COMMISSIONER OF INCOME TAX Vs. NAGPAL S C

JUDGEMENT

(1.) THE following question is required to be referred by the Inqome-tax Appellate Tribunal, Amritsar Bench, to this court for its opinion under Section 256(2) of the Income-tax Act, 1961 (for short, "the Act") :

(2.) THE assessee was a Development Officer employed in the Life Insurance Corporation of India and derived income from salary. THE assessee received incentive bonus during the previous year relevant to the assessment year 1987-88 amounting to Rs. 11,821 from the said Corporation. At the time of assessment, the assessee claimed deduction on account of expenditure at the rate of 40 per cent, amounting to Rs. 4,729. THE balance amount of Rs. 7,092 was included in the total income for the purposes of tax. THE Assessing Officer, however, rejected the claim regarding the deduction on account of expenditure and brought the entire amount of incentive bonus to tax.

(3.) THE case of the assessee is that incentive bonus was earned and received after incurring certain expenditure and, therefore, deduction was rightly allowed. THE case of the Revenue is that incentive bonus was part of the salary or in the nature of profit in lieu of salary within the meaning of Section 17(1)(iv) read with Section 17(3)(ii) of the Act.