Syed Shah Mohammed Quadri, J.
1. In this batch of cases, under section 256(1) of the Income-tax Act, 1961, the following two questions are referred to this court for opinion :
'(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that 40 per cent. of the incentive bonus is an allowance of the nature mentioned under section 10(14) and exempting the same under that provision
(2) Whether, on the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal that the incentive bonus included in allowance either to the extent proved or reasonably at 40 per cent. of the incentive bonus, which is exempt under section 10(14), is based on any material available on record ?'
2. To answer the above questions, it may be useful to refer to the facts in one of the cases. We propose to refer to the facts as stated in the statement of case in Revision Case No. 30 of 1991. The assessee was the Development Officer in the Life Insurance Corporation of India, Cuddapah. For the assessment year 1983-84, he returned an income of Rs. 29,070 and also disclosed that he received 'incentive bonus' of Rs. 36,837.42 against which he claimed to deduct expenses at 40 per cent. of the said sum amounting to Rs. 14,732 and, accordingly, deducted the same. The Income-tax Officer disallowed the expenses claimed by the assessee. Dissatisfied with the order of assessment dated March 27, 1986, the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax. On May 27, 1987, the Appellate Assistant Commissioner of Income-tax allowed the appeal upholding the claim of the assessee to deduct 40 per cent. of the incentive bonus towards expenses. Aggrieved by the said order of the Appellate Assistant Commissioner of Income-tax, the Revenue preferred an appeal before the Income-tax Appellate Tribunal, Hyderabad. That appeal was heard along with a batch of appeals out of which some were filed by the assessees and some by the Revenue. As common questions of fact and law were raised, the Tribunal disposed of those appeals by a common judgment on January 31, 1990. At the instance of the Revenue, the aforementioned questions of law were referred to this court under section 256(1) of the Income-tax Act, 1961.
3. Sri Habeeb Ansari, learned standing counsel for the Revenue, submitted that those questions are covered against the assessee by the two Division Bench judgments of this court in M. Krishna Murthy v. CIT : [1985]152ITR163(AP) and K. A. Choudary v. CIT : [1990]183ITR29(AP) .
4. Sri Y. Ratnakar, Sri A. Satyanarayana and Sri P. Srinivasa Reddy, learned counsel appearing for the assessees in the abovesaid revision cases, supported the order of the Tribunal on various grounds. It was contended that the incentive bonus did not form part of 'salary', therefore, it could not be included as receipt under the head 'salary' and that it should be treated as income from other sources and accordingly the net income after excluding necessary expenses should be taken as taxable income. They further submitted that even if it is treated as 'salary', the expression 'salary' should be so construed as to bring in its net salary after excluding expenses incurred in earning the salary and that would be the real income. It was also contended that even though there was no provision in the Income-tax Act for deducting 40 per cent. of the incentive bonus, what was taxable was only the net income and not the gross receipts, therefore, to arrive at the correct income the expenditure incurred for earning such income should be deducted. It was argued that the Development Officers incurred a lot of expenditure in holding seminars, in extensive travelling and in providing refreshments to the agents and others, so deduction of 40 per cent. of the incentive bonus should in any event be allowed.
5. On the above contentions, the following points arise for consideration :
(1) Whether 'incentive bonus' falls within the meaning of 'salary' under section 17 of the Income-tax Act, 1961 ?; and
(2) if so, whether any expenditure other than that mentioned in section 16 can be permitted as allowable deduction
Section 15 of the Income-tax Act, 1961, specifies the income as chargeable to income-tax under the head 'Salary'. The words 'salary', 'perquisite' and 'profits in lieu of salary' are defined in section 17 for the purposes of sections 15 and 16. We may note here that section 16 of the Act enumerates deductions which are deductible in computing the income chargeable under the head 'Salary'.
6. From a reading of the abovesaid provisions, it follows that if incentive bonus falls within the meaning of 'salary' or 'perquisite' or 'profits in lieu of salary' within the meaning of those expressions under section 17, it would be chargeable to tax under the head 'Salary' and the only deductions permissible in law are those specified in section 16 of the Act.
7. In M. Krishna Murthy v. CIT : [1985]152ITR163(AP) , one of the questions which fell for consideration of the Division Bench of this court, was whether the incentive bonus paid to the employees of the A.P. State Electricity Board, which was initially paid to those employees in the Thermal Station at Vijayawada but was later extended to the other employees of the Board, would fall within the meaning of 'perquisite'. The Division Bench observed that the payment under the head 'Incentive bonus' had the character of additional remuneration for services rendered by the employees for exerting more strain to maximise generation of electricity and did fall within the meaning of 'perquisite'. There it was contended that there was no contractual or statutory obligation on the part of the Board to pay bonus and that it was a voluntary payment and, therefore, it could not be treated as 'perquisite' but the Division Bench rejected the same. However, it was urged by learned counsel for the assessees that that case did not relate to Life Insurance Corporation employees. In our view for considering the question whether incentive bonus falls within the meaning of 'perquisite', the fact that that case did not relate to the employees of the Life Insurance Corporation would hardly make any difference.
