M.Y.EQBAL, J. - (1.) SINCE in both the cases common question of law and facts are involved, they have been heard together and are being disposed of by this common order.
(2.) THE main question of law which has been referred by the Income Tax Appellate Tribunal, Patna Bench, Patna in the instant reference under Section 256(1) of the Income Tax Act (in short the Act) is 'Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal, Patna was justified in holding that Incentive Bonus earned by the assessee, a Development Officer of Life Insurance Corporation of India (in short LIC) is salary as defined under Section 17 of the Act keeping in view the terms, conditions, rules and regulations of the service, and is not professional income' ? The Assessee, a Development Officer of LIC of India filed his return of income, which was taken under scrutiny after approval by the Deputy Commissioner, Ranchi. Thereafter, an order under Section 143(3) of the Act was passed on 26.6.89 determining the total income of the assessee at Rs. 50,160/ -. Subsequently, an audit inspection was made on the point of loss of share dealings, depreciation of car and deduction allowance in the matter of Incentive Bonus given to the Development Officer. The matter was taken up by the Assessing Officer under Section 154 of the Act and later on approval was taken from the Deputy Commissioner for reopening of the case under Section 147 of the Act and notice under Section 148 of the Act was issued and the reassessment proceeding under Section 143(3) and 147 of the Act was completed by the A.O. on 16.3.94. In the reassessment proceeding the A.O. considered the Incentive Bonus as part of salary and, accordingly, disallowed the claim of expenditure.
(3.) BEING aggrieved by the reassessment under Section 143(3) and 147 of the Act the Assessee went in appeal before the Commissioner, of Income Tax (Appeals) and by order dated 19.7.95 passed in I.T. Appeal No. 694/Ran/OTH/ 1994 -05, the Commissioner set aside the order of disallowance of claim of expenditure out of Incentive Bonus.;