1982 (2) TMI 116 - AT - Income Tax

Summary

Issues Involved:
1. Delay in filing cross-objections.
2. Nature of incentive bonus as part of salary.
3. Deduction of expenses against incentive bonus.

Issue-wise Detailed Analysis:

1. Delay in Filing Cross-Objections:
The cross-objections were filed late by 183 days. The delay was attributed to the demise of Shri Hem Raj, Advocate, who was preparing the memorandum of cross-objections. Additionally, Shri Raj Kumar Sethi, an employee of the Life Insurance Corporation of India, filed an affidavit explaining his transfer and subsequent actions. The Tribunal, considering these circumstances, condoned the delay, stating, "the delay was due to a reasonable cause."

2. Nature of Incentive Bonus as Part of Salary:
The primary issue was whether the incentive bonus received by the assessee, an employee of LIC, should be considered part of his salary. The revenue argued that since the assessee is an employee, the incentive bonus is part of the salary, citing the Madras High Court judgment in CIT v. India Radiators Ltd. However, the assessee contended that the incentive bonus, linked to personal efforts in securing insurance business, should not be considered salary. The Tribunal noted that sections 15 and 17 of the Income-tax Act, 1961, which define "salaries," do not explicitly mention bonus. The Tribunal concluded, "A careful perusal of the definition of salary given in section 17(1) shows that the Legislature has carefully avoided the use of the word bonus in it."

3. Deduction of Expenses Against Incentive Bonus:
The assessee claimed a deduction of 40% of the incentive bonus as expenses incurred in earning it. The Income-tax Officer (ITO) rejected this claim, allowing only standard deductions under section 16(1) of the Act. The Appellate Assistant Commissioner (AAC) partially accepted the claim, allowing 20% of the gross incentive bonus as expenses. The revenue contested this, arguing no basis for the 20% allowance. The Tribunal, however, found that the assessee had indeed incurred expenses to secure business, as evidenced by the record business of Rs. 74,17,000 on 513 lives. The Tribunal stated, "Since the expenses at 40 per cent are reasonable and fair, in our opinion, the entire expenses should have been allowed." Consequently, the Tribunal directed that 40% of the expenses be allowed, aligning with the precedent set in the case of Dr. C. Parkash, where professional income was treated separately from salary and allowed for expenses.

Conclusion:
The Tribunal dismissed the revenue's appeals and allowed the assessee's cross-objections, directing that 40% of the incentive bonus be allowed as expenses.