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.

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