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(b) Regarding incentive bonus That all the Development Officers are full-time employees of the LIC. As per the IT Act, 1961, the only deduction permissible in the case of salaried employee is standard deduction under s. 16 of the Act. That the Development Officers are not required to incur any extra expenditure for earning incentive bonus. The CBDT in Instruction No. 1774, dt. 14th October, 1987, has clarified that in the case of Development Officers, no other deductions except the deduction permissible under s. 16(1) is to be allowed. He further stated that the case of Development Officers are different than the LIC agents. Therefore, any circular for allowing ad hoc deduction in the case of LIC agents would not be applicable in respect of Development Officers. In support of this contention, he relied upon the following deductions :

Arguments of Shri H. S. Shrivastava, Advocate He submitted that the Development Officers have dual capacity, one as salaried employee of the LIC and other as the agent/representative of LIC. The activity and the services rendered by the Development Officers are not comparable with any other employees. The Development Officers have no fixed duty hours and no office work is required to be performed by them. They have only field duty. The Development Officers are required to recruit new agents and on their recommendations, the agents are appointed by LIC. The agents are trained by the Development Officers. The agents work under the direct control and the guidance of Development Officers. The incentive bonus is paid for their professional work. Incentive bonus is worked out on the basis of premium collected on the new insurance policies sold by them through agents. For rendering the proper services, the Development Officers are required to incur lot of expenditure, which are not reimbursed by the LIC. Therefore, the deduction for such expenditure incurred by the Development Officers for earning of incentive bonus should be allowed. He stated that income-tax is chargeable on income and not on gross receipts. If the deduction for the expenditure incurred in earning of incentive bonus is not allowed, it would amount to taxing the gross receipt, which would be violation of the constitution itself. In support of this contention, he relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Kiranbhai H. Shelat/Chiman Bhai S. Patel vs. CIT (1998) 99 Taxman 63 (Guj).

8. The next issue in all these appeals is with regard to the expenditure claimed by various assessees out of incentive bonus received by them. As we have already mentioned that all the assessees are Development Officers of LIC and in addition to salary they have received conveyance allowance, additional conveyance allowance and incentive bonus. It has been vehemently contended by the counsels appeared on behalf of the assessees that the Development Officers have dual capacity, one as the employee of the LIC for which salary is paid to them other as agent of the LIC. In their second capacity, they work for procuring more business for the LIC and they are paid incentive bonus on the basis of business procured by them. Thus, this incentive bonus is not part of the salary received by them from LIC. It is stated by Shri H. S. Shrivastava and Shri Arun Shrivastava, Advocates, that the incentive bonus is profit & gains of the business. Shri Ganesh Purohit, Advocate stated that the incentive bonus is neither income from salary nor profit & gains of business, but it is income from other sources. The learned Departmental Representative contended that it is income from salary and only standard deduction under s. 16 is permissible.
9. We have carefully considered the arguments of both the sides. The Development Officers are full-time employees of the LIC, their duties and obligations, as per instruction from LIC has been given in detail by us at p. 9, para 3 of our order. They are required to develop and increase the business of life insurance. They have to achieve this work through the agents, who are working under them. They are also required to introduce the suitable person for the appointment of agents. They have to motivate and activate the agents, so as to get the business for LIC. They are also required to carry out liaison work in connection with salary saving schemes business. To achieve the objective, they have to visit number of persons at number of places. There is no fixed office hours for them. For performing all these activities, they are certainly required to incur many expenses out of their pocket. Part of such expenses are reimbursed by the LIC. Thus, the case of Development Officers are not comparable with any other employee either in Government service or in private service. While they are whole-time employees of the LIC, at the same time, they have to perform the activities as an independent agents or representatives for LIC. The incentive bonus is not the bonus as in the case of any other employee. In fact, the payment of Bonus Act prohibits the payment of bonus to the Development Officers of LIC. Incentive bonus is not calculated on the basis of salary paid to them, but it is calculated on the basis of business secured by them. Despite these facts, we are unable to accept the submissions of the learned counsels for the assessees that the incentive bonus is to be considered as profit & gains of the business or income from other sources. Shri Gupta, learned counsel for the assessee contended that there is no employer-employee relationship vis-a-vis receipt of incentive bonus is concerned. We are unable to accept this argument also. The Development Officers are whole-time employees of the LIC. They are Class-II Officers. They can earn incentive bonus only while remaining in the service and not otherwise. Thus, the employer-employee relationship between the Development Officers and LIC does exist. Sec. 17 of the IT Act defines the word. "Salary" as under :