Income Tax Appellate Tribunal - Ahmedabad
Income-Tax Officer vs P.M. Suthar on 25 January, 1995
ORDER
B.M. Kothari, Accountant Member
1. All these appeals involve consideration of a common point. Hence, they are being disposed of by this common order.
2. The assessee is a Development Officer of the Life Insurance Corporation of India. Assessments for the assessment years 1983-84 to 1986-87 were reopened under Section 147(a) on the ground that the assessee's claim for deduction of expenses at the rate of 40 per cent, of the incentive bonus was wrongly allowed in the original assessments. In the reassessments for these years, the Income-tax Officer disallowed the said claim for expenses calculated at 40 per cent, of the incentive bonus. In the assessment for the assessment year 1988-89 made under Section 143 (3), the assessee claimed deduction at the rate of 50 per cent, as expenses against income by way of incentive bonus. The Income-tax Officer held that such amount received by the assessee from his employer is covered under the expression "salary". Standard deduction is granted under section 16(i) for all types of expenses incurred in relation to earning of the income under the head "Salary". No separate deduction for any expenses whatsoever can be allowed under Section 16.
3. The Commissioner of Income-tax (Appeals) allowed such claim of expenses made by the assessee against income from incentive bonus. He relied on the decision of the Income-tax Appellate Tribunal reported in Income-tax Appeal No. 582/(Ahd.) of 1984 and various other decisions of the Income-tax Appellate Tribunal, Bombay and Nagpur Benches, etc.
4. The learned Departmental representative submitted that although the issue is covered by the decision of the Ahmed'abad Benches of the Tribunal, a contrary view has been taken by the Andhra Pradesh High Court in the case of K. A. Choudary v. CIT [1990] 183 ITR 29. In view of the said judgment, he urged that the view taken by the Income-tax Officer should be restored.
5. Learned counsel for the assessee relied on the order passed by the Commissioner of Income-tax (Appeals) 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 held that incentive bonus paid to Development Officers of the Life Insurance Corporation is an additional amount which is given on the basis of additional field work which results in bringing additional premium to the Life Insurance Corporation from new customers. The definition of the term "salary" in Section 17 is very wide and that definition includes profits in lieu of and in addition to salary. In view of such a wide definition, it was held that the incentive bonus would be assessable under the head "Salaries". It was further held that as far as the amount which represents salary in the ordinary sense of the term is concerned, the gross amount received from the employer is liable to be included and the only deduction allowable is that prescribed under Section 16(i) of the Act. However, incentive bonus in the case of the 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 represents additional profits which have been earned by the assessee by extra work. These profits are assessable under the head "Salaries" along with the salary in the ordinary sense. However, as far as these profits are concerned, the net amount and not the gross amount would be includible. Expenses incurred for earning the incentive bonus by the Development Officers were allowable as deduction and the net incentive bonus alone was includible in the computation of income under the head "Salary". The question (hereafter which remained to be considered was as to what should be the reasonable amount of expenditure allowable as a deduction. The Board has issued a circular in which the Assessing Officers were directed to allow an ad hoc deduction to insurance agents of the Life Insurance Corporation at 40 per cent. of the first year commission, which was later increased to 50 per cent. and 15 per cent. of the renewal commission by way of expenses. The Tribunal also observed that the allowance of deduction at 40 per cent. in the case of the Development Officers should not be regarded as invariable. In a given case, the Income-tax Officer would be entitled to bring on record material which would indicate that the Development Officer would not have incurred 40 per cent. expenditure to earn incentive bonus. If such a material is brought on record, then expenditure at less than 40 per cent. would be allowable. After taking into consideration the facts of that case, the Tribunal directed the Income-tax Officer to allow deduction at 40 per cent. 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 per cent. for expenses against incentive bonus in all the years under consideration. The Income-tax Officer has not brought any material on record to indicate that the claim of deduction for expenses at 40 per cent. made by the assessee is unreasonable or excessive or does not represent real expenses. We, therefore, direct the Income-tax Officer to allow deduction for expenses at the rate of 40 per cent. of the incentive bonus in all the years under consideration. The assessee claimed expenses at the rate of 40 per cent. in "the assessment years 1983-84 to 1986-87 and at 50 per cent. in the assessment year 1988-89. The claim for the assessment year 1988-89 will be allowed only to the extent of 40 per cent. as against 50 per cent.