8. In a subsequent judgment of the Division Bench of this court in K. A. Choudary v. CIT : [1990]183ITR29(AP) , which is a direct case on the point now in issue, the question before the Division Bench was whether incentive bonus paid to the Development Officers of the Life Insurance Corporation would fall within the meaning of 'salary'. In that case, the matter arose on a writ petition filed by a Development Officer of the Life Insurance Corporation of India. He had received a certain amount by way of incentive bonus, viz., Rs. 9,536, during the previous year relevant to the assessment year 1981-82. He claimed deduction of Rs. 4,768, that is 50 per cent. of the incentive bonus by way of expenses in earning the said incentive bonus. That claim was rejected by the Income-tax Officer and was confirmed on appeal by the Appellate Assistant Commissioner of Income-tax as well as by the Commissioner of Income-tax in revision. Challenging the correctness of the order of the Commissioner of Income-tax, the assessee filed the writ petition. The Division Bench which dealt with the writ petition, referred to the judgment in M. Krishna Murthy's case : [1985]152ITR163(AP) and held that 'incentive bonus' would fall within the meaning of 'salary'.
9. Shri Y. Ratnakar, Learned counsel appearing for the assessees in some of the batch cases, pointed out the fact that the Division Bench referred to the definition of 'wages' under the Payment of Wages Act, 1936, to come to the conclusion that 'bonus' was included within the meaning of 'wages' and argued that the Payment of Wages Act had no application to the Development Officers of the Life Insurance Corporation of India, as such the ratio of the said judgment required reconsideration. A perusal of the judgment of the Division Bench shows that reliance on the Payment of Wages Act was an additional ground. The Division Bench rested its conclusion on the decision of this court in M. Krishna Murthy's case : [1985]152ITR163(AP) and the judgment of the Allahabad High Court in CIT v. Hind Lamps Ltd. : [1980]122ITR451(All) . Therefore, the reason that the Payment of Wages Act had no application to the Development Officers, would not militate against the authority of that judgment of the Division Bench.
10. In view of the above judgments, it cannot but be held that 'incentive bonus', whether treated as part of the salary or perquisite, is taxable under the head 'Salary' and the permissible deductions under the said head are as specified under section 16 of the Act. It is nobody's contention that 40 per cent. of the bonus, deducted by the assessees as expenditure and upheld by the Tribunal, falls under any of the items under section 16. Thus the expenditure is other than permissible deduction under section 16 of the Act. It has already been observed above that the only permissible deductions under the head 'Salary' are those mentioned in section 16 and if any expenditure does not fall within the meaning of section 16, it cannot be allowed.
11. However, it is further contended that the said expenditure would be allowable under section 10(14) of the Act. The said provision, in so far as it is relevant for our purpose, reads as follows :
'10. (14)(i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as the Central Government may, by notification in the Official Gazette, specify, to the extent to which such expenses are actually incurred for that purpose;
(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as the Central Government may, by notification in the Official Gazette, specify, to the extent specified in the notification :
Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence.'
12. A perusal of the abovesaid provisions shows that their requirements are :
(1) the amount in question is in the nature of special allowance or benefit;
(2) the special allowance or benefit is not in the nature of perquisite within the meaning of section 17(2);
(3) such amount is specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties of an office or employment of profit; and
(4) such amount should be specified and notified in the Official Gazette by the Central Government.
13. It is only where there requirements are satisfied, that the deduction would be allowable only to the extent to which such expenses are actually incurred for the purpose mentioned above.
14. We shall now examine whether the said requirements are fulfilled in this case. We have already noted the Division Bench judgment in M. Krishna Murthy's case : [1985]152ITR163(AP) , wherein it is laid down that the incentive bonus is in the nature of a perquisite within the meaning of section 17(2) of the Income-tax Act; further, to enable the assessee to have the advantage of the said provision there must be a notification by the Central Government specifying the extent to which the expenses are allowable. In the instant case, there is no such notification. For these reasons, in our view, the assessees cannot draw any support from section 10(14) of the Act.
15. No judgment is brought to our notice taking a view contrary to the decision of this court in K. A. Choudary v. CIT : [1990]183ITR29(AP) , which is binding on us. In our view, that judgment does not require reconsideration. In this view of the matter, we do not consider it necessary to delve into the other contentions raised by learned counsel appearing for the assessee or deal with the judgments cited in support thereof.
16. From the above discussion, it follows that the first question will have to be answered in the negative, i.e., in favour of the Revenue and against the assessees. So also the second question has to be answered.
17. The references in the revision cases are accordingly answered. In the circumstances of the cases, there shall be no order as to costs.