Law:

Section:

Section 15, read with section 16, of the Income-tax Act, 1961 - Salary - Chargeable as - Assessment years 1980-81 to 1982-83 - Whether incentive bonus is nothing else but commission paid to a Development Officer on basis of insurance business procured by him and same comes within definition of salary under section 17 - Held, yes - Whether assessee who was Development Officer in LIC was not entitled to claim deduction of 40 per cent of amount from incentive bonus over and above deduction permissible under section 16 - Held, yes FACTS The respondent-assessee was a Development Officer in LIC. During the relevant assessment years it had received certain incentive bonus from LIC in addition to his salary. The assessee claimed 40 per cent of incentive bonus as expenses, which was disallowed by the ITO. On appeal, the AAC allowed the claim of the assessee holding that 40 per cent deduction was reasonable as in respect of commission received similar expenses were being allowed. Order of the AAC was upheld by the Tribunal. On reference : HELD It was not in dispute that the assessee had been employed and was working as a Development Officer in the LIC. A relationship of master and servant existed. In addition to his salary, he received incentive bonus which was co-related with the amount of insurance business done by him as a Development Officer. From reading the provision of section 17(1) it is found that under clause (iv), commission is included in the term 'salary' and incentive bonus is nothing else but commission paid to a Development Officer on the basis of the insurance business procured by him. The definition of 'salary' under section 17 is wide enough to include the incentive bonus paid to an employee. It forms part of the salary. [Para 4] The assessee who was a Development Officer in the LIC was not entitled to claim deduction of 40 per cent of the amount from the incentive bonus over and above the deduction permissible under section 16. Thus, the Tribunal was not justified in upholding the allowance of deduction of 40 per cent as expenses from the incentive bonus. [Para 5] CASES REFERRED TO CIT v. Ram Krishna Banik [1995] 215 ITR 901/ 81 Taxman 288 (Gauhati)…

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