Orissa High Court
Commissioner Of Income-Tax vs Sarat Ch. Sahu on 21 February, 1992
Equivalent citations: [1992]195ITR364(ORISSA)
Author: A. Pasayat
Bench: A. Pasayat
JUDGMENT
1. At the instance of the Revenue, the following question has been referred to this court under Section 25G(1) of the Income-tax Act, 1961 (in short "the Act"), by the Income tax Appellate Tribunal, Cuttack Bench, Cuttack (in short "the Tribunal") :
"Whether, in the facts and on the circumstances of the" case, the Income-tax Appellate Tribunal was justified in law in allowing the assessee's claim of expenditure to the extent of 40% of the incentive bonus received and included in the salary income ?"
2. The assessee is an officer of the Life Insurance Corporation of India. He filed his return for the assessment year 1983-84 showing Rs. 18,844 as gross salary. But the Assessing Officer found from the certificate issued by the employer that the gross salary was Rs. 39,285. The assessee explained the situation by stating that the aforesaid sum included Rs. 9,720 as additional conveyance allowance and a sum of Rs. 11,708 towards incentive bonus for securing new business. He claimed it to be his income from business and claimed expenses of 40 per cent, thereof. The assessee put forth a claim stating that the sum of Rs. 11,708 was to be assessed under the head "Business" because the incentive bonus was given for securing new business by propagating the virtues of insuring lives. The Assessing Officer held that the incentive bonus was a part of the salary and, therefore, no expenses were to be allowed in respect thereof and that only standard deduction under Section 10(1) of the Act was to be allowed. In appeal by the assessee, the Appellate Assistant Commissioner of Income-tax set aside the conclusion and held that the incentive bonus was earned by the assessee by performance of field duties and, therefore, could not be treated as part of his salary. It was also held that it was not in the nature of any payment covered by the Payment of Bonus Act. He also held that it was not a part of the salary of the assessee as per the conditions of employment. In appeal, the Tribunal upheld the conclusions of the Appellate Assistant Commissioner. The Tribunal, even though accepting that the incentive bonus received was nothing but part and parcel of the salary of the assessee, held that he having put in extra efforts to earn the incentive bonus was entitled to expenses incurred for earning the same. It held that the expenditure claimed by the assessee at 40 per cent, was reasonable.
3. Being aggrieved by this conclusion, the Revenue moved for a reference to this court and, as aforestated, the question has been referred to us for adjudication.
4. Learned counsel for the Revenue states that, in view of the categorical conclusion and finding of the Tribunal that the incentive bonus was nothing but part and parcel of the salary of the assessee, the further conclusion that expenses are to be allowed is a contradiction in terms. The assessee's counsel, however, supports the conclusions of the Tribunal.
5. We are in agreement with the submissions of learned counsel for the Revenue that the conclusions of the Tribunal are contradictory. The basic question which was to be adjudicated was whether the amount formed part of the salary or related to business. The Appellate Assistant Commissioner held that the amount did not form part of the salary and was in the nature of an incentive given for procuring additional business. The Tribunal, on the contrary, did not consider that aspect, but held that it was a part of the salary ; at the same time it directed allowance of expenditure as if it was treating the same to be income from business. The Tribunal was, therefore, not justified in coming to contradictory conclusions. We, therefore, remit the matter to the Tribunal to consider the basic question whether the amount formed part of salary or was earned from business. The entitlement to expenses would be consequential to determination of the basic question about the nature of the income.
6. The reference application is, accordingly, disposed of.