COMMISSIONER OF INCOME-TAX vs. CHANDRAKANT M. SHAH

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ITR/201/1993HC GujaratGJHC24021252199327 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 27.04.1998, addressed identical questions in other related matters. The Court held that the Tribunal was correct in its finding that the assessee was entitled to a deduction for expenses incurred out of the incentive bonus received from LIC. However, the deduction was 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 Court answered the referred questions in the affirmative, in favour of the assessee and against the Revenue. The specific finding on whether the incentive bonus constituted 'salary' or 'income from other sources' is implicitly upheld by the allowance of deduction from it, and the deduction itself is allowed with a specific limit.

What were the facts?

The Income Tax Appellate Tribunal (ITAT) referred two questions of law to the High Court of Gujarat for assessment years 1985-86 and 1986-87. The assessee, an employee of the Life Insurance Corporation of India (LIC), received incentive bonus commission from LIC. The dispute centered on whether this incentive bonus constituted 'salary' or income from other sources, and whether the assessee was entitled to a deduction for expenses incurred in earning this income. The ITAT had previously ruled on these matters, leading to the present reference.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the incentive bonus commission received by the assessee, an employee of the Life Insurance Corporation of India, from LIC did not constitute part of 'salary' and was assessable as income from other sources. The assessee contended that the incentive bonus was not part of salary. The revenue's contention is not recorded. 2. Whether, on the facts and in the circumstances of the case and in law, the ITAT was correct in allowing a deduction at 40% from the said incentive bonus commission as expenditure for earning the said income, even though the assessee had not led evidence to prove that expenditure to that extent had been incurred. The assessee argued for the deduction. The revenue's contention is not recorded.

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 201 of 1993

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 CHANDRAKANT M. SHAH -------------------------------------------------------------- Appearance: MR RP BHATT for Petitioner NOTICE SERVED for Respondent No. 1

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

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 27/04/98

ORAL JUDGEMENT

The Income Tax Appellate Tribunal has referred the following question which pertains for the assessment years 1985-86 and 1986-87, for the opinion of this Court under Section 256(1) of the Income Tax Act.:

1.

"Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in holding that the incentive bonus commission received by the assessee, who an employee of Life Insurance Corporation of India, form the L.I.C. did not constitute part of `salary' and that it was assessable as income from other source. 2. "Whether on facts and in circumstance of the case of the assessee and in law the I.T.A.T. was correct in allowing deduction at 40% from said incentive bonus commission, as expenditure for earning the said income, even though the assessee had not led the evidence to prove that in fact expenditure to that extent had been incurred?"

Identical question came up for our consideration in ITR No.54/93 and other cognate matters with which the entire group was argued and for the reasons given by us in our judgement dated 27.4.1998, we hold that the Tribunal was right in holding that the assessee was entitled for deduction of the incentive bonus as expenses out of the amount of incentive bonus received by the assessee - Development Officer from the Life Insurance Corporation, but only to the extent of reimbursement of expenses actually incurred upto the maximum limit of 30 per cent of the incentive bonus earned by the assessee. The questions referred to us is accordingly answered in the affirmative against the Revenue and in favour of the assessee.

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