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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-III, Rajkot dated 21/11/2013 ( in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s. 144 r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt. 16/12/2011 relevant to the Assessment Year 2005-2006.
The assessee has raised the following grounds of appeal:
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The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 7,678/- in respect of conveyance allowance. The same needs deletion. 2. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 1,14,888/- in respect of Addl. conveyance allowance. The same needs deletion. 3. The Ld. CIT(A) erred in law as well as on facts in not deleting an amount of Rs.82,107/- in respect of difference of gross salary received and asking the Ld. A.O. to verify the same. Though relevant evidences were furnished he erred in not accepting if necessary by making relevant inquiry with LIC. The same needs deletion. 4. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 10,000/- in respect of standard deduction. The same needs deletion. 5. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs.20,184/- in respect of interest on housing loans. The same needs deletion. 6.1. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs.89,346/- in respect of incentive bonus. The same needs deletion. 6.2. The Ld. CIT(A) erred in law as well as on facts in not considering that the incentive bonus was allowed as deduction as expenses following the guidelines issued by the Hon. Gujarat High Court in the case of Kiranbhai H. Shelat 235 ITR 635. The claim needs to be allowed. 6.3. Without prejudice, the claim of the assessee disallowed by the Ld. CIT(A) is allowable as per C.B.D.T’ direction. 6.4 Without prejudice, the claim of the assessee confirmed by the Ld. CIT(A) is allowable as per Hon. Supreme Court decision in the case of Shri N.T. Bhuptani. The disallowance needs deletion. 7. The Ld. CIT(A) erred in law as well as on facts in disallowing an amount of Rs.7,256/- claimed as deduction at U/s.88 rebate. The same needs deletion. 8. The disallowance made in as stated above are as such against legal, statutory as well as factual position needs cancellation. 9. Without prejudice, the assessment proceedings are bad in law deserves annulment. 10. Without prejudice, the assessment made being illegal, void, bad in law and against statutory provisions, needs annulment. 11 Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while framing assessment. The assessment needs annulment. 12. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment.
The appellant craves leave to add/alter/amend and/or substitute any or appeal before the actual hearing takes place.
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The 1st issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 7,678.00 out of the fixed conveyance allowance of Rs. 10,968.00.
Pertinent facts of the case are that the assessee is a development officer working with life insurance Corporation of India. The assessee from the LIC has received fixed conveyance allowance of Rs. 10,968.00 which was claimed as deduction under the provisions of section 10(14) of the Act. However the assessee during the assessment proceedings could not furnish the documents evidencing that he has incurred expenses out of such fixed conveyance allowance. Thus the AO in the absence of documentary evidence treated 30% of fixed conveyance allowance as an expenditure incurred in performing the official duty. Hence the AO disallowed the claim of the assessee for the balance amount of Rs. 7678.00 being 70% of fixed conveyance allowance and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us in the written submission claimed that the authorities below has admitted 30% of the expenses against the conveyance allowance as discussed above which is contrary to the observation that no expense can be allowed unless it is spent wholly and exclusively for the purpose of the business. As such the learned AR claimed that the amount of disallowance has been made by the authorities below on the guesswork which is not based on any tangible materials.
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The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the disallowance of the expenses for Rs. 7,678.00 on account of non-availability of the supporting evidences. The view taken by the AO was subsequently confirmed by the learned CIT-A.
8.1 The learned AR at the time of hearing has not made any representation in the written submission filed before us about the actual expenses incurred by the assessee. As there was no representation from the side of the learned AR for the assessee qua the disallowances made by the authorities below against the fixed conveyance allowance received by the assessee from LIC, we do not find any infirmity in the order of the authorities below. Indeed, the onus lies on the assessee to furnish the details of the expenses incurred by him against the fixed conveyance allowance received from LIC. Hence, in the absence of the documentary evidence, the ground of appeal of the assessee is dismissed.
The 2st issue raised by the assessee is that the learned CIT (A) erred in confirming the addition by the AO for Rs. 1,14,888.00 out of the additional conveyance allowance of Rs. 1,93,125.00.
The assessee from the LIC has received additional conveyance allowance of Rs. 1,93,125.00 which was claimed as deduction under the provisions of section 10(14) of the Act. However the assessee during the assessment proceedings could not furnish the documents evidencing that he has incurred expenses out of such fixed conveyance allowance. Thus the AO in the absence of documentary evidence treated certain expenditure against the fixed conveyance allowance as an
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expenditure incurred in performing the official duty. Hence the AO disallowed the claim of the assessee for the balance amount of Rs. 1,14,888.00 of fixed conveyance allowance and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR initiative submission claimed that the authorities below has admitted part of the expenses against the conveyance allowance as discussed above which is contrary to the observation that no expense can be allowed unless it is spent wholly and exclusively for the purpose of the business. As such the learned AR claimed that the amount of disallowance has been made by the authorities below on the guesswork which is not based on any tangible materials.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the disallowance of the expenses for Rs. 1,14,888.00 on account of non-availability of the supporting evidences. The view taken by the AO was subsequently confirmed by the learned CIT-A.
