T K GINARAJAN Vs. COMMR OF INCOME TAX

JUDGEMENT

(1.) Whether the incentive bonus paid to the Development Officers by the Life Insurance Corporation (hereinafter referred to as 'LIC') prior to 01.04.1989 would form part of the salary and, thus, exigible to income tax, is the issue arising for consideration in this case.

(2.) However, with effect from 01.04.1989, the LIC itself issued a clarification to the effect that the Development Officers would be entitled to claim reimbursement to the extent of 30% of the incentive bonus granted to them. Thus, the dispute is confined only to the period prior to 01.04.1989 and, thereafter, the Development Officers are entitled to the reimbursement of actual expenses incurred by them, to the extent of 30%. In other words, after 01.04.1989, only that part of the incentive bonus after reimbursing the expenses to the extent of 30% will appear in the salary certificate. What is the fate of the incentive bonus to the Development Officers in LIC prior to 01.04.1989 for the purpose of income-tax is the question to be considered in this case.

(3.) Income towards salary is explained under Section 15 of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act'). Permissible deductions arc provided under Section 16. The inclusive definition of 'salary', 'perquisite' and 'profits' in lieu of salary is given under Section 17 of the Act. It is now trite law that the Income-Tax Act, 1961 is a complete code as far as tax on income is concerned. 'Income' is defined under Section 2(24) of the Act and the computation of income is provided under Chapter-III of the Act (starling with Section 10). In the case of salaried persons, the only permissible deduction is under Section 16 of the Act. Section 17 has clearly provided for the details of income by way of salary. There is no serious dispute in this case that the incentive bonus paid to the employee by the employer is nothing but salary and there cannot be any dispute either since such payments are covered by the exhaustive definition of 'salary' under Section 17(1). For the purpose of ready reference, we shall extract the same: