Income Tax Appellate Tribunal - Hyderabad
K. Gangadhar Ramareddy vs Income-Tax Officer on 26 December, 1995
Equivalent citations: [1996]59ITD282(HYD)
ORDER
P. Pradhan, Accountant Member
1. All the above-mentioned appeals have been filed by different assessees and revenue in the cases of different assessees, are directed against the assessment years 1986-87 onwards. Since common and identical issues for consideration arise in all these appeals, they are taken up together and disposed of by this consolidated order for the sake of convenience.
2. During the course of hearing, when the appeals were fixed, some of the appeals were represented by the authorised representatives, in some cases written submissions were filed, but, majority of the cases were unrepresented. Revenue's side was represented by the learned Departmental Representative.
3. The issue for consideration before us is whether the assessees who are the Development Officers of LIC are entitled to claim deduction from out of incentive bonus received by the employees and during the course of performance of their duties.
4. It was submitted by the learned authorised representatives who were present and in written submissions that the incentive bonus is a special allowance falling under Section 10(14) of Income-tax Act, as held by the Special Bench in P. Dayakar [IT Appeal Nos. 1318 and 1319 (Hyd.) of 1986 dated 23-3-1989] and hence that part of the allowance, to the extent to which the expenses were actually incurred in the performance of duties as Development Officer should not be included in the computation of the total income. It is also submitted that even assuming that the incentive bonus falls within the definition of 'salary' as contained in Section 17, still it is the net of the incentive bonus that can be taken as a part of 'salary' and not the gross. In this connection it is stated that what has not actually gone into the pocket of the assessee, but has in fact gone out of the pocket, can never be treated as income even under the head 'Salary' and in that view of the matter, the expenditure incurred for earning the incentive bonus is liable for deduction at the source or starting point itself under Section 15 of Income-tax Act, while determining the quantum of incentive bonus chargeable to tax. It is also stated that the Central Government has notified under Section 10(14) of the Act for allowing deduction. But, here it may be mentioned that there is no notification by the Government on incentive bonus. The Government has notified only in respect of conveyance allowance.
5. The learned ARs further submitted that the issue whether LIC Development Officer is entitled to claim deduction of 40% of incentive bonus or not is covered by various decisions of the Tribunal including the decision in the case of P. Dayakar (supra) rendered by Hyderabad Special Bench, that in any view of the matter, the issue whether any deduction can be allowed out of the incentive bonus towards expenditure for earning the said bonus or not is a highly debatable one and as such it can never be the subject-matter of prima facie adjustment under Section 143(1)(a) of Income-tax Act. In this regard, reliance was placed in Hyderabad 'B' Bench's decision in C. V. Ramana Rao [IT Appeal No. 275 (Hyd.) of 1992, dated 24-4-1995], for the assessment year 1990-91. On the other hand, the learned DR submitted that there cannot be any debate or doubt regarding prima facie adjustments, as the same were done in accordance with law applicable to the assessment years 1989-90 onwards. The various Tribunals decisions including the Special Bench decision in the case of P. Dayakar (supra) are no more good law after the amendment to Section 10(14), w.e.f. 1-4-1989 and in the absence of notice of notification under Section 10(14) by the Central Government. In other words, the law is that 40% deduction cannot be allowed without notification as mentioned above. It is further stated that there may be conflicting decisions by the Tribunals, but that by itself does not make the issue debatable. The remedy came in the form of P. Dayakar's case, but as stated earlier the said decision does not hold good for the years under appeal in the absence of the notification. It is further stated that jurisdictional High Court rendered its judgment in K.A. Choudary v. CIT [1990] 183 ITR 129 (AP) as early as 10-12-1987, still holds good. There is no contrary decision by any other High Court. This decision is binding. Tribunals are fact finding authorities, but, the High Court lays down the laws. So prima facie adjustments and 154 orders following High Court's order and as per law in the absence of notification cannot be said to be not in order and they are debatable. There cannot be any debate between finding of a High Court and that of the Tribunal on the same issue. The findings of the High Court has to prevail and has to be preferred. We agree with DR on this proposition.
6. The learned ARs also advanced real income theory and has also referred to the decisions of Badridas Daga v. CIT [1958] 134 ITR 10 (SC) and Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC), we have considered these submissions and find that the submissions of the ARs cannot be accepted. In the case of salary only standard deductions are to be allowed. The two Supreme Court cases relied were rendered under the head 'Profits and gains of business' and not under the head 'Salary'. The said decisions cannot be applied to the facts of the present cases.
