COMMISSIONER OF INCOME TAX Vs. P.K. BHARDWAJ

JUDGEMENT

(1.) AT the instance of the Revenue, the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short "the Tribunal"), has referred the following question of law for the opinion of this Court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the view taken by the Dy. CIT(A) to hold that the question of allowing expenses against the amount of incentive bonus received by a Development Officer of the LIC of India was a highly debatable issue and outside the purview of s. 154 -

(2.) THE assessee, an individual, is a Development Officer with the Life Insurance Corporation of India. He filed his IT return for the asst. yr. 1992 -93 declaring total income of Rs. 65,479. The case of the assessee was processed under s. 143(1)(a) of the Act and his income was computed at Rs. 71,970. The assessee filed an application for rectification under s. 154 with a prayer that additions/disallowance, if any, be deleted. The AO also issued notice under s. 154 of the Act for adding income received by the assessee on account of incentive bonus. The assessee raised objections to the proposed addition on the ground that it is a debatable issue as to whether incentive bonus is income or not and, therefore, the same cannot be added under s. 154 of the Act to his total income. The AO, however, did not agree with the contention of the assessee and made the addition. The appeal filed by the assessee was allowed by the Deputy Commissioner of Income -tax (Appeals) [for short, "the Dy. CIT(A)"]. He directed the AO to delete the disallowance of 40 per cent of the amount of incentive bonus received by the appellant.

(3.) SHRI Rajesh Bindal invited our attention to the judgment of this Court in B.M. Parmar, Development Officer, LIC of India vs. CIT (1998) 150 CTR (P&H) 548 : (1999) 235 ITR 679 (P&H) wherein it has been held that incentive bonus is assessable under the head "Salaries" and not under the head "Profits and gains of business or profession" and argued that the additions made by the AO in the income of the assessee did not suffer from any legal infirmity warranting interference by the appellate authority. He pointed out that in terms of the aforementioned judgment, deduction under s. 16(i) of the Act is admissible under the head "Salaries" and no separate deduction on account of expenditure is permissible and, therefore, 40 per cent cannot be allowed as expenses from incentive bonus and the issue was no longer debatable so far as the authorities under the jurisdictional High Court are concerned. Shri Bindal then argued that the AO did not commit any error by invoking the provisions of s. 154 of the Act for the purpose of making additions in the income of the assessee. In support of this argument, he placed reliance on CIT vs. Hukam Chand Jain (2003) 185 CTR (Raj) 537 : (2003) 262 ITR 373 (Raj).