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TMI Blog1996 (1) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... utset it would be proper to mention here as relied upon, the decision of the Tribunal dated 11-8-1995 on the identical point in IT Appeal Nos. 651 and 652 (Coch.) of 1991 for the assessment years 1987-88 and 1988-89 and C.O. Nos. 49 and 50 (Coch.) of 1991 in the case of T.K. Ginarajan, Development Officer of LIC. The Tribunal held that in view of the provisions of the Life Insurance Act, pertaining to the definition of the terms 'salary', 'remuneration', etc., in respect of the terms of employment of the Development Officer of the LIC, incentive bonus as claimed was allowable. 4. The relevant facts pertaining to the dispute in question are that the appellant is a Development Officer of the LIC. The issue involved in this appeal is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is employed by a businessman and, as a condition of his employment, it is agreed prior to the services having been rendered that he would be paid for his service at a fixed rate of percentage of the turnover or profits. In such a case, it is clear that the commission payable to the employee will, in fact, represent the salary to be drawn by him for the services. The payment on the percentage basis will only determine the measure of the salary." The learned departmental representative quoted further observations of the Supreme Court as follows :----- "It is thus clear that if under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that apart from salary, the assessee is getting some other amount which is not includible in the salary received from the LIC, but includible under the head 'Business or profession' especially when the payer is one and the same, viz., the LIC. His further submission was that the employer himself has treated this incentive bonus as salary only as is home out by the fact that in the income-tax deduction certificates issued by the employer, the incentive bonus is also included. He contended that if the intention of the employer while making the terms of payment was that incentive bonus will not be part of salary, the employer would not have included this amount in the salary certificates issued by him. 7. Therefore, while ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 ITR 368 and the Appellate Tribunal's decision in the case of ITO v. P.M. Suthar [1995] 214 ITR 12 (Ahd.)(AT). In support of the contention that the provisions of LIC Act cannot override the provisions of the Income-tax Act he has cited section 32 from the Unit Trust of India Act (L11 of 1963) and pointed out that "notwithstanding anything contained in the Wealth-tax Act, 1957, the Income-tax Act, 1961,..." such a situation is not there in the LIC Act or in the Schedule III thereto. He has pointed out that the Andhra Pradesh High Court in the case of B. Chinnaiah observed that since incentive bonus is not one of the notified items, no exemption under section 10(14) of the Income-tax Act can be given for the incentive bonus. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a period of three years, failing which they would suffer reduction in their basic pay and also one grade increment as per para 4 of the Annexure. Cost ratio has been defined including several items. But incentive bonus is not included in the cost ratio. Even the definition of 'annual remuneration' as given in Schedule III to the LIC Act does not include incentive bonus and additional conveyance allowance. Clause (j) of Schedule III which defines 'gross yearly salary' specifically says that any incentive bonus or additional conveyance allowance shall not include in the 'gross yearly salary'. 9. There is no doubt that the 'gross yearly salary' is not inclusive of incentive bonus and additional conveyance allowance. It would not be corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no attraction for him to work more. 11. There is considerable difference between the commission paid to an employee at a particular percentage in the business practice and the incentive bonus paid to the Development Officer of LIC. The incentive bonus cannot be compared with the commission received in the business practice. Receiving commission by a salesman in the business practice presupposes of selling more articles by convincing the customers. The payment of incentive bonus is also in the nature of convincing customers to ensure more lives, but without selling any articles. Therefore, commission cannot be compared with incentive bonus and, hence, the decision of the Supreme Court in the case of Gestetner Duplicators (P.) Ltd. i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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