T.k. Ginarajan v. The Commissioner Of Income Tax,Cochin, Kera La

[2013] 7 S.C.R. 813 .. at<pRTARTA| TATA, , MAHLATTAPrasPLA ( ataet Stet ASAT5216ay2002 ) 1 , 2013se[ ]BIELTERIA TS ORT2(24), 15, 16 औरा 17- "आय", "at", "Ne)" - 1.4.1989 HO Stat TATTTA TIPS AA ALIS Hl AIGA H WAN TAT HAT TAT ATSIG MCOUELLY40% - : 16 ICA ITA |cpl Helat Hr STAT HAT TAT BATTA THAT TATORT<p, -DIT Us leqU TAHT ASN OT A Ses H Tatas A HU WT AY ale Fe, MICAS TAH H TAU OTA Sl AH YS Uh ATA Hela Tet S HA SAGUs HX H STAYA 3TaT S| , , sateUN Stas Th ays A UH Hes BETH4+ saat Rest F1.4.1989 40% a Ueet SHYAT THU TT MICAS TATAHl Hetat HT SAT SH STE40% OR TUT AT Te SAT ATT WAT H TAT MICAS TTT FTplated aa earOT Sates ate Sl USAH STAHL STS ST STAHL SAT(arate) otTETTETE HY, TEA UT |TATE A Totes & Tw TAT AAAelebd Seq UTATAT Ft UTcat HT GATT | , : UTA & AA THAR WI US UTFA SIT STAT TT01.04.1989 SRT TEST SHIRA spta TactHATA THAT TAT WATS TT SAATHT, AUT SUT SA Sa AHIRSTAT H TAL A STOTT | UTA Ft AUT BING Hct BT STATIN THAT : 1.1. अगिभगिनाधां3गिरातTAA SRT HAART Hl SAT A Ae Wass TA AaaTTA STARE STATA, 1961 apt SRT17(1) p ATTA'' '' , atatPt MATA TATAddd & Tae'' '' 17 -पीगिरालब्धिIधांऔरा ITAA HT ITob stata Tea Hat 1 ata Be TMTrey, 'आय' DA € eh Hel AH HT WT HL HT HASPIMITTTA Ht ART2(24) Ph AA TANT Ha TAT S SAT STA Ht MOAT STATAAATea-III (ORT10 a Uy) ,16 [4] THAT CAH Hetdt Btealaay He AITbh sierra SloR MARL MT TAT Wy.ca. aed(1998) 229 ATR 71 (केना3टीके); a.ए. aterTAT STAHL ATT A AT(1990) 183 ITR 29 (STE WSQT); MAHL A TATA §. ए.So(1999) 235 ITR 514 (Agile); MAHL MATT TATA TT. अराRAAT SH ART(2000)242 ITR 563 (Aaa); MAHL AT TATA St ATT AS(1995) 215 ITR 224 (SST);MARL ART TATA TTT POT AAT(2001) 248 ITR 819 (STFS); MAHL ST TATATHe ATT,(2001)250 ITR 828- sate| पीब्धिश्चीम बTet USE A AT TAT SHAT TASS(1999) 1 SCC 198 rayareeaT TAT | 1.2. amt10(14) ba At At WAT Was Te01.04.1989 H Ue Fé Uy, PAAOTe F THU TU AY S| AS TAAL IR TATU S Th TS HAA SH Tes H PHT TT TAI, , SH UATQl Sl VAM HE BX SH ATA ASTAT Feb ASSTST AAT VA THAT TWAT S, तकेSA IA SH ABT VT F AST TATA STITT | HHI ST HAST &H Ue A THT TTqa AT ct WATTOT Mass HAT HIS STAT ANT THAT WAT SI TATA TTT, ATA AA BIAS BA BE APY ATT Ht TOT Att A HeatOc AN UdBchb 3R St SISA SI SRT Fea[8-9] PLAT S|UT , INT TATA UNA TT A AT2000 (2) SCR 33 = (2000) 3 SCC335 - TaQara fear TAT | MAL ST TATA THIS Ta. Mae AX ART(1999) 235 ITR 635 - 1.3. , 01.04.1989 MU ASA TH SATAN Aaa BY Use SAH SRT AT WIA TTA16 pt dda & BY A AT STAT Alay Bik ae Hae Blass Ht IMRTHeldt Hl SHIN S| AACA SAA Hea H TeqU TAHT SINTS H BT A HAST H Ges A, , eeu 1g waUh ATT Hell Tet S, [11] aSAATUS HLH GAL H BATS ||oT : 52162002RaTtel ATTA STEHTATatte Stet ASATay 8, 20, 21, 22 200031, 42 49 2001SHS Bate GATqa] औरा औरा cheHata02.11.2001 H ToT TMA H TAT SA ATS TAT, , , Hel STATAqey esqTGs SAUTI WATSHe Hal Hl Br F | , uu, , , UY.ए. Sata, ,Ast MS UlsatHNs WATSRegt PARIAT TATeat Pant, AlecteHl HSTIATCTAT(at.at. TATA STH TAT)Mita at HESS | , UTA BT TAT ATTAqd @RUAERIGAA TAT | 1. 