Income Tax Appellate Tribunal - Cochin
Shri John Varghese, Dev. Officer, Lic Of ... vs The Jt. Commissioner Of Incometax, Spl. ... on 29 October, 2002
Equivalent citations: [2004]89ITD311(COCH)
ORDER
Order passed by assessing officer following views expressed by Jurisdicational Tribunal Catch Note:
Where the assessing officer allowed 30 per cent deduction to the assessee Development Officer of LIC out of incentive earned by him following on decision of jurisdictional Tribunal available at the time of passing of order by the assessing officer, and same was not disturbed by the higher court, the order passed by the assessment could not be termed as erroneous, therefore, Commissioner's order under section 263 was not valid.
Ratio:
Where the assessing officer allowed 30 per cent deduction to the assessee Development Officer of LIC out of incentive earned by him following on decision of jurisdictional Tribunal available at the time of passing of order by the assessing officer, and same was not disturbed by the higher court, the order passed by the assessment could not be termed as erroneous, therefore, Commissioner's order under section 263 was not valid.
Held:
The Hon'ble High Court has held in CIT v. T.K. Ginarajan's Development Officer LIC of India (2002) 253 ITR 463 (Ker) that were not going into the eligibility of the claim for deduction of 30 per cent now separately given by the LIC of India, as the matters considered by Their Lordships pertain to earlier assessment years. Therefore, it is very clear that the decision of the Tribunal in ITA No. 651 (Coch)/91 dated 21-9-2000 is not disturbed by the subsequent judgment of the Hon'ble High Court in the case of T.K. Ginarajan (supra). The Commissioner has overlooked this crucial aspect while appreciating, the order passed by the assessing officer. As held by the ITAT in ITA No. 651 (Coch)/91 dated 21-9-2000, the position has changed since 1997 after the formulation of two schemes by the LIC and, therefore, the Development Officers are entitled for claiming deduction for that part of the reimbursement of expenditure comprised in the Incentive Bonus paid by the LIC to their Development Officers. Therefore, on this ground itself the revision order passed by the Commissioner is not sustainable.
As rightly pointed out by him, the assessing officer is bound to follow the order of the jurisdictional Tribunal. The assessing officer was in fact following such an order passed by the Tribunal in ITA No. 651 (Coch)/91 dated 21-9-2000. There was no decision of the High Court before the assessing officer in which the said order of the Tribunal was set aside or over-ruled. Therefore, the assessing officer was exercising his jurisdiction in a righteous manner while following the order passed by the Tribunal. Therefore, by any stretch of imagination it cannot be said that the order passed by the assessing officer was erroneous. So long as the order passed by the assessing officer is not erroneous, it is not permissible for the Commissioner to invoke the jurisdiction of the revision available under section 263. Therefore, on this legal ground also the revision order has to be set aside.
For the reasons of law as well as facts discussed in detail in the above paragraphs, the impugned revision order passed by the Commissioner is not sustainable. It is, therefore, set aside.
Application:
Also to currnet assessment year.
Decision:
In favour of assessee.2 Assessment Year:
1998-99 Cases Referred:
CIT v. T. K. Ginarajan, Development Officer, LIC of India (2002) 253 ITR 463 (Ker), K.N. Agrawal v. CIT (1991) 189 ITR 769 (All) and Malabar Industrial Co. Ltd v. CIT (2000) 14 DTC 146 (SC) : (2000) 243 ITR 83 (SC).
Income Tax Act 1961 s.263 ORDER O.K. Narayanan, Accountant Member
1. This appeal is filed by the assessee. He is a Development Officer with Life Insurance Corporation of India. The relevant assessment year is 1998-99. The appeal is filed against the revision order passed by the Commissioner of Incometax, Trivandrum under Section 263 of the Incometax Act, 1961. The assessment in this case was completed under Section 143(3) on 27.11.2000 and the revision order has been passed on 20.6.2002.
