and exclusively for the performance of the assessee’s duties, the proviso to Section 16 will be applicable.
4. The assessee is on further appeal. Shri B. Ramajoga Rao appearing for the assessee submitted that the assessee had not been using the car for his personal purposes extensively. He gave a statement which showed that he had used the car very sparingly in all these three years. He also submitted that the company is a Public Sector Undertaking in which both the Government of India and the State Government are shareholders. He then referred to two decisions of the Tribunal, wherein the Tribunal has given a finding that full standard deduction is available to employees in spite of conveyance being given to them.
5. We have considered the submissions. The deduction from salaries are governed by Section 16. Section 16(i) gives the amount of standard deduction available to the assessee. Proviso (ii) to that sub-section states that where any motor car, motor cycle etc. is provided to the assessee by his employer for being used otherwise than wholly and exclusively in the performance of his duties, the deduction shall not exceed Rs. 1,000. In other words if a vehicle is provided which can be used for the purposes other than duties i.e. personal purposes the assessee will not be entitled to full standard deduction.
6. Now, there are three types of expenditure an assessee-employee will have in travelling. The first kind is expenditure incurred in the course of his performance of duties. Now, expenditure incurred on travel in the performance of duties will be entirely on account of employer. If the assessee had been given any allowance for this purpose it will be exempt under Section 10(14). If instead of allowance a vehicle is given to the employee, even then, so long as that vehicle is used wholly and exclusively in the performance of his duties, it will have no impact on his income and assessment, because the expenditure is entirely on account of the employer. At the other end of the spectrum there is a personal expenditure incurred by the assessee. Such expenditure has nothing to do with employment. If any allowance is given for meeting his personal travels that naturally will be in the shape of a remuneration. Leave Travel Allowance is one such case, unless it is specifically exempt as in the case of section covered by Section 10(5).
7. There is another type of expenditure on travel which is neither fully personal nor fully in the performance of duties. That is the expenditure incurred by an employee who travels from the residence to the place of work and vice versa. The expenditure incurred in coming to the place of work is not personal because it is incurred in preparing himself for his duties. At the same time it is not a travel undertaken in the performance of his duties because his duty starts only after he comes to the office. Thus, this type of travel stands in a separate footing by itself. The expenses incurred by the assessee in this type of travels had been the subject-matter of decisions by the English courts. In Nolder (Inspector of Taxes) v. Walters 15 TC 380, it was held that a pilot was not entitled to claim any deduction in respect of the upkeep of a car to convey him between the aerodrome and his house. The point again has arisen in the case of Owen v. Pook (Inspector of Taxes) and Taylor v. Provan (H.M. Inspector of Taxes) 49 TC 579. The main basis for their decision in these cases is that the expenditure had been incurred by the assessees because they chose to reside where they did.
8. The standard deduction allowed under Section 16(i) is to get over this anomalous position. In the course of the evolution of standard deduction, the Legislature had initially subjected the allowances to the assessee leading evidence for having incurred such expenditure. Since this was proving cumbersome the Ligislature in their wisdom chose to allow a standard deduction avoiding queries regarding the actual expenditure by the assessee.
9. The blanket allowance of standard deduction to everyone irrespective of whether the employer provides with conveyance for coming to the office would bring inequality. In order to remove this inequality the proviso is introduced which reduces the standard deduction to Rs. 1,000 in case where the employer has allowed the assessee the use of vehicle for this purpose. That is the meaning to be attributed to the expression “otherwise than wholly and exclusively in the performance of duties” appearing in the proviso. If there is material to show that the employer had provided a vehicle for coming to the office and going to the residence, then the case will be caught by the proviso. Now, turning to the facts of the case, it will be very easy to see that the employer of the assessee treats the journey between the residence and office as duty run. This is already appearing in the instructions regarding the Staff Car which we have extracted above. In other words, the journey performed for going to the office and back is at the expense of the employer. It may be that the assessee’s employer treats this journey as duty run. However, as per Section 16(i), in the light of the provisions of law explained above, such travel cannot be considered as journey in the course of performance of duty. Therefore, it has to be treated as vehicle allowed to be used for the purposes other than wholly and exclusively in the performance of duties. So the proviso would apply and the assessee will be entitled only for Rs. 1,000 as deduction.
10. The two Tribunal decisions relied upon by the assessee are distinguishable. In the case of M.V.N. Setty [IT Appeal Nos. 602 to 604 (Bang.) of 1978-79, dated 24-7-1980], a finding of fact has been given that the car has been exclusively used for office purposes. In the case of D.S. Seth [IT Appeal Nos. 2280 and 2281 (Hyd.) of 1977-78, dated 9-9-1978], a finding has been given that the duties of the assessee were such that he does not go straight from residence to office but on the way has to attend to several official duties and the element of personal use was negligible. It was on this finding that the assessee’s contention was accepted. In the case before us the rules regarding Staff Car clearly show that the journey from residence and office is also treated as duty run and, therefore, the journey, which otherwise is not in the performance of the duties, is treated as such. As we have explained earlier this distinguishes the assessee’s case from the other cases.
11. In the result, we will dismiss the three appeals.