01.04.1989 a Feet Sita STATCube(Sab ITS,'Tests' ob OT AH ara) SRT TASTA ASIA Ht Yat TET, TAT WISTS TTT ATA CHT TSSAT SVT BT SA WTRMAHL H STAT A ATT |WaT TA 2. , .. , 1-4-1989 ataat<pRTARTAST STAT TTA A TITS stlerart 4Weer40% ATA TEU TT MICAS TTTptpctPl STAT SH AMI AT THAT UT Ce SS SA WT ATT WAR TAT WIHT TIA HT40% UAT Te AT PAT UT | | ATLA STAT TAT TAT tT AST BE TTS(SH"UtsHtStet" ) H HETAL A CATH SH TAT STAT THAT, (TAA TATA TAT AT Pep TAHT ALTSINAT Ft AAT A AT HAT H UAT AHA THA40% , Th PSAIHAA! TATMas tet Ft Tikes HI THaT THAT TAT WITS TAT eat SH HT:A SAH BMA HT SCAT S| ISL H TearT “…Wicaed TAT HT UAT SAT Tt IRA FISTS BATS SN SAT H SAAT H, TerU SAt HAT STAT SSH AUT HT BL A Be STS Heat S Ales SHIT TTT TTA AAT etप्रगितपी र्ca AAA YH ASNT SRT HU WT Aa h dee |AT BLA El SA, '' ब्धिस्थागित म5watt vrayCT TESTA STEattak Hact WIcaeATHe el Sah IAA WATTAAL A Teas &Ul St STAT AT Ft US WATT AST HATPep Wat STATA BT Ue MNT TATA SATS ST at HT TATda AAA FruTT QUt TSE S| Als VAT HIS ATT WAT S Al TS ANT Saat HT ANT Tet TATara,TI Satay , WIaTet TA A Hat etal WL THAR AST THAT STAT eIActa... |” (2013) 7 S.C.R. 813 T.K. GINARAJAN THE COMMISSIONER OF INCOME TAX,COCHIN, KERA LA (Civil Appeal No. 5216 of 2002) AUGUST 1, 2013. [SUDHANSU JYOTI MUKHOPADHAYA AND KURIAN JOSEPH, JJ.] Income Tax Act, 1961: -ss.2(24), 15, 16 and 17 "Income': "salary", "perquisite" -- Connotation of Deduction of 40% of the incentive bonus paid to Development Field Officer of UC prior to 1.4.1989 -claimed as expenditure incurred for canvassing business Held: Incentive bonus has to be treated as salary, subject to -permissible deductions u/s 16 Expenses incurred in the performance of duty as Development Officer for generating the business so as to make him eligible for the incentive bonus is not a permissible deduction and, therefore, the same is exigible to tax. The appellant, a Field Officer in Life Insurance Corporation of India, claimed in the income tax return deduction of 40% of the incentive bonus paid to him prior to 1.4.1989 on the ground that he had incurred F expenditure to the extent of 40% of the incentive bonus for canvassing business. His claim was declined by the Assistant Income Tax Officer and the Commissioner of Income-Tax (appeals). The Tribunal held against the Revenue, but the High Court held in favour of Revenue. G in the instant appeal, the question for consideration before the Court was: whether the incentive bonus paid to the Development Officers by the Life Insurance 813 A Corporation prior to 01.04.1989 would form part of the salary and, thus, exigible to income tax. Dismissing the appeal, the Court HELD: 1.1. The incentive bonus paid to the employee B by the employer is nothing but salary since such payments are covered by the exhaustive defihition of 'salary' u/s 17(1) of the lncoem Tax Act, 1961. The inclusive definition of 'salary', 'perquisite' and 'profits' in lieu of salary is given u/s 17 of the Act. It is now trite law C that the Income-Tax Act is a complete code as far as tax on income is concerned. 'Income' is defined u/s 2(24) of the Act and the computation of income is provided under Chapter-Ill of the Act (starting with s.10). In the case of salaried persons, the only permissible deduction is u/s D 16 of the Act. [para 4] (818-A-D] Commissioner of Income-Tax vs. M.D. Patil (1998) 229 ITR 71 (Karnataka); K.A. Choudary vs. Commissioner of Income-Tax and Others (1990) 183 ITR 29 (Andhra E Pradesh); Commissioner of Income-Tax vs. E. A. Rajendran (1999) 235 ITR 514 (Madras); Commissioner of Income-Tax vs. P. Arangasamy and Others (2000) 242 ITR 563 (Madras); Commissioner of Income-Tax vs. Sri Anil Singh (1995) 215 ITR 224 (Orissa); Commissioner of Income-Tax vs. Gopal F Krishna Suri (2001) 248 ITR 819 (Bombay); Commissioner of Income-Tax vs. Ram/al Agarwala (2001 )250 ITR 828 -approved. State of West Bengal and Others vs. Texmaco Limited (1999) 1 sec 198 distinguished. 