COMMISSIONER OF INCOME-TAX vs. N K JOSHI

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ITR/152/1994HC GujaratGJHC24020228199428 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court, while referring to its earlier judgment in ITR No. 54 of 1993 and other cognate matters decided on 27.04.1998, held that the Tribunal was right in principle, but modified the extent of deduction. The Court ruled that expenses incurred by the assessee for earning the incentive bonus were deductible only to the extent of reimbursement of expenses actually incurred, and that too, up to a maximum limit of 30% of the incentive bonus earned by the assessee. The question referred to the Court was answered in the affirmative, which means the Tribunal's decision was upheld in principle, but the quantum of deduction was restricted. The reference was disposed of with no order as to costs.

What were the facts?

The Commissioner of Income-tax (Revenue) has referred a question of law to the High Court of Gujarat concerning the assessment years 1983-84, 1984-85, and 1985-96. The assessee, N.K. Joshi, received incentive bonus from his employer, the Life Insurance Corporation of India (LIC). The Income-tax Appellate Tribunal had held that the assessee was entitled to a deduction of 40% of the incentive bonus towards expenses incurred for earning it. The Revenue is challenging this decision. The High Court is considering this reference under Section 256(1) of the Income-tax Act, 1961.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate 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, L.I.C. of India? (Question of law and fact, concerning deduction of expenses against incentive bonus). Assessee's Contention: The assessee argued that expenses incurred for earning the incentive bonus should be deductible. The Tribunal initially allowed 40% deduction. Revenue's Contention: The Revenue challenged the Tribunal's finding that 40% of the incentive bonus was deductible as expenses. The Revenue's position is implicitly that the deduction allowed by the Tribunal was incorrect or excessive.

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 152 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 N K JOSHI --------------------------------------------------------------

Appearance: Mr. Mihir Joshi for MR 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 years 1983-84, 1984-85 and 1985-96 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 Appellate 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, L.I.C. 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 expenses incurred by the assessee for earning the incentive bonus were deductible from incentive bonus received by the assessee from the LIC only to the expenditure of 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.

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