7. The learned ARs also brought to our notice the recent decision of the Cochin Bench in the case of ITO v. T.R. Ginarajan [ITA Nos. 651 and 652 (Coch.) of 1991, dated 11-8-1995] for the assessment years 1987-88 and 1988-89. We have gone through this order and find that this decision is also not helpful to the assessees. Firstly, the assessment years involved are prior to the amendment of Section 10(74) of Income-tax Act. Secondly, Income-tax Act is a self-contained code and therefore we need not go into the LIC Act for deciding the salary and the deduction to be allowed, etc. We have to follow only the provisions of Sections 15, 16 and 17 only. Thirdly, the decision of the Andhra Pradesh High Court which is against the assesses has to be followed in the absence of any contrary decision by any other High Court on the issue as per the decision of Bombay High Court in the case of CIT v. Smt. Godavari Devi [1978] 113 ITR 589. Moreover, the decision is of jurisdictional High Court which is binding and to follow the same would invite contempt proceeding as held by Andhra Pradesh High Court in the case of State of Andhra Pradesh v. CTO [1988] 169 ITR 564. We find some of the assessments have been made under Section 143(3). These assessments according to us are in conformity with the decision of the jurisdictional High Court and in the absence of Section 10(14) notification. We uphold the disallowance of deduction @ 40% from incentive bonus.
8. The learned DR strongly relied on the judgment of the Andhra Pradesh High Court in the case of K.A. Choudary (supra). In this particular case, their Lordships of the Andhra Pradesh High Court in an identical set of facts on a Writ Petition by the assessee held that incentive bonus is part of salary and the assessee is entitled to claim deduction of any sum spent by him for earning such income except standard deduction. While deciding the said case, the Andhra Pradesh High Court followed the decision of the Supreme Court in Gestener Duplicators P. Ltd. v. CIT [1979] 117 ITR 1 and decision of the Andhra Pradesh High Court in the case of M. Krishna Murthy v. CIT [1985] 152 ITR 163/23 Taxman 126, 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 has also followed the decision of Allahabad High Court's decision in the case of CIT v. Hind Lamps Ltd. [1980] 122 ITR 451 wherein similar view was taken that incentive bonus is 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 the 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 K.A. Choudary's case (supra) have also negatived the claim of the assessee that incentive bonus should be considered as income from profession. The submission of the DR that in view of the judgment of Andhra Pradesh High Court in the case of K.A. Choudary (supra), which is only and solitary decision on the controversial issue before us in these appeals, should be applied and followed and the decisions given by various Benches of the ITAT till now have lost validity and sanctity and therefore the stand of the revenue should be upheld. It is further submitted that there cannot be any debate on the issue as the Assessing Officer has made prirna facie adjustments/assessments as per law and as upheld by the Andhra Pradesh High Court in the case of K.A. Choudary (supra). There is no other decision by any other High Court contrary to the decision of the Andhra Pradesh High Court. Therefore it is submitted that the assessments under Sections 143(3),143(1)(a)and 154 rectifications are all in order, as the mistakes apparent from record both of facts and law can be rectified.
9. We have considered the submissions of the parties, gone through the assessment orders, appellate orders, perused the papers filed and considered the decisions relied on by the parties and find that the contentions of the revenue have to be accepted. In this connection, the observations and findings of their Lordships of the Calcutta High Court in the case of CIT v. Smt. Dipali Goswami [1985] 156 ITR 36/25 Taxman 39 is worth noting to decide the issue before us. In page"43 of the said decision, they have observed as follows :-
Section 17(7) of the Income-tax Act, 1961, defines the expression 'salary' for the purpose of Sections 15, 16 and 17 by way of an inclusive definition Salary for tax purposes includes any pension. Section 15 enumerates the income which shall be chargeable to income-tax under the head 'Salaries'. Section 16 provides that income chargeable under the head 'Salaries' shall be computed after making deductions mentioned in Section 16. It is merely a provision defining the expression 'salary' [see CIT v. G. Hyatt [1971] 80 ITR 177 (SC)]. Under Section 15, all payments made to the holder of an office or employment as such by way of remuneration for services would be treated as salary. The sine qua non or prerequisite for chargeability under the head 'Salaries' is that there must exist relationship of employee and employer between the assessee and the person making the payment. If any payment has to be regarded as salary within the meaning of Sections 15 to 17, the relationship of employer and employee has to be established. In other words, for being taxable as 'salary' payment must be due from an employer to the assessee.
