1988 (12) TMI 157 - AT - Income Tax

Summary

Issues:
- Allowance of additional conveyance allowance as deduction
- Taxability of incentive bonus

Analysis:

Issue 1: Allowance of additional conveyance allowance as deduction
The case involved appeals by the Revenue regarding the deduction of additional conveyance allowance paid to a Development Officer by the Life Insurance Corporation of India. The Revenue argued that the allowance was not solely for meeting traveling expenses and should not be exempt under section 10(14) of the Income Tax Act. The departmental representative cited precedents to support this argument. On the other hand, the assessee contended that a similar issue for a previous year had been allowed by the Commissioner of Income Tax under section 264. The Tribunal examined the nature of work done by Development Officers and the link between conveyance allowance and premium income. The Tribunal emphasized that the allowance was not a disguised form of remuneration but was directly related to the duties performed. Referring to judgments, the Tribunal held that a major portion of the expenditure could be considered for the discharge of duties, allowing 80% of the claim as a deduction under section 10(14) for each year.

Issue 2: Taxability of incentive bonus
The assessee challenged the disallowance of the incentive bonus by the Appellate Assistant Commissioner (A.A.C.). The Tribunal reviewed a previous decision where it was held that a portion of the incentive bonus could be considered as expenditure incurred in the performance of duties, making it eligible for deduction under section 10(14). The Tribunal reiterated that the incentive bonus was linked to securing new business and involved additional expenses beyond conveyance. Following this reasoning, the Tribunal allowed a deduction of 40% of the incentive bonus in each year, while taxing the remaining 60%. Consequently, the cross-objections of the Revenue seeking to uphold the A.A.C.'s order were dismissed, and both the Revenue's and the assessee's appeals were partially allowed.

In conclusion, the Tribunal's judgment clarified the eligibility of the additional conveyance allowance and the tax treatment of the incentive bonus for the Development Officer, providing detailed reasoning based on the provisions of the Income Tax Act and relevant case law.