2004 (7) TMI 84 - HC - Income Tax

In addition to the salary, assessee (a development officer) also received incentive bonus from the LIC of India. - whether incentive bonus was assessable as profits and gains of business or profession authorities held that incentive bonus was assessable under the head Salary , and, therefore, the assessee was only entitled to claim standard deduction under the provisions of section 16 of the Income-tax Act, 1961. - Since the matter is fully covered by the judgment of this court in B.M. Parmar s case, we are satisfied that the issue raised by the assessee does not give rise to any referable question of law for consideration by this court However appeal is admitted for consideration of the following question of law Whether in the absence of any direction in the assessment order for levy of interest under sections 234B and 234C, the Assessing Officer could charge such interest while computing the tax liability?

Summary

Issues involved:
1. Classification of incentive bonus received by the assessee from the Life Insurance Corporation of India.
2. Justification of levy of interest under sections 234B and 234C of the Income-tax Act, 1961.

Classification of Incentive Bonus:
The appeal was filed against the Income-tax Appellate Tribunal's order assessing the incentive bonus received by the assessee as "Salary" instead of business income. The assessee, a development officer of the Life Insurance Corporation of India, argued that the incentive bonus should be considered business income, allowing deductions for related expenses. However, all authorities, citing a previous court ruling, held that the incentive bonus falls under the head "Salary" as per the Income-tax Act, 1961. The appellant's claim was rejected based on the precedent set by the court in a previous case. The appellant contended that the previous ruling was based on an old scheme that no longer applies due to a new scheme and circulars issued by the Central Board of Direct Taxes. The court, however, upheld the classification of the incentive bonus as "Salary," emphasizing that the development officers are whole-time employees of the Life Insurance Corporation of India, primarily engaged in promoting and developing life insurance business. The court concluded that the income received by the development officers is by way of salary and should be assessed under the same head, affirming that the issue raised did not present any new legal question for consideration.

Justification of Levy of Interest:
The appellant also challenged the Tribunal's decision to uphold the levy of interest under sections 234B and 234C of the Income-tax Act, 1961, without specific direction in the assessment order. The appellant argued that the Assessing Officer could not charge interest without a clear directive in the assessment order. The court deemed this argument as a valid legal question for consideration. Consequently, the appeal was admitted for deliberation on the issue of whether the Assessing Officer could levy interest under sections 234B and 234C in the absence of explicit directions in the assessment order.