In the present appeals before us, there is no dispute that the Development. Officers are the employees of the LIC and they are receiving the incentive bonus because of their employment with the LIC. Therefore, the incentive bonus is part of salary. The Andhra Pradesh High Court has also categorically held in the case of K.A. Choudary (supra) that incentive bonus is part of salary. Again the Andhra Pradesh High Court in its recent judgment in the case of CIT v. B. Chinnaiah [1995] 214 ITR 368 have followed the K.A. Choudary's case and have held that incentive bonus paid to Development Officers of LIC constitutes salary. Therefore, it is well-settled that incentive bonus is salary or part of salary and once, it is so held then it automatically follows that only deductions to be allowed therefrom are the deductions mentioned in Section 16 and nothing else. In this connection, it may be mentioned that it is not proper or justifiable to hold that though the 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.
10. In this connection, it may also be mentioned that for the assessment years 1962-63 to 1974-75, Section 16 provided for deductions on account of purchase of books, entertainment allowance, professional taxes, etc., conveyance allowance and lastly amount necessarily expended by the assessee. But, there is a change from the assessment year 1975-76 regarding deductions to be allowed under Section 16 of the Income-tax Act. Section 16 has undergone a vital change, with effect from 1-4-1975, by the Finance Act, 1974 (20 of 1974). Clause (z) by substituting a new clause and Clauses (iii), (iv) and (v) have been omitted. Under new Clause (i), only a standard deduction has been provided for. This shows that there was some scope up to assessment year 1974-75 to allow certain deductions even from salary, but from the assessment year 1975-76 onwards only deduction to be allowed under Section 16(1) is the standard deduction and no more. In other words, the standard deduction has replaced the existing provisions relating to separate deductions in respect of expenditure on books, taxes on profession, expenditure on travelling and expenditure incurred in the performance of duties. There is also a major change from 1-4-1989. As a result of this amendment deductions under Section 10(14) can be allowed only if the same is notified by the Government of India in its Official Gazette. The present appeals before us are for the assessment year 1989-90 onwards. There is no notification by the Central Government regarding deduction to be allowed under Section 10(14) in respect of incentive bonus. So far and before 1-4-1989 amendment to Section 10(14), the different Benches of ITAT were allowing 40% as deduction from incentive bonus following the Special Bench decision in the case of P. Dayakar (supra) for the assessment years 1981-82 and 1982-83. But as a result of the amendment to Section 10(14), w.e.f. 1-4-1989, no deduction can be allowed under Section 10(14) unless the Central Government notified to that effect. To our knowledge no such notification has been issued by the Government so far. That means no deduction under Section 10(14) can be allowed without notification. Therefore, the action of the Assessing Officer in making prima facie adjustments under Section 143(1)(a) for the years under appeal are in accordance with law and cannot be said that the mistake is not apparent from record. There can also be no debate as the action of the Assessing Officer is in accordance with law and as per binding decisions of the jurisdictional High Court in the case of K.A. Choudary (supra) and B. Chinnaiah (supra). In this connection, it may be mentioned that K.A. Choudury 's case was valid and law of the land from the day the judgment was delivered on 10-12-1987 and there was no contrary decision by any other High Court. It may be mentioned that only Orissa High Court has expressed contrary view 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 salary and yet directing the Assessing Officer to allow deduction of expenses as is being done by various Benches of the Tribunal. But, in the subsequent decisions, Orissa High Court in the case of CIT v. Govind Chandra Pani [1995] 213 ITR 783, has categorically held that the incentive bonus received by the Development Officer of LIC is part of salary within the ambit of Section 17 and, therefore, had to be computed under Section 16 and categorically held that deduction mentioned in Section 16 only can be allowed and consequently the Tribunal was not justified in allowing deduction @ 40% on account of expenses.
11. So far different ITAT Benches were allowing 40% as deduction as expenses from incentive bonus as per decisions in the case of Kiranbhai H. Sheelat v. ITO and the case of P. Dayakar (supra), Special Bench. The case of Kiranbhai H. Sheelal no more holds good as the 3rd Member of the ITAT Bench, Ahmedabad itself has taken contrary view in the case of ITO v. P.M. Suthar [1995] 214 ITR 12 (Ahd.). Similarly, Special Bench in the case of P. Dayakar (supra) has held that 40% should be allowed as deduction under Section 10(14) of Income-tax Act. It was also held in the same case that incentive bonus is part of salary. Those were the cases for the assessment years 1981 -82 and 1982-83. But, the present appeals are for the assessment years 1989-90 and onwards. Therefore, unless there is notification by the Central Government, no deduction can be allowed after the amendment to Section 10(14), w.e.f. 1-4-1989 and in fact there is no notification on Section 10(14) on incentive bonus.
