We pay our staff a fixed monthly attire allowance and washing allowance and treat it as exempt under s.10(14). Nobody actually wears a uniform. Can the TDS officer make us an assessee in default?
Yes. The Tribunal held that Rule 2BB(1)(f) exempts expenditure incurred on the purchase or maintenance of a uniform for wear during the performance of duties, and that where the employees wore dress of different colour, different design and texture according to their own choice, there was no uniform and nothing to show the allowance was granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties. Tax was required to be deducted on both the attire allowance and the washing allowance, and the employer was in default under s.201(1).
Decided by the ITAT (Shri Bhavnesh Saini, Judicial Member and Shri A.N. Pahuja, Accountant Member (Income Tax Appellate Tribunal, Ahmedabad Bench 'B')) on 2009-12-31, reported as ITA Nos. 490 and 2571/Ahd/2005 and ITA Nos. 491 and 2572/Ahd/2005, Assessment Years 2002-03 and 2003-04 (ITAT Ahmedabad). It bears on section 10(14), section 192, section 201, section 133A of the Income Tax Act 1961, in Salary & Perquisites, Capital Gains Exemptions and TDS Defaults matters.
This is the Revenue-side authority on the commonest s.10(14) fact pattern — an allowance paid as a round monthly sum to everybody in a grade, reimbursed on a self-serving declaration, with no uniform in existence. Three features of the reasoning are worth carrying into a reply. First, what the Commissioner (Appeals) treated as the meaning of 'uniform' — a distinct and specific dress having a definite design, colour and texture — was accepted; personal clothing bought to taste is not a uniform, however smart the office. Second, reimbursement of 'clothes, shoes, bags and personal effects' up to a ceiling is a benefit, not an allowance to meet a duty-related expense. Third, the washing allowance was destroyed by the simple point that where no uniform was granted, the question of washing it did not arise. Set this against CIT (TDS) v Oil and Natural Gas Corporation Ltd. (Gujarat High Court, 17 March 2020), where the employer escaped a s.201 demand on self-certification — the two are reconcilable, because in ONGC the Revenue had never contended that no uniform was prescribed, whereas here the survey established it. An employer who wants the ONGC protection must first be able to point to a uniform. And from AY 2024-25 the point is largely academic for employees in the default regime: s.115BAC withholds the s.10(14) exemption except for allowances prescribed for that purpose, and uniform allowance is not one of them.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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A survey under s.133A was carried out on 3 September 2002 in the accounts office of the two assessees, public limited companies engaged in manufacturing and trading of electronic items, to verify compliance with the TDS provisions. On verification of pay slips and Form 16 of a few top executives it was found that the companies paid an 'attire allowance' to all their employees except peons; the companies explained that this was uniform allowance and therefore exempt and not included in taxable salary. The survey found that the employees were not wearing any uniform, that the amount was paid in lump sum up to a specified limit, and that it was reimbursed on the strength of declarations filed by the employees. The Senior Finance Manager stated that all officers and staff other than peons were entitled to reimbursement of clothes, shoes, bags and personal effects up to a specified amount, and that no uniform was prescribed for the executives and staff except for peons. The Assessing Officer also found that washing allowance was paid to most employees at a fixed rate irrespective of whether a uniform had been provided. The amounts in issue were attire allowance of Rs 3,31,971 and Rs 2,80,803 and washing allowance of Rs 1,32,764 and Rs 4,10,298 for DDE ORG Systems for AY 2002-03 and AY 2003-04 respectively, and attire allowance of Rs 45,929 and Rs 35,957 and washing allowance of Rs 11,500 and Rs 47,831 for Sarabhai Electronics for the same two years. The Assessing Officer treated the companies as assessees in default under s.201(1). The Commissioner (Appeals) confirmed, holding that uniform means a distinct and specific dress having a definite design, colour and texture, and that the rule requires employees to wear a similar type of dress prescribed or specified as uniform.
The grounds relating to attire allowance and washing allowance were dismissed in all four appeals. The amounts were not exempt under s.10(14)(i) read with Rule 2BB(1)(f) of the Income-tax Rules 1962 and TDS was required to be deducted on them; the findings of the Commissioner (Appeals) were not interfered with (para 6.2). The order records at the end that the four appeals are dismissed.
The Tribunal took as undisputed that none of the employees except peons was found wearing any uniform, that the allowance was paid to all officers and staff other than peons by way of reimbursement of clothes, shoes, bags and personal effects up to a specified amount, and that the employees were wearing dress of different colour, different design and texture according to their own choice. Against that, Rule 2BB(1)(f) stipulates that what is exempt is expenditure incurred on the purchase or maintenance of uniform for wearing during the performance of the duties of an office or an employment of profit, and s.10(14)(i) exempts a special allowance or benefit specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of those duties, and only to the extent such expenses are actually incurred. There being nothing to suggest either that the expenditure was incurred on providing uniform or that the attire and washing allowance was specifically granted to meet such expenses, the amounts were not exempt, and with no material to take a different view the Tribunal declined to interfere with the finding that TDS was required (para 6.2). On the washing allowance the Assessing Officer's reasoning, which was not disturbed, was that where no uniform allowance was granted to the employee the question of a washing allowance did not arise, so it was part of salary (para 2).
