2002 (10) TMI 234 - AT - Income Tax

Summary

Issues:
1. Deduction of expenditure from Incentive Bonus claimed by the assessee.
2. Interpretation of relevant legal provisions and case law regarding the deduction of expenditure from Incentive Bonus.
3. Compliance with judicial discipline and binding nature of Tribunal's order on the Assessing Officer.
4. Validity of the revision order passed by the Commissioner of Income-tax under section 263.

Issue 1: Deduction of expenditure from Incentive Bonus claimed by the assessee

The assessee, a Development Officer with LIC, received an Incentive Bonus during the relevant assessment year. The Assessing Officer allowed a deduction of 30% from the Incentive Bonus as expenditure based on a Tribunal decision. However, the Commissioner of Income-tax held that no separate deduction is admissible from the Incentive Bonus, as the Development Officer is a salaried employee. The Commissioner relied on a High Court decision and set aside the assessment order, directing a reassessment without the 30% deduction. The appeal was filed against this revision order.

Issue 2: Interpretation of relevant legal provisions and case law regarding the deduction of expenditure from Incentive Bonus

The learned Chartered Accountant argued that a change occurred post-1997, where LIC formulated separate schemes for Incentive Bonus and reimbursement of expenses for Development Officers. This change recognized the 30% expenditure component in the Incentive Bonus. Referring to a High Court judgment, the Chartered Accountant highlighted the importance of the separate schemes and the allowance of deductions for the reimbursement of expenses embedded in the Incentive Bonus. The Tribunal agreed that the position evolved after 1997, and the Commissioner erred in not considering this aspect, making the revision order unsustainable.

Issue 3: Compliance with judicial discipline and binding nature of Tribunal's order on the Assessing Officer

The Assessing Officer followed a Tribunal order available before him while framing the assessment, which was not disturbed by the High Court until then. The Chartered Accountant argued that as per judicial discipline, the Assessing Officer must adhere to the Tribunal's decision. Citing a High Court judgment, it was emphasized that the Assessing Officer acted lawfully by following the Tribunal's order. Therefore, the assessment could not be deemed erroneous based on this ground, and the Commissioner's revision under section 263 was unwarranted.

Issue 4: Validity of the revision order passed by the Commissioner of Income-tax under section 263

Considering both legal and factual grounds, the Tribunal held that the revision order by the Commissioner was unsustainable. The Tribunal found that the Assessing Officer's decision to allow the deduction was in line with the Tribunal's order and not erroneous. Referring to legal precedents, including a Supreme Court decision, it was concluded that the Commissioner could not revise the assessment order under section 263 if it was not erroneous. Consequently, the Tribunal allowed the appeal and set aside the revision order.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and setting aside the revision order passed by the Commissioner of Income-tax. The decision was based on the recognition of the change in position post-1997 regarding the deduction of expenditure from the Incentive Bonus, the importance of following judicial discipline, and the binding nature of the Tribunal's order on the Assessing Officer.