1.2. What is excluded u/s 10(14) as it stood prior to 01.04.1989 is the expenses incurred in the performance of the duty. It is for the employer to certify the actual expenses incurred in the performance of duty and in H which case, as clarified by the CBDT, to that extent, the T.K. GINARAJAN v. COMMISSIONER OF INCOME TAX.COCHIN, KERALA same shall not be shown as part of salary. There is no A claim by the employee either for reimbursement or exclusion of the actual e~penditure incurred in performance of the duty. Compartmentalization of income under various heads and computation of the taxable portion strictly in accordance with the formula of B deductions, rebates and allowances are to be done only as per the scheme provided under the Act. Kiranbhai's case decided by the High Court of Gujarat does not lay down the correct principle of law. [para 8-9] [821-B-D, F-G, H; 822-A] C Karamchari Union, Agra vs. Union of India and Others 2000 (2) SCR 33 = (2000) 3 sec 335 - relied on. Commissioner of Income-Tax vs. Kiranbhai H. She/at and Another (1999) 235 ITR 635 - disapproved. 3. , 1-4-1989 Y, यद्यगिपीTTT TAT TT At LITA SH STAT HT Uh AST HLOT STAT THAT Teh30% TIBIA Beet Ss TST WT Wises TATapt UAT Th WATdB STAT HU FH, 1-4-1989 Trae pactU Ueet HlAAT TH StAAT S HA TAH, 30% aeTITS TTRcd , 1-4-1989 , 30% Bhan Sl FAX eat AUTEd aeWied TAS HI HAT TS ATT AAT WAT Ta A eT STTl STAHL WAST1-4-1989 गिलए Y Teet STI STAT PTH A TITS SITTIN Hl Wa Sa TAS HT VTA, FITSUS Sa ATH A TTI WA S| 4. TA & Ue SA St STAHL STATA AA, 1961 (Suh Te"अगिधांगिनायम" )15 16 apt meetobld Wald Ht Sa"", "" "oq " el dda & daet AdqHATHऔरा HL TATAMT TATA ALATA Ht ATT17 -,pA sts sl sea Us TAT(eT HI STH AS AH ST WL HL HT UAT Bआयकेरा अगिधांगिनायम, 1961 Uh YT ASAT el |"आय" PlAAAI Bl IT2(24) b ATACATT THAT TAT S SX STA St OTA STITATA ch STITTIII (amt10 ) So , Mo Walt Hts Sl daATMHT Alaa ATH FTHATA CHP Petal Ba ATA16 17 Bt ART|HA ATA FA HI TAAL ATS BT HST THATaqamt17(1) b ATA"at" , :गिलएSA Sa SET HUT “17. '', '' '' 15 16 atATऔरा dat & Tact aTTRATTA—ARTऔरा AX SA ART (ii) HISAH AT AWA; (iii) HIS STS]; (iv) HT AAA UT ASTGNT H Acct Ul FAH HAART HS Woh, PATA, ATH UT ATH; (v) daa HI Hts ATA; (vi) ThatHAART SI (AT WT BaHiar pt Hat At sah sj Asa A wad His Atभ;aT (vi) Teeat AAT WIT Vay Tate A ANT Gat Tet BAIN H Wd F ATG WPT A ars, 6 ;qsTote AAT teh Tes AM 314at AUT Ho TAAPAM HIAVAS(vii) atoUT & & TAA11 sp 37-गिनायम (2) HAST AAT MT A TAT AUT TTIAT HT SetIT, Sa SAT aA US AH ST-गिनायम (4) bh sit Hr ahgTs; औरा (viii) OTRT80-HAST A TASS GT UST &H SAT THAT PHAN H GAT F TSet TThe UTS OT Hat stg Prateat SRT HAT WAT APTS | 5. , soled H At AHEIh HUT SIRT ERT AY TAT WAST TAT &40% pt Tet Hl H STs HT SAH HE [SAT TAT AT | STAHL START(rater) ft artite, BUNT HX ST! AAGMARL AAT AAT F HLSTAT & FTF TAIT BATT |, अतd यह, ete Seq TATA UST & Fal A ATRataet Satet We HTSBI 6 . Uistsct TA VAST eet[1]Tea fe VIA Saat STAT PT &H TIHTS STATA SMT Blot Wises THAT Tat16 b AAA BX HPS Fat S$ HN AH Halal H Aeaka Hig Hela FNt S| ITb Ma, R.