1996 (3) TMI 78 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 256(2) of the Income-tax Act, 1961.
2. Whether the Income-tax Appellate Tribunal was justified in its decision regarding incentive bonus and additional conveyance allowance.
3. Determining the entitlement of the assessees to claim 40% expenses out of incentive bonus or commission.
4. Conflict of opinions in previous cases.
5. Reshaping and reformulating the proposed question of law.

Analysis:
The judgment pertains to applications filed under section 256(2) of the Income-tax Act, 1961, seeking a direction to the Tribunal to state cases and refer a common question of law. The central issue revolved around whether the Income-tax Appellate Tribunal was correct in its decision regarding the incentive bonus and additional conveyance allowance received by the assessees. The Tribunal allowed the deduction of 40% claimed as expenses by the assessees, which was disputed by the Income-tax Officer and the first appellate authority. The court observed that the proposed question for reference did not cover all aspects of the controversy, necessitating a reshaping and reformulating of the question.

The court considered conflicting decisions in previous cases and analyzed the proviso to section 10(14) of the Act, inserted by the Direct Tax Laws (Section Amendment) Act, 1989. It was noted that a referable question of law arose from the conflicting opinions, requiring resolution to settle the controversy. With the consent of the parties, the question was reshaped to focus on whether the assessees were entitled to claim 40% expenses from the incentive bonus or commission received.

Ultimately, the court allowed the applications, directing the Tribunal to state the cases and refer the reformulated question of law for opinion. The judgment emphasized the need to address the conflicting opinions and provide clarity on the entitlement of assessees to claim expenses from incentive bonuses. The counsel fees were fixed, and the Tribunal was instructed to comply with the directions within a specified timeframe.