JUDGMENT
M.N. Rao, J.
1. In respect of the asst. yr. 1976-77, at the instance of this Court, the following question was referred by the Tribunal for the opinion of this Court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the boarding and lodging expenses met by the employer were granted to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties and the same was not taxable under the provisions of s. 10(14) of the IT Act, 1961 ?”
2. The above question comprehends three assessees, Dutch nationals, deputed to work in India at the relevant time on the ship named “Jagsevak”. During their stay in India, their employer had met their boarding and lodging expenses directly as indicated below :
“1. Mr. Vander C. C. Malen Rs. 200 per day x 96 Rs. 19,200
2. Mr. L. E. Martens Rs. 200 per day x 53 Rs. 10,600
3. Mr. Stock Leender Rs. 200 per day x 67 Rs. 13,400″.
The ITO, with reference to the asst. yr. 1976-77, treated the value of the boarding and lodging in respect of each of the assessees as perquisites, which should be included in the taxable income of each of them and accordingly he passed assessment orders bringing to tax the above said amounts. On appeal, the Asstt. CIT(A) based upon the orders passed by him earlier in respect of the very same assessees for the earlier assessment year held that the amounts paid by the employer directly for the facility of boarding and lodging provided to the assessees should not be treated as income of the assessees and on that view, he deleted the above amounts from the income of the assessees. The Tribunal, in the second appeal, affirmed the view of the AAC and dismissed the appeals following its earlier view. At the instance of the Revenue, this Court directed the Tribunal to refer the above question for the opinion of this Court.
3. On the last occasion when the matter came up for hearing, we adjourned the case with a view to enabling standing counsel for the Revenue to secure information as to what happened in the R.Cs., pertaining to the earlier assessment years, but learned counsel could not secure the information. The Registry also could not place the information before us. We are, therefore, constrained to dispose of the matter with reference to the facts on record and the arguments advanced by learned counsel for the Revenue. None appears for the assessees.
4. “Perquisite” is defined by s. 17(2) of the IT Act, inclusively, inter alia, as meaning :
“(2)(iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee”.
The case of the Department is that since the facility enjoyed by the assessees is a perquisite within the meaning of s. 17(2)(iv), the same is not liable to be exempted under s. 10(14), which reads as follows :
“(14) any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of clause (2) of s. 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose.
Explanation – For the removal of doubts, it is hereby declared that any allowance granted to the assessee to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides shall not be regarded, for the purposes of this clause, as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties”.
5. Section 17(2)(iv) refers to the obligation of the assessee which has been met by the employer and but for that obligation, the assessee would have incurred the expenditure himself in the same measure. We cannot predicate whether the three assessees in question would have incurred the same expenditure if the employer had not provided them the boarding and lodging facility and whether the assessees had no obligation to incur that expenditure in the particular manner as part of their duties qua employees. The amounts in question, therefore, in our view, do not amount to perquisites.
What is not a perquisite may fall under s. 10(14) provided it answers the description of a special allowance or benefit given by the employer to the employee “to meet the expenditure wholly, necessarily and exclusively” in the performance of the duties. The expenditure incurred by the employer, although was not a special allowance it, undoubtedly, is a benefit “specifically granted to meet the expenses wholly, necessarily and exclusively incurred in the performance of the duties” relatable to the employment of the assessees since, they being foreigners and serving on a ship berthed in one of the Indian ports it became the duty of the employer to provide boarding and lodging facilities to them. The expenditure in question, therefore, qualifies for exemption under clause (14) of s. 10 of the IT Act. The Tribunal was right in excluding the amounts in question from the total income of the assessees.
6. The question is, therefore, answered in the affirmative, in favour of the assessees and against the Revenue. No costs.