COMMISSIONER OF INCOME-TAX Vs. S C NAGPAL

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.) AN application was moved before the Tribunal under Section 256 (1) of the Act asking for a reference of the question regarding the deductibility on account of expenditure from the amount of incentive bonus. Though the Tribunal agreed that it was a question of law yet it declined to refer the question on the ground that the tax effect was less than Rs. 30,000 per year and, in the light of the policy decision taken by the Central Board of Direct Taxes, the matter should not be referred to the High Court for opinion. The Tribunal referred to Instruction No. 1573, dated July 12, 1984, and the Instruction No. 1764, dated July 14, 1987, and also relied upon a decision of the Bombay High Court in CWT v. Executors of Late D. T. Udeshi [1991] 189 ITR 319.