ए. WS AMT RSs H Sd St HASH FoI UAT Ft GING HE TSAT UTeR TATA, .ए. AMlITSet STET WAT[2]H ST Weal Seq ATTA SIRTWsttset TAA SSS[3] औरा. Tara[4]FAS Seg TTA SRT Mstsct TATAअराH Sal AS HT SeHrmr, ATTA TAT 8 | ASMSaT TATA ATTA PS[5]UisSsetTATATTAPU Yl[6] म5 मTe FoI ANAT Bt Hlsect TATA UAT STATA[7], . UTAT TH UST H FST F | TATAWstset TAA LHMUTATS Taee[8]APSR AAITATA ebt ART10(14) Tat Te1-4-1989 HY YH AA ANT AMAA Wald BT UsTION GSH ATATAT S |1-4-1989 BUSSa BL ART10(14) SA UP BI: “10. - Sa ST HATA AeUt HT AS STAeat Ht Alekt Ht Set TI Ht Het BT FI, TOAAAA RAT A A aT TAS H AGT A Ae THAT AT SATS HT STATA Nl-reat ST (14) Hig TIMI WAT UT ATH, SitITT17 b WS(2) b AU A AAS AA AT AT ATA, , Tagty SIG Scales ATASaSSTAQUSH 3ikt TagTy BT A , 3H Hareeu TU AAT Hl WT Hed H (AU TEM AAT S| Hat ATH | Ve AT TassA;"Th SA AAT ah VS AAT AAT A SH TSQa &H Teqw Tu sid S 2.(1990) 183 ITR 29 ( SMe WaT) 3 . (1999) 235 ITR 514 ( Tae). 4. (2000) 242 ITR 563 ( Toe).. 5 . (1995) 215 ITR 224 ( SETA). 6 . (2001) 248 ITR 819 (मबई ). 7 . (2001) 250 ITR 828. 8 . (1999) 235 ITR 635. (STR FEAT TAT) 7. "ATH" pt IT10(14) b TAX A TTL VAT TAT Sl ATTA ht MT]17(2) <p"3TetdNe)" HEAATTAT THAT TAT S | TAT17(2) ob Bieta LTS THIUT3 TIE HT A:STS HLA S TH "3.-... '' , , THTCtrHUH UT steep MatasAFUTATA UT SII Fa, , CreswaGAS OT PAR BT at At ATA A AAT ST Tell HIS Alla Ysig...।"UATz 1.3. The appellant being a salaried person, the incentive bonus received by him prior to 01.04.1989 has to be treated as salary. and he is entitled only for the permissible deductions u/s 16 of the Act. The expenses incurred in the performance of duty as Development Officer for generating the business so as to make him eligible for the incentive bonus is not a permissible deduction and, therefore, the same is exigible to tax. [para 11] [822-E-G] Case Law Reference: . (1998) 229 ITR 71 (Karnataka) approved (1990) 183 ITR 29 (Andhra Pradesh) approved (1999) 235 ITR 514 (Madras) approved (2000) 242 ITR 563 (Madras) approved (1995) 215 ITR 224 approved approved para 6 approved para 6 G approved para 6 approved para 6 approved para 6 approved para 6 H (Orissa) (2001) 248 ITR 819 816 SUPREME COURT REPORTS From the Judgment and Order dated 02.11.2001 of the c High Court o Kerala in ITA Nos. 8, 20, 21, 22 of 2000 and 31, 42 & 49 of 2001. Meha Aggarwal, Varun Tandon, Wadud Aman, Subramonium Prasad for the Appellant. Amarjit Singh Chandhiok, ASG, Arijit Prasad, Ritesh Kumar, S.A. Haseeb, Shweta Gupta, Honey Kumari, Mallika Ahluwalia (for B.V. Balaram Das) for the Respondent. The Judgment of the Court was delivered by KURIAN, J. 1. Whether the incentive bonus paid to the Development Officers by the Life Insurance Corporation (hereinafter referred to as 'UC') prior to 01.04.1989 would form part of the salary and, thus, exigible to income tax, is the issue arising for consideration in this case. SHORT FACTS 2. Appellant - T.K. Ginarajan, Development Officer in the. LIC claimed deduction of 40% of the incentive bonus paid to him in the Return of Income-Tax for the various years prior to G 