It depends on the circumstances, if for example a service person was married and there was no service housing was available and if one spouse was living in Germany and the other in the UK then separation allowance would be paid to offset the higher rents payable to civilian councils etc. It's been 4 years since I left the mob and I'm not sure if it was payable then as I was living in service housing at the time i Left.
I am however surprised that you have a form dating to 1916 seeing as then, we were in the middle of World War One, and he would be living under what's now known as 'field conditions' Sgt Davies must have been a Regular Army soldier prior to the war breaking out in 1914.
Hope this helps you