Taxability of DAILY ALLOWANCES ??
This query is : Resolved
14 September 2010
Dear All,
One of my client company is giving Daily Allowances, to Sales Officers, for FOODING & INCIDENTAL EXPENSES e.g. tea exp etc.
This allowance is FIXED on PER DAY basis.
e.g. if duty is performed IN THE CITY OF HEADQUARTER, then 200/- per day Daily Allowance. and if duty is performed OUTSIDE THE CITY OF HEADQUARTER, then 400/- per day Daily Allowance.
NO BILLS ARE SUBMITTED TO THE COMPANY FROM THE EMPLOYEE.
QUESTION : - Will the above mentioned DAILY ALLOWANCES are taxable in the hand's of EMPLOYEE ?
One of my client company is giving Daily Allowances, to Sales Officers, for FOODING & INCIDENTAL EXPENSES e.g. tea exp etc.
This allowance is FIXED on PER DAY basis.
e.g. if duty is performed IN THE CITY OF HEADQUARTER, then 200/- per day Daily Allowance. and if duty is performed OUTSIDE THE CITY OF HEADQUARTER, then 400/- per day Daily Allowance.
NO BILLS ARE SUBMITTED TO THE COMPANY FROM THE EMPLOYEE.
QUESTION : - Will the above mentioned DAILY ALLOWANCES are taxable in the hand's of EMPLOYEE ?
14 September 2010
It is allowance provided for meeting the expenses during offical duty, not taxable in the hands of employee
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16 September 2010
Dear Ramesh Ji..
Under which section it is exempt ?
if it is 10(14), then what is the proof of actual expenditure? if no actual expenditure then it will be fully taxable..
Under which section it is exempt ?
if it is 10(14), then what is the proof of actual expenditure? if no actual expenditure then it will be fully taxable..
16 September 2010
I do agree the Daily allowance covered under sec.10(14) only, what sec.10(14) says
Allowance exempted as lower of following
1.The amount of allowance
2.the amount utlised for the purpose
you refer the case Madanlal Mohanlal Narang vs CIT(2007) 11 SOT 76 (Mumbai)
it states that" the amount of exemption is the amount or the expenses incurred for specific purpose for which allowance given, which ever is lower. however, it is not open to Assessing Officer to call for the details of expenses actually incurred by the assessee unless the allowances are disproportionatly high compared to salary received by the assessee or unreasonable with the nature of the duties performed by the assessee. so providing daily allowance during travel is nature, this will meet the requirement of employee during travel. so it can be claimed exemption which is reasonable
Allowance exempted as lower of following
1.The amount of allowance
2.the amount utlised for the purpose
you refer the case Madanlal Mohanlal Narang vs CIT(2007) 11 SOT 76 (Mumbai)
it states that" the amount of exemption is the amount or the expenses incurred for specific purpose for which allowance given, which ever is lower. however, it is not open to Assessing Officer to call for the details of expenses actually incurred by the assessee unless the allowances are disproportionatly high compared to salary received by the assessee or unreasonable with the nature of the duties performed by the assessee. so providing daily allowance during travel is nature, this will meet the requirement of employee during travel. so it can be claimed exemption which is reasonable
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19 September 2010
Thanks alot for Case Law reference Dear Mr. Ramesh Ji...
Thanks..
Can i get the link of the citation of this case ?
Thanks..
Can i get the link of the citation of this case ?
26 July 2025
Happy to help! The case you mentioned is:
**Madanlal Mohanlal Narang vs CIT (2007) 11 SOT 76 (Mumbai)**
This is a decision from the Income Tax Appellate Tribunal (ITAT), Mumbai Bench.
---
### About the Case:
* It ruled that the exemption on daily allowances under **Section 10(14)** is limited to the **actual amount spent** or **amount of allowance paid**, whichever is less.
* The ITAT held that the Assessing Officer cannot demand detailed proof of expenditure unless the allowance is **unreasonable** or **disproportionate** to the employee’s salary and duties.
* If the daily allowance is reasonable and linked to official travel/duties, exemption can be claimed without furnishing bills.
---
### Citation and Access:
* The official citation:
**Madanlal Mohanlal Narang vs CIT (2007) 11 SOT 76 (Mumbai)**
* This case is usually available in ITAT decisions databases or legal research platforms like **Taxmann**, **SCC Online**, or **Indian Kanoon**.
* Unfortunately, there’s no official free government portal hosting ITAT decisions; however, you can try Indian Kanoon for a free text version:
[https://indiankanoon.org/](https://indiankanoon.org/) — search the case name or citation.
---
If you want, I can help summarize the case judgment or draft a brief note for your client based on it!
**Madanlal Mohanlal Narang vs CIT (2007) 11 SOT 76 (Mumbai)**
This is a decision from the Income Tax Appellate Tribunal (ITAT), Mumbai Bench.
---
### About the Case:
* It ruled that the exemption on daily allowances under **Section 10(14)** is limited to the **actual amount spent** or **amount of allowance paid**, whichever is less.
* The ITAT held that the Assessing Officer cannot demand detailed proof of expenditure unless the allowance is **unreasonable** or **disproportionate** to the employee’s salary and duties.
* If the daily allowance is reasonable and linked to official travel/duties, exemption can be claimed without furnishing bills.
---
### Citation and Access:
* The official citation:
**Madanlal Mohanlal Narang vs CIT (2007) 11 SOT 76 (Mumbai)**
* This case is usually available in ITAT decisions databases or legal research platforms like **Taxmann**, **SCC Online**, or **Indian Kanoon**.
* Unfortunately, there’s no official free government portal hosting ITAT decisions; however, you can try Indian Kanoon for a free text version:
[https://indiankanoon.org/](https://indiankanoon.org/) — search the case name or citation.
---
If you want, I can help summarize the case judgment or draft a brief note for your client based on it!
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