7. In the result, the appeals for the assessment years 1983-84 to 1986-87 are dismissed and appeal for the assessment year 1988-89 is partly allowed.
Abdul Razack, Judicial Member
8. I have studied the order passed by my learned Brother in the case of ITO, Ward-2, Himatnagar v. P. M. Suthar, Mehsana (N. G.) being Income-tax Appeals Nos. 2641 to 2645/ (Ahd.) of 1990. I have no dispute with my learned brother in holding that incentive bonus represents additional profit and the same is, therefore, assessable under the head "Salary". Having held so, with utmost respect for my learned brother, I am unable to agree with him that it is the net incentive bonus and not the gross which requires to be added to the assessee's other salary income and that 40 per cent. of the gross incentive bonus is considered by my learned Brother as reasonable expenditure (as claimed by the assessee) for earning such incentive bonus. My learned brother has relied heavily on the decision taken on June 5, 1992, by "B" Bench of Ahmedabad Tribunal in the case of Kiranbhai H. Sheelat v. ITO being Income-tax Appeals Nos. 1005 to 1008/(Ahd.) of 1989 which has distinguished the Andhra Pradesh High Court judgment in the case of K. A. Choudary v. CIT [1990] 183 ITR 29 on the ground that the Andhra Pradesh High Court did not consider the question whether the expenditure incurred for earning the incentive bonus was allowable as deduction at the starting point itself in view of the fact that incentive bonus did not represent salary in the ordinary sense.
9. The Departmental Representative Shri R. I. Patel strongly relied on the judgment of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29, wherein their Lordships of the Andhra Pradesh High Court on a similar set of facts on a writ petition by the assessee held that incentive bonus is part of salary and the assessee is not entitled to claim deduction of any sum spent by him for earning such income. The Andhra Pradesh High Court relied upon the decision of the Supreme Court in Gestetner Duplicators P. Ltd. v. CIT [1979] 117 ITR 1 and a decision rendered by the Andhra Pradesh High Court in the case of M. Krishna Murthy v. CIT [1985] 152 ITR 163, wherein a similar view in respect of incentive bonus was taken while considering the applicability of section 40A of the Income-tax Act. The Andhra Pradesh High Court also noted the decision of the Allahabad High Court in the case of CIT v. Hind Lamps Ltd. [1980] 122 ITR 451, wherein a similar view was taken that incentive bonus was part of salary. The Andhra Pradesh High Court also took note of the definition of "wages" under the Payment of Wages Act, which word is also used in Section 17 of the Income-tax Act, because bonus is also included in the said definition under the Payment of Bonus Act. The Andhra Pradesh High Court in the said case of K. A. Choudary [1990] 183 ITR 29 have also negatived the claim of the assessee that incentive bonus should be considered as income from profession. The submission of the Departmental Representative that in view of the judgment of the Andhra Pradesh High Court in the case of K A Choudary [1990] 183 ITR 29, which is the only and solitary decision on the controversy before us in these appeals, should be applied and followed ancl the decisions given by various Benches of the Income-tax Appellate Tribunal (I. T. A. T.) till now have lost validity and sanctity and, therefore, the order of the Appellate Commissioner has to be reversed and that of the Assessing Officer should be upheld, particularly on the strength of the judgment of the Andhra Pradesh High Court in K. A. Choudary's case [1990] 183 ITR 29.
10. No other judgment of any High Court has been brought to our notice by the 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 the 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 part of the salary and yet directing the Assessing Officer to allow deduction of expenses as is being done by my learned brother on the basis of the earlier order dated June 5, 1992, passed by the 'B' Bench of the Ahmedabad Tribunal in the case of Kiranbhai H. Sheelat. The view taken by the Cuttack Bench of this Tribunal was identical with the view taken by "B" Bench of Ahmedabad Tribunal in the case of Kiranbhai H. Sheelat and by my learned brother in these appeals.
