Rc/27/2000 Of Commissioner Of Income Tax Visakhapatam v. R Somjeevarao

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.27 of 2000 Dated:26.12.2011 Between: Commissioner of Income Tax,Visakhapatnam. …Applicant and Sri R.Sanjeeva Rao,Vijayawada. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.27 of 2000 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax got the following questionreferred to the opinion of this Court under Section 256(1) of the Income Tax Act, 1961 (the Act). Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal is justified in holdingthat 40% of incentive bonus should be allowed as anexpenditure in addition to the standard deduction underSection 16(i) more so when the expenditure involved, if any, intraveling is covered by the conveyance, additionalconveyance provided by the employer and exempted underSection 10(14) of the Income Tax Act? The brief fact of the matter is as follows. Therespondent/assessee at the relevant time was DevelopmentOfficer. For the relevant assessment year, he claimed 40%deduction out of incentive bonus received by him and deducted theentire conveyance allowance and additional conveyance allowancein computation of his income. The assessment was completedaccepting the deductions. The Commissioner of Income Taxinitiated proceedings under Section 263 of the Act and opined thatthe deductions claimed by the assessee and accepted by theAssessing Officer were erroneous and directed the Income TaxOfficer to withdraw the deduction of 40% out of incentive bonusallowed in the original assessment. On appeal by the assessee,the Tribunal cancelled the revisional order of the Commissioner. Aggrieved by the same, the Revenue sought reference underSection 256(1) of the Act. The question referred to hereinabove is squarely covered bya judgment of Division Bench of this Court in Commissioner of Income Tax v B. Chinnaiah[[1]], wherein it was held as under. … In view of the above judgments, it cannot but beheld that “incentive bonus”, whether treated as part of thesalary or perquisite, is taxable under the head “Salary” and thepermissible deductions under the said head are as specifiedunder Section 16 of the Act. It is nobody’s contention that 40percent of the bonus, deducted by the assessee asexpenditure and upheld by the Tribunal, falls under any of theitems under section 16. Thus the expenditure is other thanpermissible deduction under section 16 of the Act. It hasalready been observed above that the only permissibledeductions under the head “Salary” are those mentioned insection 16 and if any expenditure does not fall within themeaning of section 16, it cannot be allowed. … Following the above, the reference is answered in thenegative in favour of the Revenue and against the assessee. The Referred Case is accordingly disposed of without anyorder as to costs. _______________ (V.V.S.RAO, J) 26.12.2011vs ____________________(B.N.RAO NALLA, J) [1](1995) 214 ITR 368