2. The assessee is Development Officer in LIC of India working in its Mavelikkara Branch. During the previous year relevant to the assessment year under appeal, the assessee had received a sum of Rs. 16,90,008 by way of Incentive Bonus. While computing the income, the assessee claimed a deduction of 35% from the said Incentive Bonus by way of estimated expenditure. The assessing officer found that the Incometax Appellate Tribunal, Cochin Bench has decided a similar issue in ITA NO. 651(Coch)/91 dated 21.9.2000 wherein the Tribunal has directed to allow 30% of the Incentive Bonus by way of expenditure. The assessing officer followed the said decision of the Tribunal and allowed 30% of the Incentive Bonus as deduction by way of expenditure. The Commissioner of Incometax, Trivandrum thereafter verified the records of the case and found that the order passed by the assessing officer was erroneous inasmuch as he has allowed a deduction of 30% by way of expenditure from the Incentive Bonus. The Commissioner of Incometax relied on the decision of the Hon'ble High Court of Kerala in CIT v. T.K.Ginarajan (253-ITR-463) and held that no separate deduction is admissible from Incentive Bonus, as the Development Officer of LIC is a salaried employee and therefore cannot claim any deduction in excess of the deduction provided in Section 16(1) of the Incometax Act, 1961. The Commissioner also held that the decision relied on by the assessing officer was not accepted by the Department. He therefore set aside the assessment order and directed the assessing officer to redo the assessment without giving the deduction of 30%, which was allowed in the original assessment.
3. It is against the above revision order that the assessee has come in appeal before us. Shri R.Krishna Iyer, the learned Chartered Accountant appearing for the assessee argued the case, both on legal grounds and on factual grounds. The learned Chartered Accountant pointed out that the assessment year involved in the present appeal is 1998-99. The decision relied on by the Commissioner of Incometax in the case of T.K.Ginarajan (253-ITR-463) related to earlier assessment years. The learned Chartered Accountant pointed out that there is a substantial difference in the position of law that applied to the earlier assessment years considered by the High Court in the case of T.K.Ginarajan and the impugned assessment year 1998-99 considered by the assessing officer. The learned Chartered Accountant pointed out that the situation has changed by virtue of the amendment introduced by the Finance Act, 1995. As per the said amendment, reimbursement of expenditure embedded in the Incentive Bonus could be deducted in computing the income, provided such exemption is notified under Section 10(14) of the Incometax Act, 1961. The learned Chartered Accountant pointed out that the details are available in the Incentive Bonus Scheme, 1997 formulated by the Life Insurance Corporation. He has argued that the LIC itself has segregated the Incentive Bonus from the reimbursement of expenses after 1997 and it has formulated two separate schemes called,(1) Incentive Bonus Scheme 1997 for Development Officers of L.I.C., and (2) Reimbursement of Expenses Scheme, 1997 for Development Officers of LIC. The learned Chartered Accountant has pointed out that it is in tune with the suggestion made by the C.B.D.T., which is evident from the letter of the LIC dated 29.9.1986 written to the CBDT. Therefore, the subsequent formulation of the two separate schemes 1997 has changed the position declared by the Hon'ble High Court of Kerala in T.K.Ginarajan's case and has recognised the 30% component of expenditure embedded in the Incentive Bonus given to the LIC Development Officers. The learned Chartered Accountant has pointed out that the Commissioner of Incometax has found error in the order of the assessing officer without appreciating the position available after 1997, which was considered by the Tribunal in very detail in its order in ITA No. 651(Coch)/91 dated 21.9.2000, which was the basis of the order of the assessing officer.
4. The learned Chartered Accountant further contended that the Hon'ble High Court of Kerala itself has considered this position while delivering its judgment in T.K.Ginarajan's case in 253-ITR-463. For that matter, the learned Chartered Accountant relied on Paragraph-C of the judgment appearing in page 470:
"Therefore it is obvious that the LIC of India could not convince the Central Board of Direct Taxes that any part of incentive bonus is a reimbursement of expenses. We are told that the LIC of India has now changed their pattern of payment of incentive bonus which is now split into two parts, 70 per cent representing income and 30 per cent towards reimbursement of expenditure. Since the cases before us do not pertain to any assessment after the introduction of the separate payment by the LIC of India, we are not going into the eligibility of the claim for deduction of 30 per cent now separately given by the LIC of India."