11. In my view, the judgment of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 is not distinguishable at all for any reason whatsoever, but, on the contrary, the same has to be preferred and applied in these appeals as the facts and controversy before the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 were similar to the facts and controversy which we are now confronted with in these appeals. Had there been a judgment of the Gujarat High Court on identical facts and controversy taking a view contrary to that of the Andhra Pradesh High Court, then the same was undoubtedly binding upon us (this Tribunal) ; because the Gujarat High Court exercises superintendence and control over this Tribunal under Article 227 of the Constitution of India. In the absence of any decision from the Gujarat High Court, but availability of any decision of any other High Court then it would have been appropriate for us (this Tribunal) to adopt any decision of any High Court which reasonably supports wholly or partly to the facts and controversy of the case on hand. The judgment of the Andhra Pradesh High Court in K. A. Choudary's case [1990] 183 ITR 29 cannot be ignored or distinguished by us for the simple reason that the Andhra Pradesh High Court does not exercise superintendence or control over the Ahmedabad Benches of the Income-tax Appellate Tribunal under article 227 of the Constitution of India. Needless to say the Income-tax Act is an all-India Central statute and a solitary decision of any High Court, in the absence of any decision of jurisdictional High Court, taking a particular view has to be respected, applied and followed by any Tribunal or subordinate court or authority sitting or functioning anywhere in India if the facts and controversy are similar and identical with that of the judgment rendered by any High Courts in such given case. If this is not done so, I am afraid there will be confusion in the administration of law and justice and respect for law would suffer. I am saying so on the basis of the judgment of the Bombay High Court in the case of C7T v. Smt Godavaridevi Saraf [1978] 113 ITR 589.
12. 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 appeals in preference to any decision(s) of any Bench of this Tribunal including the decision rendered on June 5, 1992, by our learned Brothers of the 'B' Bench of the Ahmedabad Tribunal in the case of Kiranbhai H. Sheelat, which has been relied upon by my learned brother.
13. 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 the chargeable portion or net salary income. It is not proper or justifiable to hold that though incentive bonus is salary yet the amount spent to earn such incentive bonus has first to be deducted and the net amount is to be taken as salary and then the deduction available under section 16 will become operative. In my view, therefore, doing this exercise will amount to causing violence to Section 17 of the Act or perhaps amount to rewriting of that provision by this Tribunal, which is neither warranted nor permissible in law.
14. I am, therefore, of the considered opinion that these Revenue appeals have to be allowed upholding the order of the Assessing Officer.
ORDER OF REFERENCE TO THIRD meMBER Statement under Section 255(4) of the Income-tax Act, 1961
15. A difference of opinion having emerged between the Accountant Member and the Judicial Member who originally heard the appeals, we hereby state the points on which we differ and refer the matter to the Hon'ble President of the Income-tax Appellate Tribunal for further appropriate action.
16. The points involved are as under :
"1. Whether, on the facts and in the circumstances of the asses-see's case, who is a Development Officer of the Life Insurance Corporation of India, the gross amount of the incentive bonus determined by the Life Insurance Corporation 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 the Ahmedabad Bench of the Tribunal on the identical facts in the case of Kiranbhai H. Sheelat v. ITO after considering the judgment of the 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 ?"
ORDER OF THIRD MEMBER M. A. A. Khan, Judicial Member
17. Consequent upon a difference of opinion between the learned Members of the Bench on the common point, involved in all these appeals, the following questions were referred by the President of the Tribunal under Section 255(4) of the Income-tax, Act, 1961 ("the Act"), to me for my opinion as a Third Member in the case :
" (1) Whether, on the facts and in the circumstances of the assessee's case, who is a Development Officer of the Life Insurance Corporation of India, the gross amount of the incentive bonus determined by the Life Insurance Corporation 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 the Ahmedabad Bench of the Tribunal in the identical facts in the case of Kiranbhai H. Sheelat v. ITO after considering the judgment of the 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 ?"
