Cit Vs. I.B. Nigam - Court Judgment

Excerpt:
counsels: shambhoo chopra for the revenue. head note: income tax salary --perquisiteincentive bonus earned by development officer in licassessee, a development officer, in lic received incentive bonus and also incurred certain expenditure in earning incentive bonus, which he had claimed as deduction. the ao brought the incentive bonus to tax under the head |salary| and did not allow the expenditure. held: as incentive bonus is part of salary and expenditure incurred cannot be separately allowed when the income is computed under the head |salary|. income tax act, 1961 s.17(2) in the allahabad high court r.k. agrawal & prakash krishna, jj. - order1. the income tax appellate tribunal, allahabad, has referred the following two questions of law under section 256(1) of the income tax act, 1961 (hereinafter referred to as 'the act') for opinion to this court :'1. whether, on the facts and in the circumstances of the case, the tribunal was correct in law in holding that the incentive bonus paid to development officer of life insurance corporation of india is not chargeable to the tax under the head 'salary'?2. whether, on the facts and in the circumstances of the case, the tribunal was correct in law in holding that the incentive bonus earned by development officers of lic is business income and expenditure incurred in earning incentive bonus is an allowable deduction ?'2. briefly stated the facts giving rise to the present references are as follows:the reference relates to the assessment years 1984-85, 1985-86 and 1988-89.3. the respondent-assessee is a development officer in the life insurance corporation of india. he had received incentive bonus and also incurred certain expenditure in earning the incentive bonus, which he had claimed as deduction. the assessing officer brought the incentive bonus to tax under the head 'salary' and did not allow the expenditure. the tribunal has, however, held that the incentive bonus paid to the development officer by life insurance corporation of india is not chargeable to tax under the head 'salary' and further the expenditure incurred for earning the said incentive bonus to the extent of 40 per cent is allowable.4. we have heard shri shambhoo chopra, the learned standing counsel for the revenue. similar question came for consideration before this court in cit v. k.n. bajpai [it reference no. 43 of 1993, dated 10-3-2005], and this court has held that the incentive bonus is part of the salary and the expenditure incurred cannot be separately allowed when the income is being computed under the head 'salary'.5. respectfully following the aforesaid decision, we answer both the questions referred to us in negative, i.e., in favour of the revenue and against the assessee. there shall be no order as to costs.

Judgment:
ORDER

1. The Income Tax Appellate Tribunal, Allahabad, has referred the following two questions of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this court :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the incentive bonus paid to Development Officer of Life Insurance Corporation of India is not chargeable to the tax under the head 'Salary'?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the incentive bonus earned by Development Officers of LIC is business income and expenditure incurred in earning incentive bonus is an allowable deduction ?'

2. Briefly stated the facts giving rise to the present references are as follows:

The reference relates to the assessment years 1984-85, 1985-86 and 1988-89.

3. The respondent-assessee is a Development Officer in the Life Insurance Corporation of India. He had received incentive bonus and also incurred certain expenditure in earning the incentive bonus, which he had claimed as deduction. The assessing officer brought the incentive bonus to tax under the head 'Salary' and did not allow the expenditure. The Tribunal has, however, held that the incentive bonus paid to the Development Officer by Life Insurance Corporation of India is not chargeable to tax under the head 'Salary' and further the expenditure incurred for earning the said incentive bonus to the extent of 40 per cent is allowable.

4. We have heard Shri Shambhoo Chopra, the learned standing counsel for the revenue. Similar question came for consideration before this court in CIT v. K.N. Bajpai [IT Reference No. 43 of 1993, dated 10-3-2005], and this court has held that the incentive bonus is part of the salary and the expenditure incurred cannot be separately allowed when the income is being computed under the head 'Salary'.

5. Respectfully following the aforesaid decision, we answer both the questions referred to us in negative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.