I can kind of see why he might think that's the case - IE is designed to be paid if you stay in Temporary Service Accommodation, or hotels. (i.e. if you're on a course, meeting, or other peacetime type activity).
If field conditions are applied or granted this means you will not pay your usual food and accommodation charges. If field conditions are granted you can not claim incidental expenses. If field conditions are not grant and you are away either on exercise or course you can claim Â£5 per day for UK courses/exercise and Â£10 per day for courses/exercise in Germany.
If no drinking water was available this is serious matter you should pass up the chain of command. I don't know the situation but NCO's and/or officers should have sorted that at the time.