14.1 The learned AR at the time of hearing has not made any representation in the written submission filed before us about the actual expenses incurred by the assessee. As there was no representation from the side of the learned AR
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for the assessee qua the disallowances made by the authorities below against the additional conveyance allowance received by the assessee from LIC, we do not find any infirmity in the order of the authorities below. Indeed, the onus lies on the assessee to furnish the details of the expenses incurred by him against the additional conveyance allowance received from LIC. Hence, in the absence of the documentary evidence, the ground of appeal of the assessee is dismissed.
The issue raised by the assessee in ground No. 3 is that the learned CIT (A) erred in directing the AO to verify the amount of difference of ₹ 82,107.00 between the gross salary received from LIC and shown by the assessee.
The AO during the assessment proceedings observed that the assessee has received gross salary amounting to ₹ 7,24,050.30 whereas the assessee has shown gross salary of ₹ 6,41,940 (apart of the taxable perquisites of ₹ 9,676.00) leading to a difference of ₹ 82,107 which was added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT (A) claimed that the amount of gross salary is of ₹ 6,51,619.00 as per the form No. 16 issued by the LIC. The assessee in support of his contention also filed a letter issued by the LIC dated 26 April 2013. The learned CIT (A) accordingly directed the AO to verify the letter furnished by the LIC and adopt the correct amount of salary.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
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The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. From the preceding discussion we note that the learned CIT (A) has given the direction to verify the letter issued by the LIC dated 26 April 2013 and adjudicate the same to determine the total income of the assessee. We do not find any infirmity in the direction provided by the learned CIT-A. Accordingly, we uphold the same. Hence the ground of appeal of the assessee is dismissed.
The 4th issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by sustaining the addition of ₹ 10,000 on account of standard deduction.
The AO during the assessment proceedings observed that the assessee is entitled for the standard deduction for ₹ 20,000 as provided under section 16 of the Act whereas the assessee has claimed the same for ₹ 30,000 leading to excess deduction claimed by ₹10,000.00 only. Accordingly the AO restricted the standard deduction at ₹20,000 only.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us submitted to provide the direction to the AO to allow the standard deduction after carrying out the effect of the order of the ITAT.
On the other hand, the learned DR vehemently supported the order of the authorities below.
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We have heard the rival contentions of both the parties and perused the materials available on record. The learned AR at the time of hearing has not made any representation in the written submission filed before us about the entitlement of the assessee for the standard deduction. As there was no representation from the side of the learned AR for the assessee qua the addition made by the authorities below against the standard deduction claimed by him, we do not find any infirmity in the order of the authorities below. Indeed, the onus lies on the assessee to furnish the details in support of his contention. However in the interest of justice and fair play we direct the AO to provide the benefit of the standard deduction after giving effect to this order. Hence, the ground of appeal of the assessee is partly allowed.
The 5th issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowance of Rs. 20,184.00 with respect to the interest on housing loans.
The AO during the assessment proceedings found that the loan taken by the assessee was not utilized for the purpose of the renovation and repair of the house. Therefore he was of the view that the interest expense on such loan is ineligible for deduction under section 24 of the Act. The view of the AO was based on the fact that the assessee has not furnished any documentary evidence about the utilization of such loan. Accordingly the deduction claimed under section 24 of the Act was denied by the AO.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
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The learned AR before us in the written submission claimed that the matter pertains to the very old assessment year and therefore he is unable to produce the documentary evidence. However the learned AR claimed that the loans obtained by the assessee were utilized for the purpose of the renovation and repair of the house.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions and perused the materials available on record. From the preceding discussion we note that the main reason for not allowing the deduction under section 24 of the Act was the non availability of documentary evidence for the utilization of loan. However we note that the assessee has filed the certificate from the societies for utilization of the loan obtained from them i.e. for the renovation and repair of the house. These certificates are available on record and no infirmity was pointed out by the authorities below with respect to such certificates. Accordingly, we are of the view that the assessee is entitled for deduction under section 24 of the Act with respect to the interest paid on the loans utilized for the purpose of the renovation and repair of the house. Hence the ground of appeal of the assessee is allowed.
The issue raised by the assessee in ground No. 6 is that the learned CIT (A) erred in confirming the disallowance of ₹ 89,346.00 for the expenditures incurred against the incentive bonus.
The assessee in the year under consideration has received the incentive bonus of Rs. 2,97,821.00 from the LIC of India. The assessee against such incentive bonus has claimed deduction of ₹ 89,346.00 being 30 percent of rupees 2,97,821.00. As per the assessee, he has incurred the expenses as development officer of LIC to recruit the LIC agents, development of the agents, their
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arrangement, team-work and field work expenses. However, the assessee during the assessment proceedings admitted the fact that he does not maintain any documentary evidence in support of such expenses.
