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TMI Blog1995 (1) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee being an employee of the Life Insurance Corporation of India and deriving both salary and incentive bonus could not be assessed under section 16 of the Income-tax Act, 1961, in respect of his incentive bonus receipt ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right to endorse the view of the Appellate Assistant Commissioner of Income-tax in holding that the term 'salary' as defined in section 17 would not include 'incentive bonus' ?" Questions Nos. 2 and 3 are really one and the same question and, therefore, after hearing learned standing counsel for the Revenue, we reframe only one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord "bonus". It further held that the claim of the assessee claiming deduction of 40 per cent. towards expenses from the incentive bonus received should be allowed. The assessee's appeal thus being allowed, the Revenue carried the matter in second appeal to the Tribunal. The Tribunal by a rather cryptic order having dismissed the appeal and confirmed the conclusion of the appellate authority, the Revenue filed an application under section 256(1) of the Income-tax Act and, ultimately, the Tribunal referred the questions as already stated. Mr. Ray, learned standing counsel appearing for the Revenue, contends that the incentive bonus which is received by an employee of the Life Insurance Corporation is nothing but remuneration or recompense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on contained in section 17(1)(iv). It is an accepted rule of interpretation of statutes that the word "includes" is used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the "statute" and when it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. In Nagpur Corporation's case, AIR 1960 SC 675 ; [1960-61] 18 FJR 28, 35, Corporation of the City of Nagpur v. Its Employees, their Lordships of the Supreme Court held : "The inclusive definition is a well recognised device to enlarge the meaning of the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense 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 Income-tax Officer having examined the details of the scheme of award of the incentive bonus found that the same was calculated on a percentage basis on the total first year's scheduled premium income secured by the employees who are assigned to work under the jurisdiction of a Development Officer. On examining the terms and conditions of appointment of the Development Officer, the said Income-tax Officer had found that it is the duty of such officer to develop and increase the production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the terms of engagement having clearly reflected the relationship between the employer and employee, the commission received by the employee was assessable as income from salary. In the aforesaid premises, we answer the question formulated by us in favour of the Department and against the assessee and hold that the incentive bonus which the assessee as the Development Officer gets from the employer, the Life Insurance Corporation, partakes of the character of salary as defined under section 17 of the Income-tax Act and is chargeable to income-tax under section 16 of the Act. So far as question No. 1 formulated by the Tribunal is concerned in view of our earlier answer to the question formulated by us, once it is held that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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