Since there is nothing to suggest that the expenditure was incurred towards either providing uniform or that said attire/washing allowance or benefit, was specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, the aforesaid amount is apparently not exempt
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Handle my notice → Ask a CA on WhatsAppYes. The Tribunal held that Rule 2BB(1)(f) exempts expenditure incurred on the purchase or maintenance of a uniform for wear during the performance of duties, and that where the employees wore dress of different colour, different design and texture according to their own choice, there was no uniform and nothing to show the allowance was granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties. Tax was required to be deducted on both the attire allowance and the washing allowance, and the employer was in default under s.201(1). This was decided by the ITAT (Shri Bhavnesh Saini, Judicial Member and Shri A.N. Pahuja, Accountant Member (Income Tax Appellate Tribunal, Ahmedabad Bench 'B')) and bears on section 10(14), section 192, section 201, section 133A of the Income Tax Act 1961. It is reported as ITA Nos. 490 and 2571/Ahd/2005 and ITA Nos. 491 and 2572/Ahd/2005, Assessment Years 2002-03 and 2003-04 (ITAT Ahmedabad). This is the Revenue-side authority on the commonest s.10(14) fact pattern — an allowance paid as a round monthly sum to everybody in a grade, reimbursed on a self-serving declaration, with no uniform in existence. Three features of the reasoning are worth carrying into a reply. First, what the Commissioner (Appeals) treated as the meaning of 'uniform' — a distinct and specific dress having a definite design, colour and texture — was accepted; personal clothing bought to taste is not a uniform, however smart the office. Second, reimbursement of 'clothes, shoes, bags and personal effects' up to a ceiling is a benefit, not an allowance to meet a duty-related expense. Third, the washing allowance was destroyed by the simple point that where no uniform was granted, the question of washing it did not arise. Set this against CIT (TDS) v Oil and Natural Gas Corporation Ltd. (Gujarat High Court, 17 March 2020), where the employer escaped a s.201 demand on self-certification — the two are reconcilable, because in ONGC the Revenue had never contended that no uniform was prescribed, whereas here the survey established it. An employer who wants the ONGC protection must first be able to point to a uniform. And from AY 2024-25 the point is largely academic for employees in the default regime: s.115BAC withholds the s.10(14) exemption except for allowances prescribed for that purpose, and uniform allowance is not one of them. If it applies to you, the first step is this: Before treating any allowance as exempt under s.10(14), identify the clause of Rule 2BB it is said to fall in and check that the facts answer that clause's own words — 'uniform for wear during the performance of the duties' is a narrow phrase.
A survey under s.133A was carried out on 3 September 2002 in the accounts office of the two assessees, public limited companies engaged in manufacturing and trading of electronic items, to verify compliance with the TDS provisions. On verification of pay slips and Form 16 of a few top executives it was found that the companies paid an 'attire allowance' to all their employees except peons; the companies explained that this was uniform allowance and therefore exempt and not included in taxable salary. The survey found that the employees were not wearing any uniform, that the amount was paid in lump sum up to a specified limit, and that it was reimbursed on the strength of declarations filed by the employees. The Senior Finance Manager stated that all officers and staff other than peons were entitled to reimbursement of clothes, shoes, bags and personal effects up to a specified amount, and that no uniform was prescribed for the executives and staff except for peons. The Assessing Officer also found that washing allowance was paid to most employees at a fixed rate irrespective of whether a uniform had been provided. The amounts in issue were attire allowance of Rs 3,31,971 and Rs 2,80,803 and washing allowance of Rs 1,32,764 and Rs 4,10,298 for DDE ORG Systems for AY 2002-03 and AY 2003-04 respectively, and attire allowance of Rs 45,929 and Rs 35,957 and washing allowance of Rs 11,500 and Rs 47,831 for Sarabhai Electronics for the same two years. The Assessing Officer treated the companies as assessees in default under s.201(1). The Commissioner (Appeals) confirmed, holding that uniform means a distinct and specific dress having a definite design, colour and texture, and that the rule requires employees to wear a similar type of dress prescribed or specified as uniform. The matter was decided on 2009-12-31 by the ITAT (Shri Bhavnesh Saini, Judicial Member and Shri A.N. Pahuja, Accountant Member (Income Tax Appellate Tribunal, Ahmedabad Bench 'B')). On those facts the ITAT held as follows. The grounds relating to attire allowance and washing allowance were dismissed in all four appeals. The amounts were not exempt under s.10(14)(i) read with Rule 2BB(1)(f) of the Income-tax Rules 1962 and TDS was required to be deducted on them; the findings of the Commissioner (Appeals) were not interfered with (para 6.2). The order records at the end that the four appeals are dismissed.
