TMI Blog1995 (1) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... es incurred in relation to earning of the income under the head 'Salary'. No separate deduction for any expenses whatsoever can be allowed u/s 16. 3. The CIT(A) allowed such claim of expenses made by the assessee against income from Incentive bonus. He relied on the decision of ITAT reported in ITA No. 582 /Ahd. / 84 and various other decisions of ITAT, Bombay and Nagpur Benches, etc. 4. The learned DR submitted that although the Issue Is covered by the decision of the Ahmedabad Benches of the Tribunal, but a contrary view has been taken by the Hon'ble Andhra Pradesh High Court in the case of K.A. Choudhary v. CIT [1990] 183 ITR 29. In view of the said judgment, he urged that the view taken by the ITO should be restored. 5. The learned counsel for the assessee relied on the order passed by the CIT(A) as well as on the various decisions referred to in the order of the first appellate authority. 6. We have carefully considered the submissions made by the learned representatives and have gone through all the decisions relied upon by the learned representatives. The Ahmedabad Bench of the Tribunal in the case of Kiranbhai H. Sheelat v. ITO [1993] 112 CTR (Ahd.) 140 held that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of expenses against incentive bonus. Respectfully following the said decision, we are also of the view that in the present case the assessee should get deduction at the rate of 40% for expenses against incentive bonus in all the years under consideration. The ITO has not brought any material on record to indicate that the claim of deduction for expenses at 40% made by the assessee is unreasonable or excessive or does not represent real expenses. We, therefore, direct the ITO to allow deduction for expenses at the rate of 40% of incentive bonus in all the years under consideration. The assessee claimed expenses at the rate of 40% in Assessment years 1983-84 to 1986-87 and at 50% in assessment year 1988-89. The claim for assessment year 1988-89 will be allowed only to the extent of 40% as against 50%. 7. In the result appeals for assessment years 1983-84 to 1986-87 are dismissed and appeal for assessment year 1988-89 is partly allowed. Per Shri Abdul Razak (Judicial Member) - I have studied the order passed by my learned Brother in the case of ITO v. P.M. Suthar, being IT Appeal Nos. 2641 to 2645 (Ahd.) of 1990. I have no dispute with my learned Brother in holding that inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m profession. The submission of the DR that in view of the judgment of the Andhra Pradesh High Court in the case of K.A. Choudhary , which is the only and solitary decision on the controversy before us In these appeals, should be applied and followed and the decisions given by various Benches of the Income-tax Appellate Tribunal (ITAT) till now have lost validity and sanctity and, therefore the order of the Appellate Commissioner (A/C.) has to be reversed and that of the Assessing Officer (A.O.) should be upheld particularly, on the strength of the judgment of the Andhra Pradesh High Court in K.A. Choudhary's case. 3. No other judgment of any High Court has been brought to our notice by representatives of either of the parties, much less the assessee's representative taking a view contrary to the view taken by the Andhra Pradesh High Court. At least I am not aware of any judgment of any High Court taking a contrary view except the judgment of Orissa High Court in the case of CIT v. Sarat Ch. Sahu [1992] 195 ITR 364. But the Orissa High Court has also remanded the matter to the Tribunal for giving a clear finding since the Tribunal in that case had held that incentive bonus was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld suffer. I am saying so on the basis of judgment of the Bombay High Court in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589. 5. Since the judgment of the Andhra Pradesh High Court is the only and solitary judgment holding that incentive bonus is part of salary and no deduction of any expenditure is allowed for earning the same except those laid down in section 16 of the Act, the same has, therefore, to be followed and applied in these revenue's appeal in preference to any decisions) of any Bench of this Tribunal including the decision rendered on 5-6-1992 by our learned Brothers of 'B' Bench of Ahmedabad Tribunal in the case of Kiranbhai H. Sheelat , which has been relied upon by my learned Brother. 6. There is another way of looking at the issue. Once it is held that incentive bonus is salary or part of salary, then naturally the deductions which are laid down in section 16 of the Act have to be given to an assessee to arrive at a chargeable portion or net salary income. It is not proper or justifiable to hold that though incentive bonus is salary yet the amounts spent to earn such incentive bonus has first to be deducted and the net amount is to be taken as a salary and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us determined by the L.I.C. on the basis of appraisal of extra and additional field work done which results in bringing of additional premium from new customers or only the net amount of income from such incentive bonus arrived at after deducting the expenses necessarily required for earning such incentive commission is chargeable to tax under the head 'Income from salary' ? (2) Whether the earlier decision of Ahmedabad Bench of the Tribunal on the identical facts in the case of Kiranbhai H. Sheelat v. ITO reported in [1993] 112 CTR (Ahd.)