Whether LTC availed of in two different calendar years,

but in same accounting year are exempted from tax

1.An Income-tax assessee who is a salaried employee availed of Leave Travel Concession for home town in November, 1985. He has availed of Leave Travel concession again in the month of February, 1986 for travelling anywhere in India (“anywhere in India” for the first time in the current block of 4 years). The employee wants to include the second one in the taxable income of the employee on the ground that the latter has availed of L.T.C. twice in the same Financial Year i.e. 1985-86 (A.Y. 1986-87). However, the employee contends that L.T.C. is exempt as per Income-tax Rule 2B which uses the term ‘Calendar Year’ and Not ‘Financial Year’ and since he has taken L.T.C. during two different calendar years, viz., 1985 and 1986, both of these should be excluded from his taxable income.

2. The querist has sought the opinion of the Expert Advisory Committee as to whether the second L.T.C. availed of by the assessee should be included in the taxable income for the assessment year 1986-87.

Opinion October 15, 1986

1. The Committee notes that Section 10 (5) (ii) of the Income-tax Act, 1961 lays down as below:

“in relation any other assessment year the value of any travel concession or assistance received by or due to such individual-

(a) from his employer for [himself and his family], in connection with his proceeding on leave to any place in India;

(b) from his employer or former employer for [himself and his family], in connection with his proceeding to any place in India after retirement from service or after the termination of his service :

(c) Provided that the amount exempt under item (a) or item (b) of this sub-clause [shall not, except in such cases and under such circumstances as may be prescribed having regard to the travel concession or assistance granted to the employees of the Central Government, exceed] the value of the travel concession or assistance which would have been received by or due to the individual in connection with his proceeding to his home-district in India on leave or, as the case may be, after retirement from service or after termination of his service]”

2. The Committee further notes that Rule 2B of the Income-tax Rules 1962, provides as under:

“2B. The amount exempt under item (a) of subclause (ii) of clause (5) of section 10 in respect of the value of the travel concession or assistance received by or due to the individual from his employer for himself and his family, in connection with his proceeding on leave to any place in India, may exceed the value of the travel concession or the assistance which would have been received by or due to him in connection with his proceeding to his home district in India on leave in the cases and under the circumstances specified below, namely :-

(a) where the individual is entitled to such travel concession or assistance once in a block of four calendar years commencing from the calendar year 1974, the value of such travel concession or assistance availed of in each such block;

(b) where the individual is entitled to such travel concession or assistance more than once in any such block of four calendar years, the value of the travel concession or assistance first availed of by him in each such block;

(c) where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, the value of the travel concession or assistance, if any, first availed of by the individual during the first calendar year of the immediately succeeding block of four calendar years.

Explanation: The value of the travel concession or assistance referred to in clause (c) shall not be taken into account in determining the eligibility of the value of the travel concession or assistance under clause (a) or, as the case may be, clause (b) of this rule.”

3. The Committee also notes that from the facts of the query, it is not clear whether L.T.C. scheme applicable to the assessee in question is similar to the one applicable to the employees of the Central Government as envisaged in the proviso to Section 10 (5) (ii) of the Income-tax Act, 1961.

4. The Committee is of the opinion that since both the L.T.C.s availed of by the assessee fall in different calendar years, through relevant to the same assessment year, these should not be included in the taxable income of the assessee, provided the L.T.C. scheme applicable to the assessee is similar to the one applicable to the employees of the Central Government.

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