33.1 However, the AO was of the view that the impugned incentive bonus is part of the salary as provided under section 17 of the Act. The assessee received such bonus for the quantity, quality or volume of the work done by him. As such the amount of incentive bonus does not represent any allowance or reimbursement of expenses provided by the employer. Accordingly, he disregarded the contention of the assessee and added the amount of ₹ 89,346 to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The ld. AR before us filed the written submissions which are placed on record.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the disallowance of the expenses for Rs. 89,346.00 claimed against the incentive bonus received by the assessee from the employer. The AO was of the view that the impugned amount of incentive bonus represents the salary income as provided under section 17 of the Act. Therefore, no deduction against such incentive bonus
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can be provided for the expenditure claimed to be incurred against it. The view taken by the AO was subsequently confirmed by the learners ITA.
37.1 From the preceding discussion, we also note that there is no provision under the Act authorizing the assessee to claim the deduction against the incentive bonus which is part of the salary as provided under section 17 of the Act. Similarly the case laws referred by the assessee in the ground of appeal in the case of Shri Kiranbhai H. Shelat 235 ITR 635 of Hon’ble Gujarat High Court has been overruled by the Hon’ble Apex court in the case of T.K. Ginarajan VS CIT reported in 36 taxmann.com 583 wherein it was held as under: “8. That apart, what is excluded under Section 10(14) as it stood prior to 01.04.1989 is the expenses incurred in the performance of the duty. It is for the employer to certify the actual expenses incurred in the performance of duty and in which case, as clarified by the CBDT, to that extent, the same shall not be shown as part of salary. On facts, as clearly noted in the Judgment of the High Court of Kerala, there is no claim by the employee either for reimbursement or exclusion of the actual expenditure incurred in performance of the duty. These two distinctions unfortunately missed the notice of the High Court of Gujarat. The Court in fact was swayed by the letter written by the LIC of India to the CBDT for clarification that, to the extent of 40% of the incentive bonus could be exempted as expenditure incurred for the development of business which made them eligible for the incentive bonus. The High Court of Gujarat failed to take note of the reply by the CBDT that it was for the LIC of India to reimburse the actual expenditure involved in the performance of the duty by the Development Officers and to that extent the same was not to be shown as salary. 9. Compartmentalization of income under various heads and computation of the taxable portion strictly in accordance with the formula of deductions, rebates and allowances are to be done only as per the scheme provided under the Act. As held by this Court in Karamchari Union v. Union of India [2000] 3 SCC 335, the Income-Tax Act, 1961 is a self contained code and taxability of the receipt of any amount or allowance has to be determined on the basis of the meaning given to the words or phrases given in the Act. Thus, we do not agree with the view taken by the High Court of Gujarat in Kiranbhai's case (supra). The same does not lay down the correct principle of law. 10. Though learned counsel for the appellant made a persuasive attempt to place reliance on the decision of this Court in State of West Bengal v. Texmaco Ltd. [1999] 1 SCC 198, we are afraid the same is of no assistance to the appellant. The incentive bonus referred to in the said decision is the special scheme of the
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company. The question considered in the said decision was as to whether the said bonus would form part of salary as defined under the West Bengal State Tax on Professions, Trades, Callings and Employments Act, 1979. This Court held, placing reliance on the definition of 'salary' in the said Act that only in case there was remuneration on a regular basis, the same was exigible to tax under the said Act. On facts, it was found that there was no regular payment of incentive bonus. That is not the factual or legal position in the case of the appellant under the Act and, therefore, the said decision is not relevant at all for the purpose of this case. 11. The appellant being a salaried person, the incentive bonus received by him prior to 01.04.1989 has to be treated as salary and he is entitled only for the permissible deductions under Section 16 of the Act. The expenses incurred in the performance of duty as Development Officer for generating the business so as to make him eligible for the incentive bonus is not a permissible deduction and, hence, the same is exigible to tax. There is no merit in the appeal. The appeal is accordingly dismissed. No costs.”
In view of the above, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.
The issue raised by the assessee in ground No. 7 is that the learned CIT (A) erred in confirming the order of the AO by disallowing the rebate of ₹7,256.00 claimed under section 88 of the Act.
The AO during the assessment proceedings found that the total income of the assessee before allowing the deduction under chapter VI-A of the Act exceeds ₹5 lakhs. Accordingly he was of the view that the assessee was not entitled for the deduction under section 88 of the Act for ₹ 7 256.00 only. Accordingly the AO disallowed the same and added to the total income of the assessee.
39.1 However, the assessee against such disallowance has not preferred any appeal before the learned CIT (A). But he has filed the appeal before the ITAT which is not in consonance to the provisions of law. As such, the assessee was to maintain the hierarchy in filing the appeal in case he’s aggrieved by the order of the AO. Moreover, the learned AR for the assessee before us has not made any representation regarding the disallowance of the debate claimed under section 88
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of the Act. Thus, in the absence of any assistance from the side of the assessee/his authorized representative, we do not find any infirmity in the order of the AO. Hence the ground of appeal of the assessee is dismissed.
The issues raised by the assessee in ground No. 8 to 12 are general in nature which requires no separate adjudication and therefore we dismiss the same.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 10/12/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 10/12/2019 manish