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TMI Blog2002 (8) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... t, nevertheless, this can and in fact, has been given effect to. Thus, the issues which are required to be gone into in the present case are : i. Whether the incentive bonus given to the Development Officers of the Life Insurance Corporation of India is to be counted for the purposes of deduction of tax; ii.Whether at least that much portion of the incentive which has been incurred by the Development Officer for procuring business for the Corporation is exempt; iii.That as to whether while deciding the question posed at serial Nos. (i) and (ii) above, the circular issued by the Central Board of Direct Taxes is required to be taken note of and whether this circular has any force of law and effect over and above the provisions contained in the Income-tax Act. So far as the first question is concerned, it is submitted by the respondents that this stands answered by a Division Bench of Punjab and Haryana High Court in the case of B.M. Parmar, Development Officer, Life Insurance Corpn. of India v. CIT [1999] 235 ITR 6791. Similar view has been expressed by the Madras High Court in the case of CIT v. E.A. Rajendran [1999] 235 ITR 514. 2. It is submitted that the above two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The above judgment would be commented upon while dealing with the second and third question formulated above because it deals with the same concept as has been put across on the basis of circular issued by the Central Board of Direct Taxes. 5. The Central Board of Direct Taxes, as indicated above, has issued a circular. This has been reproduced in the grounds of Appeal. For facility of reference, this is being noticed below :- Sub : Incentive Bonus paid to Development Officers. I am directed to refer to your Letter No. Mktg./DO/163 dated 5-1-1996, and the scheme submitted in pursuance to discussions the officers of the Corporation had with the CBDT when representatives of National Federation of Insurance Field Workers of India were also present. Your request for notifying Incentive Bonus under sub-clause (14) of section 10 of the Income-tax Act cannot be acceded to. It may, however, be added that the portion of the allowance certified as having been actually incurred in the performance of duties shall be exempt under the above provision. 6. It is on the basis of the last three lines of the above circular, urged that once it is shown that a particular port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt which were referred to in this regard are duly noticed at page 40 of the judgment. What was observed in this regard by the Division Bench of Kerala High Court is being reproduced below : Apart from the fact that such circulars are binding on the officers of the Department, even if the circulars are relied on for the first time in the High Court during the course of hearing, the assessee will be entitled to the benefit afforded by the circular. The court is bound to take note of the circular. These propositions are well settled by a series of decisions of the Supreme Court as well as of the High Courts (Vide Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 at p. 203 (SC), Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC), Tata Iron Steel Co. Ltd. v. N.C. Upadhyaya [1974] 96 ITR 1 (Bom.), F.C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati), Navnitlal Ambalal v. CIT [1976] 105 ITR 735 (Bom.), CWT v. Gammon India P. Ltd. [1981] 130 ITR 471 (Bom.) and Addl. CIT v. Mrs. Avtar Mohan Singh [1982] 136 ITR 645 (Delhi). This court has also taken the same view in a series of decisions. They are : Rajarajeswari Weaving Mills v. ITO [1978] 113 ITR 405, CIT v. B.M. Edward, India Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by him as a Development Officer in the discharge of his duties. It was accordingly held that where expenses are actually incurred by a Development Officer from the component which may fall under section 2(24) and is to be treated as income, then it is the profit element alone which has to be taken note of for the purposes of taxation under the Income-tax Act. The relevant observations made in this regard are being quoted below :- However, the facts proved clearly indicate that a part thereof was granted to the employee with a view to meet the expenses that might have to be incurred by him as Development Officer for the discharge of his duty. Therefore, when the expenses are actually incurred by the Development Officer, from that component which may fall under section 2(24) and be treated as income, in cases where such income does not fall in the exemption category under section 10(14), it is the profit element alone which remains with the assessee that can be treated as salary, being profit in addition to salary or wages. At page 658 of the judgment, it was observed as under :- It would be the right of a citizen to ensure that any part of his receipts as is rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or for that matter by the Madras High Court. Therefore, the two authorities which have been cited by the Revenue may not be of much assistance. On the other hand, the view expressed by the Gujarat High Court in the case, referred to above, takes notice of the view put across by the Life Insurance Corporation before the Central Board of Direct Taxes and as a matter of fact, the Board has chosen to take a decision by issuing a circular in this regard, which circular stands noticed above. 15. We accordingly prefer and follow the view expressed by the Gujarat High Court. This is because, the judgment in the above said case takes notice of the Circular issued by the Central Board of Direct Taxes whereas, the circular in question was not brought to the notice of Punjab and Haryana High Court, and therefore, that court was not in a position to comment upon the impact of the said circular. 16. We are accordingly of the view that, that much component which is actually spent by a Development Officer when he procures extra business for the Corporation would be exempt. For this, the procedure as indicated by the respondent authorities can be taken note of. In the alternative, this has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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