SH. KANWARJEET SINGH MONGA,NEW DELHI vs. ITO, NEW DELHI

The only issue raised in this appeal is against the confirmation of disallowance of Rs.2,61,854/- out of incentive bonus.

Briefly stated, the facts of the case are that the assessee is a Development Officer with LIC of India. A sum of Rs.7,93,498/- was given as incentive bonus to the assessee against which deduction of Rs.2,61,854/- was claimed by relying on the judgment of the Hon'ble Gujarat High Court in the case of Chimanbhai H. Patel (1998) 99 Taxman 63 (Guj). The Assessing Officer refused to allow such deduction and disallowed a sum of Rs.2,61,854/-. The ld. CIT(A), relying on judgment of the Hon'ble Supreme Court in T.K. Ginarajan vs. CIT (2013) 9 SCC 270, upheld the disallowance. The assessee is aggrieved against the sustenance of disallowance.

I have heard the rival submissions and perused the relevant material on record. The only issue is about the admissibility or otherwise of deduction for expenses amounting to Rs.2,61,854/- against the incentive bonus received by the assessee. It is seen that the ld. CIT(A) has relied on the case of T.K. Ginarajan (supra) for denying the deduction. It is true that the Hon'ble Supreme Court did not allow deduction by holding that the incentive bonus received by a Government officer of LIC of India is chargeable to tax as salary and no deduction other than that permissible u/s 16 can be allowed. However, it is relevant to note that the Hon'ble Supreme Court in the same judgment has noticed vide para 3 as under : -

Thus, it is apparent that the judgment in the case of T.K. Ginarajan (supra) is applicable to the period prior to 01.04.1989. In the same breath, the reliance of the ld. DR on the case of CIT vs. Ganesh Chand Saxena (2006) 280 ITR 372 (All) is again misconceived as that case having assessment years 1980-81 to 1982-83 also pertains to the period prior to 01.04.1989

The Assessing Officer in the instant case has referred to the CBDT letter No.149/25/96/tpl dated 13.03.1997 addressed to the Chairman of LIC of India admitting that `such portion of the incentive bonus which is actually spent by the Development Officer for duty of office can still be exempted from tax if the LIC makes the payment against which expenses incurred by the Development Officer by way of reimbursement of expenses.’ When I turn to the facts of the instant case, it is found that there is a certificate from Branch Manager, LIC of India, copy placed at page 2 of the paper book, certifying incurring of Rs.2,61,854/- by the assessee for meeting expenses of conveyance, being incurred wholly, necessarily and exclusively in the performance of duties as a Development Officer of a Corporation. However, there is no mention about the reimbursement of expenses by the LIC of India. There is no discussion in the order as to whether the claim of the assessee for deduction of expenses was actually reimbursed by the LIC or not. This is a relevant factor as the deduction is permissible only to the extent of expenses actually reimbursed. Under these circumstances, I set aside the impugned order and remit the matter to the AO for examining the aspect of reimbursement of expenses by LIC of India and then reduce the chargeable income accordingly.