1995 (3) TMI 85 - HC - Income Tax

Summary

Issues involved: Interpretation of "incentive bonus" under section 10(14) of the Income-tax Act, 1961 and determination of allowable deductions for Development Officers of the Life Insurance Corporation.

Interpretation of "incentive bonus" under section 17:
The court considered whether "incentive bonus" falls within the meaning of "salary" under section 17 of the Income-tax Act, 1961. Previous judgments established that "incentive bonus" is taxable under the head "Salary" and permissible deductions are as specified under section 16 of the Act. The court emphasized that if any expenditure does not fall within the meaning of section 16, it cannot be allowed as a deduction.

Allowable deductions under section 10(14):
The court examined whether the expenditure claimed by the assessees could be allowed under section 10(14) of the Act. The requirements for deduction under this section include that the amount should be specifically granted to meet expenses wholly, necessarily, and exclusively incurred in the performance of duties, and there should be a notification by the Central Government specifying the extent of allowable expenses. Since no such notification existed in this case, the assessees could not benefit from section 10(14) deductions.

Conclusion:
The court answered both questions against the assessees, in favor of the Revenue. The judgment emphasized that the incentive bonus is taxable under the head "Salary" and allowable deductions are limited to those specified under section 16 of the Income-tax Act, 1961. The references in the revision cases were accordingly answered, with no order as to costs.