12. In our view, the judgment of Andhra Pradesh High Court in the case of K.A. Choudury is not distinguishable and has to be preferred and applied in the absence of any contrary decision by any other High Court as the facts and issues in the said cases and cases before us for consideration are identical. The decision of the K.A. Choudury's case has binding effect within the State of Andhra Pradesh as the Andhra Pradesh High Court exercises superintendence and control over us under Article 227 of the Constitution of India. The IT Tribunal working within its jurisdiction are bound to follow the said decision.
13. Since the original judgment of the Andhra Pradesh High Court in the case of K.A. Choudary (supra) and subsequent decision of Andhra Pradesh High Court also in case of B. Chinnaiah (supra) and Orissa High Court's decision in the case of Govind Chandra Pani (supra), axe the only judgments holding that incentive bonus is part of salary and no deduction of any expenditure is allowed for earning the same except those mentioned in Section 16 of the Income-tax Act. These judgments have to be followed and applied in these appeals in preference to any decision(s) of any Bench of this Tribunal as the facts and circumstances are identical. In view of the Bombay High Court decision in the case of CIT v. Smt. Godavari Devi Saraf [1978] 113 ITR 589, the decision of the High Court has to prevail in preference to any ITAT's decision. If this principle is not followed, then there will be judicial anarchy. On the issue in question there is already a decision by the,Special Bench in the case of P. Dayakarbut as a result of amendment to Section 10(14) w.e.f. 1-4-1989, the said finding does not hold good. There are two decisions of the Andhra Pradesh High Court and one decision of the Orissa High Court directly on the issue and there is no contrary decision by any other High Court. Therefore, in these circumstances it will be wrong to say that the matter is debatable. There is no dispute that the ITAT Benches have given conflicting decisions and the outcome of the same was in the form of Special Bench in the case of P. Dayakar which does not hold good because of amendment to Section 10(74). The High Court's decisions on the issue are in favour of revenue as stated in foregoing partis. Therefore, there cannot be any debate in respect of the decisions in the cases of K.A. Choudary (supra), B. Chinnaiah (supra) and Govind Chandr Pani (supra). Therefore, prima facie adjustments under Section 143(1)(a) which were made by disallowing the claim of 40% as deduction from incentive bonus is in accordance with law and as per two A.P. High Court decisions and as per amendment to Section 10(14) and in the absence of any notification they are in accordance with law and there cannot be any debate on the same. As regards deductions which were earlier allowed and subsequently rectified under Section 154 by the Assessing Officer, we hold that the same is also as per law as mentioned above and hence there cannot be any debate. This is on the well-settled premise by now that mistake of fact as well as law can be rectified if they are apparent. In the instant cases, the mistakes of law are apparent. Therefore, we hold that prima facie adjustments, orders under Section 143(3) and order under Section 154 are in order. The case of C.V. Rarnana Rao (supra), the Bench has also not considered the amendment to Section 10(14) w.e.f. 1-4-1989.
14. Calcutta High Court in the case of Modern Fibotex India Ltd. v. Dy. CIT [1995] 212 ITR 496, has held that prima facie adjustments under Section 143(1)(a), can be made not only to the mistakes which are obvious, but also to that which are deducible from the return as filed. Prima facie adjustments can also be made if the same are in accordance with the law prevailing on the date when the return was filed.
15. In the case of Khalau Junkar Ltd. v. K.S. Pathania [1992] 196 ITR 55, Division Bench of the Bombay High Court has held at page 71 :-
This is because the scope of the powers to make prima facie adjustments under Section 143(1)(a) is somewhat coterminous with the power to rectify a mistake apparent from the record under Section 154. Therefore, the Board itself has viewed the power to make adjustments as coterminous with the power to rectify mistakes apparent from the record under Section 154.
We are not here concerned with a case where, under any specific Section of the Income-tax Act, a certain deduction or allowance cannot be granted unless certain specified documents are annexed to the return. In such a case, it may be possible to say that, in the absence of such a document, the deduction cannot be granted because the Section of the Income-tax Act itself says so. We, however, have not examined this aspect of the matter as it does not arise in the cases which are before us. But, in any event, in the absence of any specific provision in the Income-tax Act which disallows a deduction because a specific document specified in that Section is not annexed to the return, the Income-tax Officer cannot, under Clause (iii) of the proviso to Section 143(1)(a) disallow a claim or a deduction because, in his view, adequate evidence in support of such a claim or deduction is not before him. He can disallow a claim for deduction only if he is satisfied, on the basis of the material which is before him, that the assessee is not entitled to such a deduction.