18. The relevant facts leading to the reference on the abovementioned questions are that the assessee is a Development Officer of the Life Insurance Corporation of India. While completing the assessments in the case of the assessee for the assessment years 1983-84 to 1986-87, the Assessing Officer had allowed deduction of expenses at the rate of 40 per cent. of the incentive bonus. Similarly, such expenses at the rate of 50 per cent. against income earned by way of incentive bonus were allowed for the assessment year 1988-89. However, the assessments for all the years under consideration were reopened by the Assessing Officer on the ground that the assessee's claim for deduction of expenses, at the rates mentioned above, was wrongly accepted in the original assessments. After hearing the assessee, the Assessing Officer held that the amount received by the assessee from his employer by way of incentive bonus was covered by the definition of "salary" and, therefore, the only deduction allowable to the assessee against such income was that contemplated under section 16(i) of the Act. He, accordingly, withdrew the deduction of expenses as had been allowed by him in the original assessments.
19. In appeals, the learned Commissioner of Income-tax (Appeals) accepted the claim of the assessee for expenses claimed against the incentive bonus in various years on the basis of the decision of the Tribunal in the case in Income-tax Appeal No. 582/(Ahd) of 1984 and various other decisions of the Bombay and Nagpur Benches of the Tribunal. The Department approached the Tribunal in second appeals.
20. Before the Tribunal it was submitted on behalf of the Revenue that although the issue was covered in favour of the assessee by the decision of the Ahmedabad Benches of the Tribunal, yet a contrary view had been taken by the Andhra Pradesh High Court in the case of K. A. Choudary v. CIT [1990] 183 ITR 29. It was, therefore, urged that there being no decision contrary to that of the Andhra Pradesh High Court the same should govern the answer to this common issue in these appeals and the view taken by the Assessing Officer be restored. Learned counsel for the assessee, however, appears to have relied upon various decisions of the Tribunal in support of the order of the learned Commissioner of Income: tax (Appeals) in his favour.
21. The learned Accountant Member observed that the definition of the term "salary" in Section 17 was very wide and included profits in lieu of and in" addition to salary. He further observed that in view of the wide definition, the incentive bonus would be assessable under the head "Salaries" and thus the gross amount received by the employee from his employer would be liable to be included in the definition of the term "salary" and the only deduction allowable would be that prescribed under Section 16(i) 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 the 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 v. ITO. 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, he took note of the circular of the Board in which the Assessing Officer was directed to allow an ad hoc deduction to insurance agents of the Life Insurance Corporation at 40 per cent. of the first year commission, which was later increased to 50 per cent. and 15 per cent. of the renewal of commission, by way of expenses. The learned Accountant Member referring to the view adopted by the Tribunal in the case of Kiranbhai H. Sheelat further observed that the allowance of deduction at 40 per cent. in the case of Development Officers should not be regarded as invariable. In a given case, the Income-tax Officer would be entitled to bring on record material which would indicate that the Development Officers would not have incurred 40 per cent. Expenditure to earn the incentive bonus. If such material is brought on record, then expenditure at less than 40 per cent. would be allowable. Thus, following the decision of the Tribunal in the case of Kiranbhai H. Sheelat, the learned Accountant Member held that the assessee should get deduction at the rate of 40 per cent. for expenses against incentive bonus in all the years under consideration.
22. The learned Judicial Member, however, did not agree with the views taken and conclusions arrived at by the learned Accountant Member. He took note of the fact that in the case of K. A. Choudary [1990] 183 ITR 29, the Andhra Pradesh High Court held on a similar set of facts that incentive bonus was a part of the salary and the assessee was not entitled to claim deduction of any sum spent by him for earning such income. The learned Judicial Member, taking note of the Bombay High Court decision in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589, wherein it was held that the Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question, decided the issue in favour of the Revenue thus restoring the order of the Income-tax Officer in all the years under consideration. The difference of opinion on the point has given rise to two questions referred to me.
23. Shri R. N. Tripathi, the learned senior Departmental Representative appeared for the Revenue, and Shri A. C. Shah, learned counsel for the assessee, appeared for the assessee.
