COMMISSIONER OF INCOME TAX Vs. VARGHESE MATHEW

JUDGEMENT

(1.) THESE cases are connected. At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following questions of law, in the above cases, for the decision of this court:

(2.) THE respondents, in this batch of cases, are Development Officers in the Life Insurance Corporation of India. Identical questions arise for consideration in these cases. In I. T. R. Nos. 560 to 563 of 1985, we are concerned with the assessment years 1980-81 and 1981-82 and in I. T. R. Nos. 90 to 93 of 1986, we are concerned with the assessment years 1979-80 and 1980-81. THE sole question that arises for consideration is whether the respondents/assessees--Development Officers--are entitled to deduction of the expenditure from the amounts received as incentive bonus from their employer. It is stated that the incentive bonus was paid for having canvassed additional business for which the assessee had incurred considerable expenditure which will not be covered by conveyance allowance and additional conveyance allowance granted by the employer. 40% of the incentive bonus was claimed as expenditure for earning the income. This plea was disallowed by the Income-tax Officer. He held that the incentive bonus was only part of the salary and so the assessees will be entitled only to the standard deduction under Section 16(1) of the Act. THE Appellate Assistant Commissioner accepted the plea of the asses-sees. He allowed 20% deduction. THE assessees as well as the Revenue appealed before the Appellate Tribunal. Following one of its earlier orders in I. T. A. Nos. 2237 to 2239 (Bom) of 1981, the Appellate Tribunal held that 40% of the incentive bonus constitutes a reasonable deduction as expenditure incurred for earning the said amount. THEreafter, at the instance of the Revenue, the Income-tax Appellate Tribunal has referred the questions of law, formulated hereinabove, for the decision of this court.

(3.) THE order of the Appellate Tribunal is far from satisfactory. THE Tribunal has mechanically followed the order passed by the President of the Tribunal dated July 31, 1984, in I. T. A. Nos. 2237 to 2239 (Bom) of 1981. We are not in a position to know the contents of the various conflicting decisions rendered by various Benches of the Tribunal. THE decisions as such were not placed before us. That apart, the order of the Tribunal suffers from a fundamental infirmity. THE tenability of the assessees' claim for deduction of an amount from the incentive bonus received by them, as an expenditure incurred for earning the same, depends upon the fundamental question as to the nature of the income received by the assessees. Does the incentive bonus received by the assessees form part of their salary or is it outside the salary income, is the fundamental question to be adjudicated. THE contract of employment by which the salary and other amounts are payable to the Development Officers by the Life Insurance Corporation of India does not form part of the paper book. Why and for what reason, and on what basis, was the incentive bonus paid to the various Development Officers ? This should be evaluated to find whether the incentive bonus received by the Development Officers forms part of their salary. Only when a finding is rendered on that aspect, the further question as to whether the assessees are entitled to any deduction for earning the incentive bonus will arise for consideration. THEse fundamental aspects were not borne in mind, nor Has any attempt been made to ascertain the basic facts regarding the source and nature of payment of the incentive bonus. In these circumstances and in the light of the conflicting decisions of the various Benches of the Tribunal, we are not in a position to give any definite answer to the questions referred for our decision. THE matter requires a more careful analysis and appraisal, bearing in mind the salient features stated above.