High Court Of Rajasthan : Jaipur Bench
H.M. Pareek vs. CIT
Section 15, 16, 17(1)(iv)
Y.R. Meena & Shashi Kant Sharma, JJ.
IT Ref. No. 18 of 1995
5th July, 2002
Counsel Appeared
None, for the Assessee : Anuroop Singhi, for the Revenue
JUDGMENT
BY THE COURT :
On an application filed under s. 256(1) of the IT Act, 1961, the Tribunal has referred the following question for our opinion :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no deduction is allowable from the incentive bonus received by the Development Officers of the Life Insurance Corporation of India as incentive bonus is a part of salary ?”
2. The assessee is a salaried employee of the Life Insurance Corporation of India (hereinafter to be referred to as “LIC” for short). In addition to the salary from LIC, the assessee received “Incentive bonus” of Rs. 1,15,106 from the LIC. The assessee claimed deduction @ 40 per cent on the amount of this incentive bonus as estimated expenses for earning such incentive bonus. The ITO disallowed the claim of the assessee. In appeal before the Dy. CIT(A), the Dy. CIT(A) confirmed the view taken by ITO. In appeal before the Tribunal, Tribunal has also taken the view that when the Development Officer of LIC is a salaried employee, whatever the incentive bonus he received, that is covered by the definition of “salary” and hence entitled only to those deductions, which are admissible for computation of income from salary.
3. None appeared for the assessee. Heard learned counsel for the Revenue Mr. Singhi. Learned counsel for the Revenue submits that when the Development Officer is full-time salaried employee and his income has been assessed under the head “Salary”, whatever he receives including the income in the form of incentive bonus, that forms part of the salary. He further submits that once that forms part of the salary, therefore, there is no question of any deduction out of that amount i.e., incentive bonus and the assessee is only entitled for the standard deduction, which is made available for the employees. In support of his contentions, he has placed reliance on the decision of Bombay High Court in the case of CIT vs. Gopal Krishna Suri (2000) 164 CTR (Bom) 266 : (2001) 248 ITR 819 (Bom). At p. 826, Bombay High Court took the following view : “We have discussed the scheme of payment of incentive bonus hereinabove which shows that the incentive bonus forms part of salary. The said payment is includible in the computation of income under the head “Salary”. Once a receipt forms part of income under the head “Salary”, then s. 16 squarely applies. Under s. 16, a standard deduction is prescribed. We, therefore, do not see any reason for coming to the conclusion that net incentive bonus alone was includible in the computation of income under the head “Salary”. The word “Salary” under s. 17(1)(iv) is very wide. The word “Salary” under s. 17(1) is an inclusive definition. It includes any fees, commission, perquisites or profits in lieu of salary or profits in addition to any salary or wages. Under the circumstances, we do not find any merit in the contention advanced on behalf of the assessee that only net incentive bonus was includible in the computation of income under the head “Salary”. There is no provision to that effect in s. 16 of the IT Act. Once we hold that the incentive bonus is includible in the computation of income under the head “Salary” and once we hold that the word “Salary” includes fees, commissions, perquisites or profits in lieu of or in addition to salary then the intent of the legislature is very clear, viz., to tax the entire incentive bonus as income under the head “Salary.”
4. We agree with the Bombay High Court that once the incentive bonus forms part of the salary, there is no question of any deduction out of that bonus amount, the Tribunal has rightly held that assessee is not entitled for 40 per cent deduction out of the incentive bonus.
In the result, we answer the question in affirmative i.e., in favour of Revenue and against the assessee. Reference so made stands disposed of accordingly.
[Citation : 257 ITR 790]
