Held: Amount advanced to petitioner, a New Jersey State trooper, as a meal allowance is includable in his income under sec. 61, I.R.C. 1954, and is not excludable under sec. 119, I.R.C. 1954, since the amount was paid to him in cash. Saunders v. Commissioner, 215 F.2d 768 (3d Cir. 1954), revg. 21 T.C. 630 (1954), is not controlling since it involved years prior to the addition to the Code of sec. 119 providing for exclusion from income of the value of meals furnished for the convenience of the employer on the business premises of the employer. Held, further, petitioner is entitled to deduct the amount he spent for meals while away from home overnight in his duties as a trooper which amount is determined from the facts to be $1,136.

A very estimable appellate court has so held. Saunders v. Commissioner, 215 F.2d 768 [771-772], 3rd Cir. (1954). "The nub of the issue is what, in the light of all of the facts, does the $3-per day allowance represent — expense reimbursement or compensation?

In a reviewed decision, the Tax Court, with six dissents, held that the cash meal payments were income within the meaning of § 61 and, further, that such payments were not excludable under § 119. 65 T.C. 44 (1975). The Court of Appeals for the Third Circuit, in a per curiam opinion, held that its earlier decision in Saunders v. Commissioner, 215 F.2d 768 (1954), which determined that cash payments under the New Jersey meal-allowance program were not taxable, required reversal. 544 F.2d 686 (1976).

We reverse. The precise issue, albeit presented prior to 1954 when section 119 was added to the Code, was decided by us in Saunders v.Commissioner, 215 F.2d 768 (3d Cir. 1954), in which we ruled in favor of the New Jersey State troopers and reversed 21 T.C. 630 (1954). Although not presenting the precise issue, Jacob v. United States, 493 F.2d 1294 (3d Cir. 1974), gave continued vitality to the Saunders rationale.

Our position finds support in the so-called "state trooper" cases, in which courts have held that state troopers are entitled to exclude under § 119 the amount of cash allowances for meals taken at roadside restaurants. See United States v. Keeton, 383 F.2d 429 (10th Cir. 1967); United States v. Morelan, 356 F.2d 199 (8th Cir. 1966); United States v. Barrett, 321 F.2d 911 (5th Cir. 1963); Saunders v. Commissioner of Internal Revenue, 215 F.2d 768 (3d Cir. 1954); but see Wilson v. United States, 412 F.2d 694 (1st Cir. 1969). While these cases are not exactly on point, they nevertheless show that courts have focused primarily on the "convenience of the employer" test in determining whether an employee is entitled to an exclusion under § 119 and have construed the term "meals" broadly in order to give effect to the basic purpose and spirit of § 119.

Second, we cannot agree that the meals furnished must invariably be in kind. A similar argument was made in Saunders v. Commissioner, 3 Cir. 1954, 215 F.2d 768. In that case a trooper on the New Jersey State Police Force received a monthly cash food allowance in lieu of meals in kind.

Thus, we have the Congress, for the first time, making subsistence payments to state police officers excludable from income, but not effective until after December 31, 1953. Furthermore, as has been stated, there are no administrative rulings by the executive branch which would exclude such payments from income, and in the judicial branch only the Third Circuit in Saunders v. Commissioner of Internal Revenue, 1954, 215 F.2d 768, and the Court of Claims in Jones v. United States, 1925, 60 Ct.Cl. 552, which will be discussed later, have ruled that such money might be excluded from income. On the other hand, the Commissioner and the Tax Court have held that such payments are income and taxable.

A very estimable appellate court has so held. Saunders v. Commissioner, 215 F.2d 768, 3rd Cir. (1954). Apparently on the authority of the Saunders case, the Internal Revenue Service took the position in 1960 that Iowa State Highway Patrolmen could properly exclude their per diem allowance from gross income.

Thus, even the income tax character of lunch reimbursements was not yet partially clarified before the end of 1967, four full years after the tax year for which withholding taxes on lunch reimbursements are now being claimed from the Company in the present case, and were not entirely clarified until the Kowalski decision a few weeks ago. E.g., Wilson v. United States, 412 F.2d 694 (CA1 1969); Commissioner v. Bagley, 374 F.2d 204 (CA1 1967), cert. denied, 389 U.S. 1046 (1968); Saunders v. Commissioner, 215 F.2d 768 (CA3 1954); Koerner v. United States, 550 F.2d 1362 (CA4), cert. denied, 434 U.S. 984 (1977); Smith v. United States, 543 F.2d 1155 (CA5 1976), vacated and remanded, 434 U.S. 978 (1977); United States v. Barrett, 321 F.2d 911 (CA5 1963); Magness v. Commissioner, 247 F.2d 740 (CA5 1957), cert. denied, 355 U.S. 931 (1958); Correll v. United States, 369 F.2d 87 (CA6 1966), rev'd, 389 U.S. 299 (1967); United States v. Morelan, 356 F.2d 199 (CA8 1966); Hanson v. Commissioner, 298 F.2d 391 (CA8 1962); United States v. Keeton, 383 F.2d 429 (CA10 1967). III

It may seem unfair to make the distinction between meals "furnished * * * on the business premises of the employer" and those provided elsewhere, but deductions from income depend entirely on legislative grace and not on principles of absolute fairness. Actually, it is unlikely that a completely fair system of taxation could be formulated. Kowalski v. Commissioner of Internal Revenue (3d Cir. 1976) 544 F.2d 686; Jacob v. United States (3d Cir. 1974) 493 F.2d 1294; Saunders v. Commissioner of Internal Revenue (3d Cir. 1954) 215 F.2d 768.United States v. Barrett (5th Cir. 1963) 321 F.2d 911.