Section 5 l Chargeable Expenditure
Circular No. 658 was issued by the Central Board of Direct Taxes on 2 September 1993. Its subject is Section 5 l Chargeable Expenditure.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Withdraws the expenditure-tax exemption the Board had earlier given to officials of international organisations. Circular No. 637 dated 2 September 1992 had read section 3 of the United Nations (Privileges and Immunities) Act, 1947 with section 18 of its Schedule to hold that officials of bodies such as the World Bank Mission staff, staying in hotels on official duty, were exempt from expenditure-tax. Since the exemption for expenditure incurred or paid for in foreign exchange was withdrawn from 1 October 1992 by amendment to section 5 of the Expenditure-tax Act, the Board is advised that those officials are no longer entitled to the exemption. Chargeable expenditure will still exclude expenditure by persons within the Vienna Convention on Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963. Circular No. 637 stands modified to that extent.
The amendment to section 5 of the Expenditure-tax Act removing the foreign exchange exemption with effect from 1 October 1992 knocked away the basis of the earlier circular, and the Board was advised accordingly.
SECTION 5 l CHARGEABLE EXPENDITURE
Whether World Bank Mission Staff and other international organisations are exempt
1. Under section 3 of the United Nations (Privileges and Immunities) Act, 1947, read with section 18 of the Schedule to the said Act, officials of International Organisations like the World Bank Mission Staff staying in hotels on official duty, are accorded the same privileges in respect of exchange facility as are accorded to the officials of comparable ranks forming part of Diplomatic Missions to the Government concerned. Based on this provision, the Board vide Circular No. 637, dated 2-9-1992 clarified that the officials of such international organisations covered by section 18 of the Schedule to the aforesaid Act shall be entitled for exemption from the levy of expenditure-tax.
2. The exemption from the levy of the expenditure-tax in respect of any expenditure which is incurred or the payment for which is made in foreign exchange has since been withdrawn from 1-10-1992. The Board has now been advised that consequent to this amendment in section 5 of the Expenditure-tax Act, the officials of the international organiations to which provisions of section 18 of the Schedule to the United Nations (Privileges and Immunities) Act, 1947 have been extended including the World Bank Mission Staff staying in hotels on official duty shall no longer be entitled for exemption from the levy of the expenditure-tax on the chargeable expenditure incurred by them. However, the chargeable expenditure for the levy of the expenditure-tax will continue to exclude the expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963.
3. The Board Circular No. 637, dated 2-9-1992 stands modified accordingly.
Circular : No. 658, dated 2-9-1993.
In an expenditure-tax demand on a hotel for the period after 1 October 1992 covering bills of international organisation officials.
Source: the Income Tax Department’s own published text — its page for this instrument.