01.04.1989 on the ground that he had incurred expenditure to the extent of 40% of the incentive bonus for canvassing business. LIC of India had requested the Central Board of Direct Taxes (hereinafter referred to as 'CBDT') for a clarification on deduction explaining that the Development T.K. GINARAJAN v. COMMISSIONER OF INCOME TAX, COCHIN, KERALA [KURIAN, J.] Officers had actually incurred some expenditure in the performance of their duty, to the tune of at least 40% of the incentive bonus paid to them. However, the CBDT affirmed that the incentive bonus paid by the UC to the Development Officers formed part of their income towards salary. To quote: " ... Such portion of the incentive bonus which is actually spent by the Development Officer for duties of office can still be exempted from tax if the UC makes the payment against the expenses incurred by the Development Officer by way of reimbursement of C expenses. In that case, such reimbursement will not form a part of the 'salary' of the Development Officer and only the incentive bonus will appear in their salary certificates. UC has not certified that a part of the incentive bonus is against the expenses incurred by the Development Officers by way of reimbursement of expenses. If such a D part is certified and thii!t part will not form part of the salary and that part of the incentive bonus which is not certified will appear in the salary certificate. Hence, no deduction is contemplated from the incentive bonus, which finds a place in the salary certificates .... " E 8. SUH AAA, ORT10(14) HAMA ATs WATS TS1-4-1989 Ute SiaCatt FHT TT Ae sl SAA HU ATHY NT AAI AA Hl WANT HAT , , Sq ESTTAU BT PA S SH SA Rata FSTAT feb UTSHStSt ST VATE THAT TAT z, , तकेSU Ada ch SS SH HT FH Nl TATA STITT | LAATSTAT fe HUT TET UTATATT, TAU A IRS BY Y Soa THAT TITSPHAR SRI HAA H Test A ey WT Tedrasae ptWaTTOT AAS HT HIS STAT ARTS | TULA S Y SAT Us SATA Seq AATHl ASM A Ae AT AAS Tes A UNAS Stat AAT TTA ST AteltStet Ht, CTL ch TAT feat TT TA A WMT BST IT, cb TTT EU TT AT SH HT FS Ses VICTSA TAA H TAT ATA TATA SWicd TAT40% Ht AAT AH Se SA AH S | TSN FoI YATAY UaStet H SF HATS WT LATAoo FH Tarte Tal ee TAHT STATING SRI HAA H eta FA MAA IRs BA aप्रगितपी र्ft HLA MAA SIT STAT TTA HT HUA S BX TA AAT ash Sa Ida H BT A Feat.TATA STAT TIT | 9. , TATAS MGT H Baa BIT HT PATS BI HT TP UT Ht TAT Gat S Hetatछ टीBA Wd H Hct H 34RatSeat€| SST Te SI AMT A HAIR AT IATA AURA AT(2000) 3 SCC 335 म5, , 1961 -ATTA THAT TAT ATआयकेरा अगिधांगिनायमUhTalat ASAT S Sy Tea HTTTT BT Wt St WI Ht HLS SAAT A TSU WT Veal AT ATA HT Tea Wa sw H, Mat UT TAIN Ht Aat Sl SA WHRBF THLOTMTS ATAct FST SeT ATTAENT AIAG TY SEH H MSA AaNt S| FES TA H TNl ASIA Hi AN TNt HAT S| 10. TAY soteathal & TISIA Bla A TAATTet Use TAT SHAT eles1999 1 SCC 198 ,HSM UMTS H ATT AL TAA HLA HT UHTh Ware Hatcited BA St 6 fh SAM WMH Ht His Aas el Tettl Saat THOT F StecthaaAICATET TTA HAT Hl TANT ASAT B | SHA TATA FH TAT THAT TAT UA BS UT Pe FAT, , , 1979SHAT TAS AAT HT TESA SETI SHAT Te FatATA" " पीरा पीब्धिश्चीम बTe UST HL H BATA TRAN THAT TAT Sl Sa AAMASatpICRUTSTUt Tae Aad Hd ST AMMAN Hal te sat AMAIA Hac, TATA STE AE OTN ATA Slt ht RATT ASAT UT ALATA TAT TAT Te MIST TAS HT AMATMIATA HAGA BAileHal H Act FH