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TMI Blog1995 (12) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... he employees and during the course of performance of their duties. 4. It was submitted by the learned authorised representatives who were present and in written submissions that the incentive bonus is a special allowance failing under section 10(14) of Income-tax Act, as held by the Special Bench in P. Dayakar [IT Appeal Nos. 1318 and 1319 (Hyd.) of 1986 dated 23-3-1989] and hence that part of the allowance, to the extent to which the expenses were actually incurred in the performance of duties as Development Officer should not be included in the computation of the total income. It is also submitted that even assuming that the incentive bonus falls within the definition of 'salary' as contained in section 17, still it is the net of the incentive bonus that can be taken as a part of 'salary' and not the gross. In this connection it is stated that what has not actually gone into the pocket of the assessee, but has in fact gone out of the pocket, can never be treated as income even under the head 'Salary', and in that view of the matter, the expenditure incurred for earning the incentive bonus is liable for deduction at the source or starting point itself under section 15 of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's order and as per law in the absence of notification cannot be said to be not in order and they are debatable. There cannot be any debate between finding of a High Court and that of the Tribunal on the same issue. The findings of the High Court has to prevail and has to be preferred. We agree with DR on this proposition. 6. The learned ARs also advanced real income theory and has also referred to the decisions of Badridas Daga v. CIT [1958] 134 ITR 10 (SC) and Poona Electric Supply Co. Ltd v. CIT [1965] 57 ITR 521 (SC), we have considered these submissions and find that the submissions of the ARs cannot be accepted. In the case of salary only standard deductions are to be allowed. The two Supreme Court cases relied were rendered under the head 'Profits and gains of business' and not under the head 'Salary'. The said decisions cannot be applied to the facts of the present cases. 7. The learned ARs also brought to our notice the recent decision of the Cochin Bench in the case of ITO v. T.R. Ginarajan [ITA Nos. 651 and 652 (Coch.) of 1991, dated 11-8-1995] for the assessment years 1987-88 and 1988-89. We have gone through this order and find that this decision is also not helpf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also included in the said definition under the Payment of Bonus Act. The Andhra Pradesh High Court in K.A. Choudary 's case have also negatived the claim of the assessee that incentive bonus should be considered as income from profession. The submission of the DR that in view of the judgment of Andhra Pradesh High Court in the case of K.A. Choudary, which is only and solitary decision on the controversial issue before us in these appeals, should be applied and followed and the decisions given by various Benches of the ITAT till now have lost validity and sanctity, and therefore the stand of the revenue should be upheld. It is further submitted that there cannot be any debate on the issue as the Assessing Officer has made prima facie adjustments/assessments as per law and as upheld by the Andhra Pradesh High Court in the case of K.A. Choudary. There is no other decision by any other High Court contrary to the decision of the Andhra Pradesh High Court. Therefore it is submitted that the assessments under sections 143(3), 143(1)(a) and 154 rectifications are all in order, as the mistakes apparent from record both of facts and law can be rectified. 9. We have considered the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only deductions to be allowed therefrom are the deductions mentioned in section 16, and nothing else. In this connection, it may be mentioned that it is not proper or justifiable to hold that though the incentive bonus is salary yet the amount spent to earn such incentive bonus has first to be deducted and the net amount is to be taken as salary and then the deduction available under section 16 will become operative. 10. In this connection, it may also be mentioned that for the assessment years 1962-63 to 1974-75, section 16 provided for deductions on account of purchase of books, entertainment allowance, professional taxes, etc., conveyance allowance and lastly amount necessarily expended by the assessee. But, there is a change from the assessment year 1975-76 regarding deductions to be allowed under section 16 of the Income-tax Act. Section 16 has undergone a vital change, with effect from 1-4-1975, by the Finance Act, 1974 (20 of 1974). Clause (i) by substituting a new clause, and clauses (iii), (iv) and (v) have been omitted. Under new clause (i), only a standard deduction has been provided for. This shows that there was some scope up to assessment year 1974-75 to allow certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow deduction of expenses as is being done by various Benches of the Tribunal. But, in the subsequent decisions, Orissa High Court in the case of CIT v. Govind Chandra Pani [1995] 213 ITR 783, has categorically held that the incentive bonus received by the Development Officer of LIC is part of salary within the ambit of section 17 and, therefore, had to be computed under section 16, and categorically held that deduction mentioned in section 16 only can be allowed and consequently the Tribunal was not justified in allowing deduction @ 40% on account of expenses. 