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TMI Blog1996 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... In that assessment order, he was shown to be drawing three sources of remuneration from the employer company. They are salary, incentives and perquisites/allowances. I presume that the assessee also should be drawing the same three types of remunerations from his employer company namely Modi Zerox Ltd. Thus, it is established that the assessee has been drawing salary, incentives and perquisites separately. The assessee claimed Rs. 42,151 out of the total incentive commission as deductible. He drew a similarity with that of LIC development officer who was held entitled to 40 per cent deduction from out of the incentive bonus earned by him. The assessee contends that similarly in his case also Rs. 42,151 should be allowed while making the assessment. The ITO disallowed the same who held that the incentive bonus is a part of the salary from which only the standard deduction is allowable and not any other type of deduction. He, therefore, disallowed Rs. 42,151 and framed the assessment. 2. Having been aggrieved against the assessment, the assessee went in appeal before the Dy. CIT(A), New Delhi. Before the Dy. CIT(A), various types of extra work which was put forth by him before ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roj Deswal, learned Departmental Representative for the Department and Shri S.L. Deepak, learned advocate for the assessee. The Department relied upon the following decisions: CIT vs. B. Chinnaiah Ors. (1995) 127 CTR (AP) 467 : (1995) 214 ITR 368 (AP), CIT vs. Govind Chandra Pani (1995) 126 CTR (Ori) 359 : (1995) 213 ITR 783 (Ori), ITO vs. P.M. Suthar (1995) 52 TTJ (Ahd)(TM) 260 : (1995) 53 ITD 1 (Ahd)(TM). The assessee relied upon the following decisions: ITO vs. P.M. Suthar. In CIT vs. Govind Chandra Pani in the head note it is stated as follows: "Sec. 17(1) of the IT Act, 1961, provides that for the purposes of ss. 15 16, 'salary' includes 'any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages". Salary means recompense, reward: to pay for something done'. 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 the turnover achieved by him then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary. The assessee, an employee of the LIC, had received a cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take advantage of s. 10(14), there must be a notification by the Central Government specifying the extent to which the expenses are allowable. In the instant case there is no such notification. Hence the deduction under s. 10(14) cannot be claimed in respect of the incentive bonus". So, the Andhra Pradesh High Court held that to claim exemption under s. 10(14), a notification by the Central Government specifying the extent to which the expenses are allowable is a condition precedent. However, in the facts of the present case before us, there is no such notification and hence the deduction cannot be claimed under s. 10(14). It is also further held in the same decision that the incentive bonus received by the development officer of LIC whether treated as part of the salary or perquisite is taxable under the head 'salary' and, therefore, deductions that are available under s. 16 are only available. In (1995) 214 ITR 12 (AT), as per the head note obtaining at page 13, the Tribunal at Ahmedabad held the following: "Held (per M.A.A. Khan and Abdul Razack (JMs.) and B.M. Kothari (AM): That the definition of the term 'salary' in s. 17 is very wide and includes profits in lieu of or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wrong footing. In the result, the incentive bonus earned by the assessee was to be treated as income from other sources and the expenditure incurred wholly and exclusively for earning such incentive bonus reasonably was to be estimated at 25 per cent to be allowed as a deduction from such incentive bonus and the balance was to be charged to tax". 6. In CIT vs. M.C. Shah (1991) 189 ITR 180 (Bom), the findings of fact of the Tribunal that the incentive bonus or commission received by the assessee from the LIC was income from business or profession and not from salary and the assessee was entitled to deduction of 40 per cent of such bonus/commission as expenses for earning such income have been held to be findings of fact giving rise to no question of law. Similarly in CIT vs. Tukaram Ramchandra Shinde (1994) 121 ITR 251 (Bom), the Tribunal on the basis of the Department's Circular reproduced at XXVIIA at page 1669 Vol. 2 held that the respondent-assessee was entitled to 50 per cent deduction made out of commission (earned as an LIC agent) upto Rs. 60,000. It has been held that the said circular has been correctly interpreted by the Tribunal and there was no infirmity in the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind to come to the conclusion that the nature of the commission earned cannot be considered to be salary but can be considered only as income from other sources and, therefore, the decisions rendered in cases of LIC Development Officers did not come to the aid of the Department. I also hold that allowing Rs. 42,251 as expenditure to earn income of Rs. 1,05,576 under the facts and circumstances of the case is quite reasonable and was not proved to be excessive by the Department. Therefore, in my considered opinion, there is no valid ground for the Department in this appeal. Hence, the appeal is to fail on this ground. 8. The second ground taken in this appeal is that the ITO while making the assessment made an addition of Rs. 5,000 for inadequate drawls for household expenses. In appeal, the addition of Rs. 5,000 made by the ITO was set aside. The Department took the stand that the fresh evidence which is adduced before the Dy. CIT(A) is in contravention of r. 46A of the IT Rules. 9. I do not agree with this contention of the learned Departmental Representative. In this case, the assessee was asked to produce the following by the AO: 1. Photocopies of bank account; 2. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mary of the bank accounts which the assessee maintained with various banks, it is to be seen that he withdrew a total sum of Rs. 94,076.65 from his bank accounts, out of which he spent Rs. 42,151 for depositing in HUDA and a sum of Rs. 51,925.65 was available to him for personal and household expenses. Having regard to the size of the family and the necessities of the family, I hold that this amount of Rs. 51,925.65 is reasonable, the addition of Rs. 5,000 is not warranted. I fail to see any merit in this ground and hence, it is to be dismissed. Since both the grounds are dismissed, the appeal itself is dismissed. ITA No. 2417 13. This is a Departmental appeal for asst. yr. 1989-90 against the order of Dy. CIT(A), dt. 22nd Jan., 1993 cancelling the penalty imposed under s. 271(1)(c). 14. I have already seen that the assessee was an employee in Modi Zerox Ltd. For asst. yr. 1989-90, i.e., the same assessment year in which the quantum appeal is involved and is disposed of by me earlier, the assessee was assessed on a total income of Rs. 87,460, against the returned income of Rs. 42,360. In the quantum assessment Rs. 5,000 were added towards low withdrawals and Rs. 42,151 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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