COMMISSIONER OF INCOME TAX vs. M J DOSHI

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ITR/108/1994HC GujaratGJHC24020186199428 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was right in its decision. The Court reasoned that expenses incurred by the assessee in earning the incentive bonus were deductible, but only to the extent of reimbursement of actual expenses incurred. This deduction was capped at a maximum of 30% of the incentive bonus earned. The question referred to the Court was answered in the affirmative, favoring the assessee and against the revenue. The reference was disposed of without costs.

What were the facts?

The Income Tax Appellate Tribunal (ITAT) referred a question to the High Court of Gujarat concerning the assessment year 1988-89. The dispute involved the deductibility of expenses incurred by the assessee, M.J. Doshi, in earning an incentive bonus from LIC. The Income Tax Officer (ITO) had disallowed 40% of this incentive bonus, considering it part of the salary. The ITAT directed the ITO to allow a deduction of 40% of the incentive bonus as expenses incurred for earning it. The revenue challenged this direction.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the ITO to allow deduction of 40% of the incentive bonus as expenses incurred for earning the incentive bonus, which was disallowed by the ITO on the ground that incentive bonus was part of salary? Assessee's Contention: The judgment does not record specific arguments made by the assessee. Revenue's Contention: The revenue contended that the incentive bonus was part of the salary and therefore, no deduction should be allowed for expenses incurred in earning it. The revenue challenged the ITAT's direction to allow a 40% 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 108 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 M J DOSHI -------------------------------------------------------------- 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 the Appellate Tribunal is right in law and on facts in directing the ITO to allow deduction of 40% ofthe incentive bonus as expenses incurred for earning the incentive bonus which was disallowed bythe ITO on the ground that incentive bonus was part of salary ?"

2.

Identical question came up for our consideration in ITR No. 54 of 1993 and other cognate matter 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 in earning the incentive bonus were liable to be deducted from the incentive bonus received by the assessee from the LIC only to the extent 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.

**** ***darji

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