Us CATH IT fate Rata Aet s sik, salery 11. , 1-4-1989 AU AHaAL Uh ATTHET Aleka SY Uset SAK SRT UT WIA St TATA Ht16 Fas AAT STUNT SAX TS SHIT ATTA HT ATTHAMA ATA Hela HI SHAN,S| DIS Sa BLA H Tere Tara BIN S BST A HAA HA Alou AA, ,Tes SS WIA SA TAS H TAT WT TATA ST . US BX H STATA MAT S | Aer H HS Tet TNT FतदानाRate SUNS Ht ATA S|GAb INH His MST Tet THAT AAT | .AAT AUST - अनाTahUH PHAM WIS AIL AAT Te GA TAT TAQyUTA STA ITTTAIT SIT TAAAAT ATS SAL WSQT 3. However, with effect from 01.04.1989, the UC itself issued a clarification to the effect that the Development Officers would be entitled to claim reimbursement to the extent of 30% of the incentive bonus granted to them. Thus, the dispute is confined only to the period prior to 01.04.1989 and, thereafter, the Development Officers are entitled to the reimbursement of actual expenses incurred by them, to the extent of 30%. In other words, after 01.04.1989, only that part of the incentive bonus after reimbursing the expenses to the extent of 30% will appear in the salary certificate. What is the fate of the incentive bonus to the Development Officers in UC prior to 01.04.1989 for the purpose of income-tax is the question to be considered in this case. 4. Income towards salary is explained under Section 15 A of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act'). Permissible deductions are provided under Section 16. The inclusive definition of 'salary', 'perquisite' and 'profits' in lieu of salary is given under Section 17 of the Act. It is now trite law that the Income-Tax Act, 1961 is a complete code as far as tax B on income is concerned. 'Income' is defined under Section 2(24) of the Act and the computation of income is provided under Chapter-Ill of the Act (starting with Section 10). In the case of salaried persons, the only permissible deduction is under Section 16 of the Act. Section 17 has clearly provided for the c details of income by way of salary. There is no serious dispute in this case that the incentive bonus paid to the employee by the employer is nothing but salary and there cannot be any dispute either since such payments are covered by the exhaustive definition of 'salary' under Section 17(1). For the 0 [purpose ][of ][ready reference, we shall extract the same: ] ""Salary", "perquisite" and ~·profits ir:t lieu of salary" defined. 17. For the purposes of sections 15 and 16 and of this E section,- (1) "salary'' includes - (i) wages; (ii) any annuity or pension; (iii) any gratuity ; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; (vi) any payment received by an employee in respect of any period of leave not availed of by him; {vi) the annual accretion to the balance at the credit T.K. GINARAJAN v. COMMISSIONER OF INCOME TAX, COCHIN, KERALA [KURIAN, J.] of an employee participating i.n a recognised provident fund, to the extent to which it is chargeable to tax. under rule 6 of Part A of the Fourth Schedule; {vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; and (viii) the contribution made by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD;" 5. In the case of the appellant, the claim for exclusion of 40% of the incentive bonus towards the expenditure was declined by the Assistant Income-Tax Officer. The Commissioner of Income-Tax {Appeals) dismissed the appeal. However, the Income-Tax Appellate Tribunal held in favour of E the assessee. But the High Court was in favour of the Revenue and, thus, the Civil Appeal. 