(Trib.) 140 after considering the judgment of Hon'ble Andhra Pradesh High Court in the case of K.A. Choudary v. CIT [1990] 183 ITR 29 should be followed by another/successor Ahmedabad Bench of the Tribunal or the successor Bench can come to a conclusion contrary to the earlier decision or whether in such a situation. the Bench should refer the matter to a larger Bench? " 2. The relevant facts leading to the reference on the abovementioned questions are that the assessee is a Development Officer of the LIC of India. While completing the assessments in the case of the assessee for assessment years 1983-84 to 1986-87 the Assessing Officer had al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 16(1) of the Act. The learned Accountant Member however further observed that Incentive Bonus in the case of Development Officers does not represent salary in the ordinary sense of the term and it is included under the head 'Salary' because of the wide definition in section 17 of the Act. The incentive bonus, according to his opinion, represented additional profits which have been earned by the assessee by extra work. These profits are, he opined, assessable under the head 'Salaries' along with the salary in the ordinary sense. However, as far as these profits are concerned, he took view, the net amount and not the gross amount would be includible and expenses incurred for earning incentive bonus by the Development Officers would be allowable as deduction and the net incentive bonus alone would be includible in the computation of income under the head 'Salaries'. In this behalf the learned Accountant Member subscribed to the view taken by the Ahmedabad Bench of the Tribunal in the case of Kiranbhai H. Sheelat. The learned Accountant Member then addressed himself to the question as to what should be the reasonable amount of expenses allowable as deduction. In this behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(1) of the Act was allowable. The learned DR further submitted that once it is held that the incentive bonus was a part of the salary earned by the assessee in the course of his employment with LIC of India the only deduction allowable to him in respect of that part of salary would be as contemplated under section 16(1). In this behalf the learned DR heavily relied upon the decision of the Andhra Pradesh High Court in the case of K.A. Choudhary which according to him was the only decision on the point. The learned DR further submitted that where there was no contrary decision of any other High Court on the same point, the decision of the Andhra Pradesh High Court in the case of K.A. Choudhary was binding on the Tribunal despite the fact that the Tribunal might have taken another view of the matter in its earlier decision. 9. Shri A.C. Shah, the learned counsel for the assessee, on the other hand, supported the order of the learned Accountant Member and further submitted that in order to earn the incentive bonus the Development Officers have to incur lot of expenditure in procuring business for the LIC and therefore such expenditure was required to be deducted in computing his i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act 11. The view taken by me above get support from the decision of the Andhra Pradesh High Court in the case of K.A. Choudhary. In that case the assessee was also a Development Officer employed by the LIC of India and had received a sum of Rs. 9536 from his employer by way of incentive bonus during the previous year relevant to assessment year 1981-82. In his return filed under the Income-tax Act, he claimed deduction of Rs. 4768 by way of expenses in earning such incentive bonus. The ITO had declined to give the deduction claimed on the ground that incentive bonus was a part of the salary for which standard deduction was allowed. The order of the ITO was confirmed by the Appellate Authority as well as the CIT in revision. Thereafter, the petitioner approached the High Court in a Writ Petition seeking direction that incentive bonus shall not be included as a part of the salary during the said and subsequent year. Their Lordships held that the circumstances that, under section 36(1), sub-clause (ii) such a payment is given as a deduction to the employer also will not militate against the fact that the incentive bonus forms part of the salary. Their Lordships further held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of K.A. Choudhary was brought to my notice. The Tribunal, therefore had no option to take another view of the matter, save that taken by the Hon'ble Andhra Pradesh High Court in the case of K.A. Choudhary notwithstanding the fact that the Ahmedabad Bench of Tribunal in the case of Kiranbhai H. Sheelat and some other Benches of the Tribunal at other places in India, might have taken a contrary view and the Circular of the CBDT might also be favouring such a view. 14. In view of the above discussions I hold that the only deduction allowable to the assessee in respect of his salary income for various years including the amount of incentive bonus determined by the LIC on the basis of appraisal of extra and additional field work. was that contemplated by section 16(1) of the Act, i.e. standard deduction. I accordingly answer question No. 1 in favour of the Revenue. 15. In so far as the answer to question No. 2 is concerned, I am of the opinion that since there was the only decision of the Andhra Pradesh High Court in the case of K.A. Choudhary on the point on hand, and which was required to be followed by the Tribunal in view of the decision of the Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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