COMMISSIONER OF INCOME TAX vs. KUMUDBHAI H SHETH

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ITR/252/1994HC GujaratGJHC24020328199428 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
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What did the High Court hold?

The High Court, in its judgment dated 28.04.1998, referred to its earlier decision in ITR No. 54 of 1993 and other cognate matters. The Court held that the Tribunal was correct in allowing a deduction for expenses incurred to earn the incentive bonus. However, the deduction is limited to the extent of reimbursement of expenses actually incurred, capped at a maximum of 30% of the incentive bonus earned by the assessee. The question referred to the Court is answered in the affirmative, meaning the assessee is entitled to the deduction as modified by the Court, and against the revenue. The reference stands disposed of.

What were the facts?

This case concerns Income Tax Reference No. 252 of 1994, filed by the Commissioner of Income Tax against Kumudbhai H. Sheth for the assessment year 1988-89. The Income-tax Appellate Tribunal (ITAT) had referred a question of law to the High Court. The assessee, an employee of LIC of India, received an incentive bonus. The dispute revolves around the deductibility of expenses incurred by the assessee for earning this incentive bonus. The ITAT had ruled that the assessee was entitled to a deduction of 40% of the incentive bonus towards expenses. The revenue challenged this finding.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and on facts in holding that the assessee is entitled to a deduction of 40% of the incentive bonus towards expenses for earning the incentive bonus, when the assessee received the incentive bonus from its employer, namely, LIC of India? The assessee contended that expenses incurred for earning the incentive bonus should be deductible. The revenue challenged the Tribunal's finding that 40% of the incentive bonus was a reasonable deduction for expenses. The judgment does not explicitly detail the arguments of the assessee or the revenue beyond what is implied by the question referred and the court's decision. However, the core issue is the extent to which expenses incurred to earn the incentive bonus are allowable as a deduction.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 252 of 1994

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus KUMUDBHAI H SHETH -------------------------------------------------------------- Appearance: Mr.Mihir Joshi for MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 28/04/98

ORAL JUDGEMENT

(Per R.K.Abichandani,J)

The Income-tax Appellate Tribunal has referred the following question which pertains to the assessment year 1988-89 for the opinion of this Court

under section 256 (1) of the Income-tax Act, 1961. "Whether on the facts and in the circumstances of the case, the Tribunal is right in law and on facts in holding that the assessee is entitled to deduction of 40% of the incentive bonus towards expenses for earning the incentive bonus, when the assessee received the incentive bonus from its employer,namely, LIC of India ?"

2.

Identical question came up for our consideration in ITR No. 54 of 1993 and other cognate matters with which the entire group was argued and for the reasons given by us in our judgment dated 27.4.1998, we hold that the Tribunal was right in holding that the the assessee is entitled to deduction of the incentive bonus towards expenses for earning incentive bonus received from LIC by the assessee, but only to the extent of the reimbursement of expenses actually incurred upto the maximum limit of 30% of the incentive bonus earned by the assessee. The question referred to us is accordingly answered in the affirmative against the revenue and in favour of the assessee. The Reference stands disposed of with no order as to costs.

**** ***darji

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