The use of the phrases 'prima facie admissible' in Clause (ii) to the proviso and 'prima facie inadmissible' in Clause (iii) to the proviso also lend support to this interpretation. In its literal sense, "prima facie means on the face of it. Hence, on the face of the return and the documents and accounts accompanying it, the deduction claimed must be inadmissible. Only then, can it be disallowed under the proviso to Section 143(1)(a). If any further enquiry is necessary, or if the Income-tax Officer feels that further enquiry is necessary, or if the Income-tax Officer feels that further proof is required in connection with the claim for deduction, he will have to issue a notice under Sub-section (2) of Section 143.
16. In the appeals before us the assessees invariably filed the returns for the years under appeal claiming deduction of 40% from incentive bonus towards expenses. This particular claim is a obvious mistake as the claims have been made by claiming obviously incorrect deductions contrary to K.A. Choudary's case (supra), B. Chinnaiah's case (supra) and in the absence of any notification on incentive bonus by the Government. In other words, the claim is prima facie inadmissible. In this connection, it may be stated that the incentive bonus which is received by the Development Officer, who is an employee of the LIC is nothing but remuneration, or recompense for the services rendered by the employee but is determined at a fixed percentage of the turnover achieved by him and, therefore, it partakes of the character of salary within the ambit of Section 17 of the Act. In K.A. Choudary's case, (supra), Andhra Pradesh High Court by a judgment dated 10-12-1987, has held that the incentive bonus is part of salary and the assessee is not entitled to any other deduction except standard deduction as mentioned in Section 16 of the Act. Special Bench decision dated 23-3-1989 in the case of P. Dayakar (supra) for the assessment years 1981-82 and 1982-83 has also held that the incentive bonus is part of salary but considered the K.A. Choudary's case (supra) and held that the deduction @ 40% is to be allowed under Section 10(14) of the Act in respect of incentive bonus. In this connection, it may be stated that Section 10(14) has been amended w.e.f. 1-4-1989. This amended provision is applicable for the assessment year 1989-90 onwards which stipulates that no deductions under Section 10(14) should be allowed unless Central Government notifies to that effect. That means this is the law on incentive bonus so far there is no notification to allow deduction on incentive bonus. In the later decision of Andhra Pradesh High Court in the case of B. Chinnaiah (supra) has followed and affirmed the findings in K.A. Choudary's case (supra). Orissa High Court has also held in the case of Govind Chandra Pani (supra) that the incentive bonus is part of salary and assessee is entitled for no other deduction except standard deduction. There is no contrary decisions by any other High Courts on the issue. In view of these facts, the claim is prima facie inadmissible, because the claim is neither in accordance with the Income-tax Act, nor as per the decisions of the jurisdictional High Court. The claim is also not in accordance with the law as prevailing on 1-4-1989, as mentioned above. Therefore, the Assessing Officers' action in making prima facie adjustments by disallowing the claim of 40% as expenditure is in order. Similarly, the action of the Assessing Officer to rectify under Section 154, the obvious mistake by withdrawing the deduction which were wrongly allowed initially is also in order. The obvious mistakes of law and fact can be rectified.
17. Before parting with the subject, we may mention that orders passed by the Assessing Officer under Sections 143(1)(a) and 154 are in accordance with law. Therefore, there cannot be any debate on the issue. But again we may state that the case of K.A. Choudary (supra) was rendered as early as 1987 and still holds good and clearly shows that the returns for the years under appeal were filed much after which are now before us. Similarly, subsequent to the filing of the return by the present assessee against Andhra Pradesh High Court has rendered judgment on the issue following the judgment of K.A. Choudary (supra). The Orissa High Court has also given similar finding in the case of Govind Chandra Pani (supra). There is also Supreme Court's decision on the issue in the case of Gestetner Duplicators P. Ltd. (supra). There is no doubt that there are conflicting decisions by the different Benches of the Tribunal. But, when the Supreme Court and High Courts' decisions are available on the issue and in the absence of contrary decision by any other High Court, the findings of the High Courts and Supreme Court have to be followed and there cannot be any debate between the findings of the High Court vis-a-vis Tribunal. Debate can be there among the equals and not with unequals.
