B M PARMAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The following question of law has been referred by the Tribunal, Amritsar Bench at the instance of the assessee under s. 256(1) of the IT Act, 1961 (for short 'the Act') :

(2.) The assessee derived income from salary and interest. He was employed in the Life Insurance Corporation of India (for short, the "LIC") as a Development Officer. He field returned of his income for the asst. yr. 1980-81 declaring income at Rs. 15,880. Salary as per the salary certificate was shown by the assessee at Rs. 26,729. He claimed deduction of Rs. 3,007 from the incentive bonus amounting to Rs. 7,517. The assessee field his return of income for the asst. yr. 1981-82 declaring income at Rs. 29,140. In this year also, the assessee claimed deduction of Rs. 9,020 on account of expenses at 40 per cent of the incentive bonus amounting to Rs. 22,549 received by him.

(3.) A. K. Mittal, learned counsel for the assessee, has vehemently argued that the amount of incentive bonus was not received by a Development Officer as part of his salary but as income from profession. The Development Officers are required to go to the field for the purposes of development of insurance business. Expenses are, therefore, incurred while procuring more insurance business. If first year's premium earned by a Development Officer was in excess of five times the total expenses incurred on him by the LIC, the incentive bonus could be paid to the Development Officer at the rate of 6 per cent of such income. Similarly, different rates of incentive bonus have been laid down in the scheme for still higher premium earned for the LIC in a year. Thus, incentive bonus depended on the personal efforts and the volume of business procured by the Development Officer for his employer, the LIC.