Proviso to s. 10(14) provides allowances or benefits which were not specified u/s 10(14)(ii), which were granted to meet expenses "wholly, necessarily and exclusively incurred in performance of duties of an office or employment" were not to be treated as income.

Held Sec.10 which defines what was not income, inter-alia, proviso to s. 10(14) provides allowances or benefits which were not specified u/s 10(14)(ii), which were granted to meet expenses "wholly, necessarily and exclusively incurred in performance of duties of an office or employment" were not to be treated as income. (Para 9) Development Officers were charged with responsibility of increasing business of Corporation in areas under their supervision. Apparently, this involved a range of duties that also called for extensive travelling within city or touring outside city including in rural areas. Circulars referring to terms of employment clearly indicated that LIC expects such Development Officers to routinely travel within city and also undertake journey outside city periodically. Analogy which DCIT appeared to have drawn by comparing chart, which referred to s. 10(14)(ii), and granting relief limited to extent chart indicated, was not appropriate. Decision of employer to grant allowance either on actual reimbursement after verifying it or spare itself added responsibility of verifying it but based upon observing a general pattern give a lump-sum allowance, which either covers it fully or in part leaving the rest to be reimbursed, if a higher amount was incurred, was a business or commercial decision. Stereotypical approach adopted by DCIT was clearly not warranted. What Central Government or State Government might permit their employees or officers under employment or having authority of law could not blindly be applied to other organisations-even to Public Sector Units which were expected to be organised on commercial pattern and had entire different objectives. (Para 11) High Court in Life Insurance Corporation's case held that relief had to be granted to individual employees/assessees. That such employees were subjected to TDS which ultimately turned out to be justified and was implemented by LIC which had no choice in matter, could not now come back to haunt them and deny them relief. Possibly, deductions were adjusted ultimately towards tax liability. Result of present proceedings would only mean that there would be decreased tax exposure to an extent that permissible allowances would not be treated as income. Ultimate TDS liability would then be viewed, depending on individual facts of each assessee, an relief by way of refund would have to be worked out. (Para 13) DCIT and concerned AOs were hereby directed to facilitate working out of reversal of TDS having regard to circulars of the LIC (especially circular of 18.03.1991) with respect to reimbursement of three items i.e. fixed conveyance allowance, additional conveyance allowance and expenses under head "reimbursement of expenses scheme". LIC should also ensure that amounts withheld from employee and kept in a fixed deposit were reimbursed having regard to orders of AO. Towards such reimbursement, TDS amounts, if any, should receive benefit of spread out u/s 89. (Para 14 & 16)