24. The learned Departmental Representative urged that the incentive bonus earned by an employee in the course of his employment was a part of the salary of the employee and, therefore, in earning that part of the income the only deduction as contemplated under Section 16(i) of the Act was allowable. The learned Departmental Representative 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 the Life Insurance Corporation of India the only deduction allowable to him in respect of that part of. salary would be as contemplated under Section 16(i). In this behalf, the learned Departmental Representative heavily relied upon the decision of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29, which according to him was the only decision on the point. The learned Departmental Representative 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. Choudary [1990] 183 ITR 29 was binding on the Tribunal despite the fact that the Tribunal might have taken another view of the matter in its earlier decision.
25. Shri A. C. Shah, 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 a lot of expenditure in procuring business for the Life Insurance Corporation and, therefore, such expenditure was required to be deducted in computing his income from salary. In support of his arguments, learned counsel for the assessee heavily relied upon the decision of the Ahmedabad Bench of the Tribunal in the case of Kiranbhai H. Sheelat and submitted that this succeeding Bench was required to follow the same view in the case of the present assessee for various years. Learned counsel for the assessee further submitted that in case the succeeding Bench intended to take a different view of the matter it was incumbent upon it to have referred the matter to the President for obtaining the opinion of a larger Bench.
26. It is not in dispute in the present case, that there existed a relationship of employee and employer between the assessee and the Life Insurance Corporation of India. It was in consequence of such relationship between the two that the assessee received incentive bonus from its employer in addition to the salary received by him. Such incentive bonus was no doubt an additional amount which was given to the assessee on the basis of additional field work which might have resulted in bringing additional business to the Life Insurance Corporation from new customers but that fact does not alter the position that incentive bonus was received by the assessee in various years in lieu of and/or in addition to salary received by him from his employer. The definition of the term "salary" in Section 17 as has also been observed by the learned Accountant Member in his order is very wide and includes profits in lieu of and/or in addition to salary. In view of such a wide definition of the term "salary", the incentive bonus would be, being a part of the salary, assessable under the head "Salary". Once the incentive bonus, being a part of the salary, is liable to be so assessed under the head "Salaries", the computation of the income of the assessee under that head would be governed by Sections 15, 16 and 17. Section 15 enumerates income chargeable to income-tax under the head "Salaries". Section 16 lays down the deduction allowable in the computation of the income chargeable under the head "Salaries". Section 17 defines the terms "salary", "perquisite" and "profits in lieu of salary". It is thus clear that the only deduction allowable in the computation of the income chargeable under the head "Salaries" is that contemplated under Section 16. In the present case, therefore, the assessee could not have claimed deduction beyond that prescribed under Section 16(i) of the Act. The view taken by me above gets, support from the decision of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29. In that case, the assessee was also a Development Officer employed by the, Life Insurance Corporation of India and had received a sum of Rs. 9,536 from his employer by way of incentive bonus during the previous year relevant to the assessment year 1981-82. In his return filed under the Income-tax Act, he claimed a deduction of Rs. 4,768 by way of expenses in earning such incentive bonus. The Income-tax Officer 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 Income-tax Officer was confirmed by the appellate authority as well as the Commissioner of Income-tax in revision. Thereafter, the petitioner approached the High Court in a writ petition seeking a direction that the incentive bonus shall not be included as a part of the salary during the said and subsequent year. Their Lordships held that the circumstance 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 that the petitioner could not have earned this amount if he were not in the employment of the Life Insurance Corporation. In support of their view, their Lordships referred to the decision of the Supreme Court in Gestetner Duplicators (P.) Ltd. v. CTT [1979] 117 ITR 1 (SC) and their own decision in the case of Krishna Murthy (M.) v. OT [1985] 152 ITR 163 (AP) and that of the Allahabad High Court in CIT v. Hind Lamps Ltd. [1980] 122 ITR 451.
