2022 (10) TMI 281 - AT - Income Tax

Disallowing being 30% of Income of Incentive Bonus Commission - AO observed from the Salary Certificate (Form 16) issued by the employer, that entire sum has been treated as the Salary of the assessee, including the sum being claimed by the assessee as incentive Bonus - HELD THAT - Issue squarely covered in favour of assessee by the judgment of Hon'ble Allahabad High Court in the case of Sr. Branch Manager, of LIC vs CIT 2012 (5) TMI 117 - ALLAHABAD HIGH COURT held conveyance allowance and additional conveyance allowance received by the Development Officers of the Corporation was permissible deduction under Section 10(14) as they were paid to Development Officer against the expenses actually incurred on duty as per the rules and circulars of the Life Insurance Corporation - both the AO and Appellate Authority as well as the Tribunal have proceeded on the premise that the officers of the Corporation cannot suo motu allow any deduction towards conveyance allowance or additional conveyance allowance and was in the domain of the Assessing Officer, the very premise on which the authorities have proceeded is unfounded as it is the employer who makes the payment to its employee as per the rules or the procedure regulated by it - Decided in favour of the assessee. Disallowance of expenses incurred for Running Maintaining Premium Collection Centre - HELD THAT - LIC Business is unique business and where the assessee incurs expenses on maintenance of collection centre and these expenses are not income of the assessee. As per the nature of business, the assessee has to incur expenses on collection centers - As relying on Nitibhai Bhuptani 2018 (4) TMI 1610 - ITAT RAJKOT issue decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of claim of deduction on incentive bonus commission.
2. Disallowance of claim of conveyance expenses under section 10(14) of the Income Tax Act.
3. Disallowance of expenses incurred for running and maintaining a premium collection center.

Detailed Analysis:

1. Disallowance of Claim of Deduction on Incentive Bonus Commission:
The assessee claimed a deduction of Rs. 8,34,845, which is 30% of the incentive bonus commission of Rs. 27,82,817. The Assessing Officer (AO) disallowed this claim, stating that the entire amount was treated as salary by the employer (LIC) and TDS was deducted on the total amount, including the incentive bonus. The AO argued that there was no statutory basis for the deduction, and reliance on judicial pronouncements was insufficient. The CIT(A) upheld the AO's decision. However, the ITAT referred to the judgment of the Hon'ble Supreme Court in T.K. Ginarajan vs. CIT, which allowed a 30% deduction on incentive bonuses post-01.04.1989. Following this precedent and the decision of the ITAT Lucknow in Rajendra Mani Yadav vs. DCIT, the ITAT allowed the assessee's claim for the 30% deduction on the incentive bonus.

2. Disallowance of Claim of Conveyance Expenses under Section 10(14):
The assessee claimed conveyance expenses of Rs. 6,95,704 under section 10(14) of the Income Tax Act. The AO disallowed this claim, stating that neither the statute provided for such an allowance nor did the assessee provide a legal basis for it. The CIT(A) upheld the AO's decision. The ITAT, however, referred to the judgment of the Hon'ble Allahabad High Court in Sr. Branch Manager, LIC vs. CIT, which held that conveyance allowances paid to Development Officers for meeting actual expenditures in the discharge of their duties were exempt under section 10(14). The ITAT allowed the assessee's claim for conveyance expenses, following this judgment.

3. Disallowance of Expenses Incurred for Running and Maintaining a Premium Collection Center:
The assessee claimed a deduction of Rs. 3,84,532 for expenses incurred in running and maintaining a premium collection center. The AO disallowed this claim, stating that there was no provision for such an expenditure against salary income. The CIT(A) upheld the AO's decision. The ITAT referred to the decision of the ITAT Visakhapatnam in a similar case, which allowed such expenses as they were necessary for the performance of duties and were presumed to be incurred for the purpose for which they were granted. The ITAT also referred to the judgment of the ITAT Rajkot in Nitibhai Bhuptani, which supported the allowance of such expenses. Following these precedents, the ITAT allowed the assessee's claim for the expenses incurred for running and maintaining the premium collection center.

Conclusion:
The ITAT allowed the appeal filed by the assessee, granting the deductions for the incentive bonus commission, conveyance expenses, and expenses incurred for running and maintaining the premium collection center. The judgment was pronounced in the open court on 06/10/2022.