18. In the case of Kiranbhai H. Sheelat (supra), the Ahmedabad Bench has also referred to the case of K.A. Choudary (supra) and held that the assessee is entitled for the deduction @ 40% from incentive bonus. It has already been discussed in foregoing paras that no deduction can be allowed in the face of binding nature of jurisdictional High Court's decision in the case of K.A. Choudary (supra) and in the absence of notification by the Government under Section 10(14). As already stated that Special Bench in the case of P. Dayakarhad held that 40% deduction should be allowed under Section 10(14) but after the amendment to Section 10(14), this decision does not hold good. It has already been stated that for the assessment year 1975-76 and onwards salaried employee is entitled for standard deductions only and no more. Therefore, this decision also does not hold good for the years under appeal. It may again be mentioned that the case of Badridas Daga (supra) and Poona Electric Supply Co. Ltd.'s case (supra), were rendered under the head 'Business' and not under the head 'Salaries'. So they are not applicable to the facts of the present cases.
19. Assuming but not admitting that there is a mistake yet according to us the same can be rectified and authorities are justified in passing orders under Sections 143(1)(a) and 154. The law on the issue is clear. As stated earlier the salaried employee for the years under appeal is entitled for deduction of standard deduction only. This position of the law has been upheld by the Andhra Pradesh High Court in the case of K.A. Choudary (supra). Again in a subsequent decision on the same issue, Andhra Pradesh High Court followed K.A. Choudary's case (supra), in the case of B. Chinnaiah (supra) and upheld the revenue's stand. Similarly, Orissa High Court has also upheld the revenue's stand. There is no contrary decision by any other High Court on that issue. That means the law as per Income-tax Act and as upheld by the Courts as mentioned above is the law.
Therefore, the actions of the Assessing Officer which are in. conformity with law cannot be said to be not in order.
20. The recent Andhra Pradesh High Court's decision in the case of B. V.K. Seshavataram v. CIT [1994] 210 ITR 633, held that a subsequent decision can validly form the basis for rectifying an order of assessment under Section 154. The legal position on this issue is no longer in doubt in view of the authoritative pronouncement of the Supreme Court in SAL Narayana Rao, CIT v. Model Mills Nagapur Ltd. [1967] 64 ITR 67. In SAL Narayana Rao's case (supra), the Supreme Court affirmed the view taken by the Bombay High Court that the assessee was entitled for the refund.
Accordingly, the Andhra Pradesh High Court held in B. V.K. Seshavataram's case (supra) that the decision of Supreme Court in SAL Narayana Rao's case (supra) is a clear authority for the proposition that subsequent decision can validly form the basis for rectifying an order under Section 154 of the Act.
21. Again in the case of Bahauram Jawharimal v. CIT [1980] 121 ITR 487 at 490 (All.), it was held that where an order of assessment is based upon a decision of the Tribunal which was the subject-matter of reference to the High Court when the order was made, the any error discovered in the order, on the basis of the subsequent judgment of the High Court on that reference, would be an error apparent from record. The facts of the present appeals on the issue are identical to the decision of the High Court.
22. In the case of Nav Nirman P. Ltd. v. CIT [1988] 174 ITR 574 at 578 (M.P.), it was held that in the circumstances of a given case, a mistake discovered in an order on the basis of subsequent judgment of the High Court may be a mistake apparent on the record and a ground for rectification. The subsequent decision of the High Court should, however, in such cases be directly a point. The present appeals before us are all in fours with this High Court's decision as the point at issue is incentive bonus received by an employee of LIC and allowability of deduction from incentive bonus.
23. In the case of CIT v. K. Venkateswar Rao [1988] 169 ITR 330, Andhra Pradesh High Court has gone into the issue regarding the decision of a High Court not existing on date of rectification and have held that rectification was invalid because debate subsisted on the date of rectification. In the appeals before us the binding decision of Andhra Pradesh High Court in the case of K.A. Choudary (supra) was very much in existence. Therefore, it could safely be concluded that on the basis of this binding decision of the jurisdictional High Court, the orders under Section 154 and 143(1)(a) have to be sustained.
24. As regards the appeals prior to assessment year 1989-90 and onwards, we have already discussed the points at issue in preceding paras of this order, that the salaried employees are entitled for the standard deductions only. Therefore, considering the totality of facts and circumstances stated above, we dismiss the appeals filed by the assessees and allow the appeals of the Revenue.