27. It is thus clear that the only decision on the point is that of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 as supported by the decisions of the Supreme Court and the Allahabad High Court and there is no decision contrary to the view taken by the Andhra Pradesh High Court. At least I did not come across a decision of a High Court wherein a view contrary to that of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 had been taken. In the case of Smt. Godavaridevi Saraf [1978] 113 ITR 589, the Bombay High Court observed that an authority like the Income-tax Tribunal, acting anywhere in the country, has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. This view of the Bombay High Court was endorsed by the Gujarat High Court in the case of CIT v. Sarabhai Sons Ltd. [1983] 143 ITR 473, wherein it was observed that the view held by other High Courts has to be followed as of practice. In the case of CIT v. Sarabhai Sons Pvt. Ltd. [1993] 204 ITR 728, the Gujarat High Court endorsing the same view as was expressed in CIT v. Sarabhai Sons Ltd. [1983] 143 ITR 473 (Guj) again reiterated that the Income-tax Act is an all-India statute and it is desirable in the interest of uniformity that one High Court should follow the decision of another High Court.
28. The above discussion takes me to hold that the Tribunal acting any, where in the country has to follow the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question, notwithstanding the fact that it has taken another view of the matter in a number of cases decided by it. The view expressed by the High Court on the same point shall have to be given due respect not only by the Tribunal, which is subordinate to the High Court in a hierarchical set up, but also by other High Courts as observed by the Gujarat High Court in its decisions referred to above. As stated above, no view contrary to that of the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 was brought to my notice. The Tribunal, therefore, had no option to take another view of the matter, save that taken by the Andhra Pradesh High Court in the case of K. A. Choudary [1990] 183 ITR 29 notwithstanding the fact that the Ahmedabad Bench of the 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 Central Board of Direct Taxes might also be favouring such a view.
29. 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 Life Insurance Corporation on the basis of appraisal of extra and additional field work, was that contemplated by Section 16(i) of the Act, i.e., standard deduction. I accordingly answer question No. 1 in favour of the Revenue.
30. 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. Choudary [1990] 183 ITR 29 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 case of CIT v. Smt. Goda-varidevi Saraf [1978] 113 ITR 589, it was not open to the Bench deciding these appeals to take another view of the matter and subscribe to the view taken by the Tribunal in the case of Kiranbhai H. Sheelat which might have considered the Andhra Pradesh High Court decision. Since there was no decision of any other High Court contrary to that of the Andhra Pradesh High Court in the case of K A Choudary [19901 183 ITR 29 and the view of the Andhra Pradesh High Court was to be followed by the Tribunal in deciding this issue, it was not necessary for a succeeding Bench which held a view contrary to that expressed by the Tribunal in the case of Kiranbhai H. Sheelat to refer the matter to a larger Bench. A matter may be referred to a larger Bench where two co-ordinate Benches of the Tribunal have taken conflicting views on the same point. In this behalf, the principle embodied in Section 255(4) of the Act may be applied with some modification in deciding the conflicting opinions of the co-ordinate Benches on the same point. But where there is only the decision of a High Court on a particular point and there is no decision of any other High Court contrary to that decision on the same point, the Tribunal has to follow that view notwithstanding the fact that an earlier Bench of the Tribunal even after considering the High Court decision has taken a view contrary to that of the High Court on that point. If that is not done, the doctrine of hierarchical obedience in judicial matters and the practice of following the decision of the superior authority, as stressed by the Bombay High Court in the case of Smt. Godavaridevi Saraf [1978] 113 ITR 589, would stand frustrated. The necessity of referring the matter to a larger Bench may only arise where there is no such decision of a High Court on that point or there are conflicting decisions on the same point by different High Courts. In the instant case, there was no such situation and, therefore, there was no such necessity for the succeeding Bench to have thought of referring the matter to a larger Bench on the ground that one of the members of the succeeding Bench took or proposed to take a view different from that taken by the earlier Bench in the case of Kiranbhai H. Sheelat which had already considered the said decision of the Andhra Pradesh High Court.
31. To sum up, I answer the two questions in the manner stated above. Let the record of the case be put up before the Bench, deciding these appeals, for further orders according to law.
ORDER B. M. Kothari, Accountant Member
32. The learned Third Member by his opinion dated January 25, 1995, having concurred with the view of the Judicial Member and in accordance with the majority view these Revenue's appe'als are allowed.