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
Circular No. 10 was issued by the Central Board of Direct Taxes on 26 March 1969. Its subject is 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.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Ties the conveyance allowance to registration of the vehicle. The Ministry's circular letter of 26 March 1968 on deducting tax from salaries in financial year 1968-69 had said, at paragraph 4 item (ix), that salary income is reduced by the appropriate standard deduction for maintenance and wear and tear of motor cars and other conveyances owned by the employee and used for his employment. The question was whether that deduction is available where the employee says he financed the purchase from his own funds but the vehicle is registered in his wife's or another's name. The Board holds it is not: the deduction under section 16(iv) is admissible only where the conveyance is owned by the employee and used for the purposes of his employment, and since the Motor Vehicles Act, 1939 requires an owner to register the vehicle in his own name within a specified period, a vehicle not so registered cannot in law be regarded as owned by him.
A question arose on the treatment of employees who claimed to have paid for a vehicle themselves while it stood registered in someone else's name, and disbursing officers needed a rule for deduction of tax from salaries.
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
Allowance for maintenance expenditure/wear and tear of conveyance— Whether available where conveyance is not registered in the name of assessee—
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.
In a salary assessment or a section 201 proceeding where a conveyance deduction allowed by the employer is withdrawn because the vehicle stands in another's name.
Source: the Income Tax Department’s own published text — its page for this instrument.