5. We considered the arguments of the learned Chartered Accountant made on the basis of the facts. We agree with his arguments. The Hon'ble High Court has held in T.K.Ginarajan's case (supra) that Their Lordships were not going into the eligibility of the claim for deduction of 30% now separately given by the LIC of India, as the matters considered by Their Lordships pertain to earlier assessment years. Therefore, it is very clear that the decision of the Tribunal in ITA No.651(Coch)/91 dated 21.9.2000 is not disturbed by the subsequent judgment of the Hon'ble High Court in the case of T.K.Ginarajan (253-ITA-463). The Commissioner of Incometax has overlooked this crucial aspect while appreciating the order passed by the assessing officer. As held by the ITAT in ITA No.651 (Coch)/91 dated 21.9.2000, the position has changed since 1997 after the formulation of two schemes by the LIC and therefore the Development Officers are entitled for claiming deduction for that part of the reimbursement of expenditure comprised in the Incentive Bonus paid by the LIC to their Development Officers. Therefore, on this ground itself we are of the view that the revision order passed by the Commissioner of Incometax is not sustainable.
6. We have also considered the alternative legal ground raised by the learned Chartered Accountant. The learned Chartered Accountant has pointed out that the assessment order was passed on 27.11.2000. The Tribunal order relied on by the assessing officer was passed on 21.9.2000 and the said order was available before him while framing the assessment. The decision of the Hon'ble High Court in T.K.Ginarajan's case (253-ITR-463) was rendered on 2.11.2001. Therefore it is clear that the Tribunal order was available before the assessing officer at the time of assessment without being disturbed by the High Court. As per the judicial discipline and also as per the law laid down clearly in the statute, the assessing officer is bound to follow the order of the jurisdictional Tribunal. Therefore, in this case the assessing officer has done the right thing in law in following the decision of the Appellate Tribunal on the subject. Therefore, the assessment cannot be branded as erroneous on that ground. The learned Chartered Accountant relied on the decision of the Hon'ble Allahabad High Court in K.N.Agrawal v. CIT (189-ITR-769) where the Court has held that the orders of the Tribunal and the High Court are binding upon the assessing officer and since he acts in a quasi-judicial capacity, the discipline of such function demands that he follow the decision of the Tribunal or the High Court, as the case may be. The Court continued to observe that the assessing officer cannot ignore it merely on the ground that the Tribunal's order is the subject matter of a reference in the High Court or that the High Court's order is under appeal before the Supreme Court. The Court held that where the assessing officer follows the decision of an appellate authority, it cannot be said that his decision is erroneous. The Court also held that such a decision cannot be revised by the Commissioner of Incometax under Section 263 Shri Krishna Iyer pointed out that the above decision clearly applies to the present case argued before the Tribunal. As the order of the assessing officer cannot be held as erroneous, the learned Chartered Accountant contended that the assessment order cannot be revised under Section 263, in view of the decision of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT (243-ITR-83). In the said case, the Hon'ble Supreme Court has held that the assessment order cannot be revised by the Commissioner even if it may be prejudicial to the Revenue, but where the assessment order is not erroneous. The learned Chartered Accountant further relied on the observation of the Supreme Court in the said case that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by an assessing officer, but it could be used only when an order is erroneous and prejudicial to the interests of Revenue.
7. On this legal ground also we are inclined to accept the contention of the learned Chartered Accountant. As rightly pointed out by him, the assessing officer is bound to follow the order of the jurisdictional Tribunal. The assessing officer was in fact following such an order passed by the Tribunal in ITA No. 651(Coch)/91 dated 21.9.2000. There was no decision of the High Court before the assessing officer in which the said order of the Tribunal was set aside or over-ruled. Therefore, the assessing officer was exercising his jurisdiction in a righteous manner while following the order passed by the Tribunal. Therefore, by any stretch of imagination it cannot be said that the order passed by the assessing officer was erroneous. So long as the order passed by the assessing officer is not erroneous, it is not permissible for the Commissioner of Incometax to invoke the jurisdiction of the revision available under Section 263. Therefore, we are of the view that on this legal ground also the revision order has to be set aside.
8. For the reasons of law as well as facts discussed in detail in the above paragraphs, we hold that the impugned revision order passed by the Commissioner of Incometax is not sustainable. It is therefore set a side. The appeal filed by the assessee is allowed. Order accordingly.