The Tribunal took as undisputed that none of the employees except peons was found wearing any uniform, that the allowance was paid to all officers and staff other than peons by way of reimbursement of clothes, shoes, bags and personal effects up to a specified amount, and that the employees were wearing dress of different colour, different design and texture according to their own choice. Against that, Rule 2BB(1)(f) stipulates that what is exempt is expenditure incurred on the purchase or maintenance of uniform for wearing during the performance of the duties of an office or an employment of profit, and s.10(14)(i) exempts a special allowance or benefit specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of those duties, and only to the extent such expenses are actually incurred. There being nothing to suggest either that the expenditure was incurred on providing uniform or that the attire and washing allowance was specifically granted to meet such expenses, the amounts were not exempt, and with no material to take a different view the Tribunal declined to interfere with the finding that TDS was required (para 6.2). On the washing allowance the Assessing Officer's reasoning, which was not disturbed, was that where no uniform allowance was granted to the employee the question of a washing allowance did not arise, so it was part of salary (para 2). In the words reproduced by the source cited on this page: "Since there is nothing to suggest that the expenditure was incurred towards either providing uniform or that said attire/washing allowance or benefit, was specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, the aforesaid amount is apparently not exempt"
It was decided by the ITAT on 2009-12-31 and is reported as ITA Nos. 490 and 2571/Ahd/2005 and ITA Nos. 491 and 2572/Ahd/2005, Assessment Years 2002-03 and 2003-04 (ITAT Ahmedabad). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(14), section 192, section 201, section 133A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The grounds relating to attire allowance and washing allowance were dismissed in all four appeals. The amounts were not exempt under s.10(14)(i) read with Rule 2BB(1)(f) of the Income-tax Rules 1962 and TDS was required to be deducted on them; the findings of the Commissioner (Appeals) were not interfered with (para 6.2). The order records at the end that the four appeals are dismissed. It arises in Salary & Perquisites, Capital Gains Exemptions and TDS Defaults matters, on section 10(14), section 192, section 201, section 133A of the Income Tax Act 1961, and was decided by Shri Bhavnesh Saini, Judicial Member and Shri A.N. Pahuja, Accountant Member (Income Tax Appellate Tribunal, Ahmedabad Bench 'B'). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If you pay a uniform or attire allowance, prescribe a uniform in writing, make it identifiable by design, colour and texture, and be able to show it is actually worn; a survey team will look. Do not pay a washing allowance to employees who have no uniform — it is the easiest disallowance an officer will make. Move away from a flat monthly sum paid to everyone in a grade towards reimbursement against bills, and retain the bills; s.10(14)(i) exempts only to the extent expenses are actually incurred. If a s.201 order is already made, check whether the Assessing Officer put his case on the absence of a uniform or on the absence of proof of expenditure — the Gujarat High Court in the ONGC appeal held the Revenue to the ground it had actually taken. For years from AY 2024-25, check the employee's regime before allowing a s.10(14) allowance as exempt in Form 16.
Validity check could not be completed. Validity check could not be completed — no later-treatment or appeal search was run on this 2009 order. It states the position under s.10(14)(i) read with Rule 2BB(1)(f) as it then stood and there is no reason to think that clause has since changed, but the surrounding law has: s.115BAC, the default regime from AY 2024-25, withholds the s.10(14) exemption except for allowances prescribed for that purpose, so for a default-regime employee the allowance is taxable irrespective of whether a uniform is prescribed. The current text of the sub-rule prescribing which allowances survive under s.115BAC could not be retrieved from an official source for this entry and should be checked before advising. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The four appeals were disposed of by a single order and the numbering of the paragraphs is irregular (para 2 carries the whole of the facts, and the operative discussion is at para 6.2). The rupee figures for attire allowance and washing allowance for each company and each year, given in the facts below, were obtained on a targeted fetch that returned them as a list rather than as running text, so while they were returned identically on two passes they were not read inside a fully transcribed paragraph; treat the figures as indicative and check them against the order before relying on any one of them. The order also touched a further ground about transport allowance which was not read for this entry, and the paragraph in which the Commissioner (Appeals) defined 'uniform' was returned as a short quoted sentence rather than in full context. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The grounds relating to attire allowance and washing allowance were dismissed in all four appeals. The amounts were not exempt under s.10(14)(i) read with Rule 2BB(1)(f) of the Income-tax Rules 1962 and TDS was required to be deducted on them; the findings of the Commissioner (Appeals) were not interfered with (para 6.2). The order records at the end that the four appeals are dismissed.
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