11. So far different ITAT Benches were allowing 40% as deduction as expenses from incentive bonus as per decisions in the case of Kiranbhai H. Sheelat v. ITO [1993] 112 CTR (Ahd.) (Trib.) 140 and the case of P. Dayakar, Special Bench. The case of Kiranbhai H. Sheelat no more holds good as the 3rd Member of the ITAT Bench, Ahmedabad itself has taken contrary view in the case of ITO v. P.M. Suthar [1995] 214 ITR 12 (Ahd.). Similarly, Special Bench in the case of P. Dayakar has held that 40% should be allowed as deduction under section 10(14) of Income-tax Act. It was also held in the same case that incentive bonus is part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conflicting decisions and the outcome of the same was in the form of Special Bench in the case of P. Dayakar which does not hold good because of amendment to section 10(14). The High Court's decisions on the issue are in favour of revenue as stated in foregoing paras. Therefore, there cannot be any debate in respect of the decisions in the cases of K.A. Choudary, B. Chinnaiah and Govind Chandr Pani. Therefore, prima facie adjustments under section 143(1)(a) which were made by disallowing the claim of 40% as deduction from incentive bonus is in accordance with law and as per two A.P. High Court decisions and as per amendment to section 10(14), and in the absence of any notification they are in accordance with law and there cannot be any debate on the same. As regards deductions which were earlier allowed and subsequently rectified under section 154 by the Assessing Officer, we hold that the same is also as per law as mentioned above and hence there cannot be any debate. This is on the well-settled premise by now that mistake of fact as well as law can be rectified if they are apparent. In the instant cases, the mistakes of law are apparent. Therefore, we hold that prima facie adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means on the face of it. Hence, on the face of the return and the documents and accounts accompanying it, the deduction claimed must be inadmissible. Only then, can it be disallowed under the proviso to section 143(1)(a). If any further enquiry is necessary, or if the Income-tax Officer feels that further enquiry is necessary, or if the Income-tax Officer feels that further proof is required in connection with the claim for deduction, he will have to issue a notice under sub-section (2) of section 143." 16. In the appeals before us the assessees invariably filed the returns for the years under appeal claiming deduction of 40% from incentive bonus towards expenses. This particular claim is a obvious mistake as the claims have been made by claiming obviously incorrect deductions contrary to K.A. Choudary's case, B. Chinnaiah's case and in the absence of any notification on incentive bonus by the Government. In other words, the claim is prima facie inadmissible. In this connection, it may be stated that the incentive bonus which is received by the Development Officer, who is an employee of the LIC is nothing but remuneration, or recompense for the services rendered by the employee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any debate on the issue. But again we may state that the case of K.A. Choudary was rendered as early as 1987, and still holds good and clearly shows that the returns for the years under appeal were filed much after which are now before us. Similarly, subsequent to the filing of the return by the present assessee against Andhra Pradesh High Court has rendered judgment on the issue following the judgment of K.A. Choudary. The Orissa High Court has also given similar finding in the case of Govind Chandra Pani. There is also Supreme Court's decision on the issue in the case of Gestetner Duplicators P. Ltd. There is no doubt that there are conflicting decisions by the different Benches of the Tribunal. But, when the Supreme Court and High Courts' decisions are available on the issue and in the absence of contrary decision by any other High Court, the findings of the High Courts and Supreme Court have to be followed, and there cannot be any debate between the findings of the High Court vis-a-vis Tribunal. Debate can be there among the equals and not with unequals. 18. In the case of Kiranbhai H. Sheelat, the Ahmedabad Bench has also referred to the case of K.A. Choudary and held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Supreme Court affirmed the view taken by the Bombay High Court that the assessee was entitled for the refund. Accordingly, the Andhra Pradesh High Court held in B.V.K. Seshavataram's case that the decision of Supreme Court in SAL Narayana Rao's case is a clear authority for the proposition that subsequent decision can validly form the basis for rectifying an order under section 154 of the Act. 21. Again in the case of Bahauram Jawharimal v. CIT [1980] 121 ITR 487 at 490 (All.), it was held that where an order of assessment is based upon a decision of the Tribunal which was the subject-matter of reference to the High Court when the order was made, the any error discovered in the order, on the basis of the subsequent judgment of the High Court on that reference, would be an error apparent from record. The facts of the present appeals on the issue are identical to the decision of the High Court. 22. In the case of Nav Nirman P. Ltd. v. CIT [1988] 174 ITR 574 at 578 (M.P.), it was held that in the circumstances of a given case, a mistake discovered in an order on the basis of subsequent judgment of the High Court may be a mistake apparent on the record and a ground for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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