1992 (2) TMI 76 - HC - Income Tax

Summary

Issues Involved: Determination of whether the incentive bonus received by the assessee is part of salary income or income from business, and the allowance of expenses u/s 16(1) of the Income-tax Act, 1961.

Summary:
The case involved a dispute regarding the treatment of an incentive bonus received by an officer of the Life Insurance Corporation of India. The assessee claimed that the bonus was earned by securing new business and should be assessed under the head "Business," allowing expenses of 40% thereof. The Assessing Officer considered the bonus as part of the salary, disallowing any expenses beyond standard deduction u/s 16(1) of the Act. The Appellate Assistant Commissioner disagreed, stating that the bonus was earned through field duties and not part of the salary. The Tribunal upheld this view, acknowledging the bonus as part of the salary but allowing expenses incurred for earning it.

The Revenue challenged the Tribunal's decision, arguing that allowing expenses on a bonus considered part of the salary was contradictory. The High Court agreed with the Revenue, noting the Tribunal's contradictory conclusions. The Court emphasized the need to determine whether the bonus formed part of the salary or was earned from business activities. As the Tribunal failed to address this fundamental question, the matter was remitted back to the Tribunal for reconsideration. The Court clarified that the allowance of expenses would depend on the nature of the income, whether salary or business-related.

In conclusion, the High Court disposed of the reference application, directing the Tribunal to reevaluate the nature of the income received by the assessee and decide on the allowance of expenses accordingly.