6. The Full Bench of the High Court of Karnataka in XXX XXX XXX Commissioner of Income-Tax vs. M.D. Patil' took the view that incentive bonus earned by the Development Officers of the UC of India is nothing but salary and no deduction over and above the standard deduction provided under Section 16 is permissible under the Act. Accordingly, the claim of expenditure or net income theory put forward by the Development Officers was rejected by the High Court of Karnataka. Similar is the view taken by the High Court of Andhra Pradesh in K. A. Choudary vs. Commissioner of Income-Tax and Others2, the Madras 1. (1998) 229 ITR 71 (Kamataka) 2. (1990) 183 ITR 29 (Andhra Pradesh) A High .Court in Commissioner of Income-Tax vs. E.A. Rajendran[3 ]and in Commissioner of Income-Tax vs. P. Arangasamy and Others[4 ], the Orissa High Court in the deGision in Commissioner of Income-Tax vs. Sri Anil Singh[5], the High Court of Bombay in Commissioner of Income-Tax vs. B Gopal Krishna Suri[6 ]and the Calcutta High Court in Commissioner of Income-Tax vs. Ram/al Agarwala[7], all in favour of the Revenue. However, the High Court of Gujarat in Commissioner of Income-Tax vs. Kiranbhai H. She/at and Another8 has taken a contrary view placing heavy reliance on c Section 10(14) of the Act as it stood prior to 01.04.1989. Section 10(14) of the Act prior to 01.04.1989 reads as follows:- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-D (14) any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose." 7. "Perquisite" is excluded from the purview of Section 10(14). 'Perquisite' is defined under Section 17(2) of the Act. Explanation 3 under Section 17(2) clearly provides that: G 3. (1999) 235 ITR 514 (Madras). 4. (2000) 242 ITR 563 (Madras). 5. (1995) 215 ITR 224 (Orissa). 6. (2001) 248 ITR 819 (Bombay). H 8. (1999) 235 ITR 635. T.K. GINARAJAN v. COMMISSIONER OF INCOME TAX, COCHIN, KERALA [KURIAN, J.] 821 ""Salary" includes the pay, allowances, bonus or A commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be, .... " 8. That apart, what is excluded under Section 10(14) as it stood prior to 01.04.1989 is the expenses incurred in the performance of the duty. It is for the employer to certify the actual expenses incurred in the performance of duty and in which case, as clarified by the CBDT, to that extent, the same shall not be shown as part of salary. On facts, as clearly noted in the Judgment of the High Court of Kerala, there is no claim by the employee either for reimbursement or exclusion of the actual expenditure incurred in performance of the duty. These two distinctions unfortunately missed the notice of the High Court of Gujarat. The Court in fact was swayed by the letter written by the UC of India to the CBDT for clarification that, to the extent of 40% of the incentive bonus could be exempted as expenditure incurred for the development of business which made them eligible for the incentive bonus. The High Court of Gujarat failed to take note of the reply by the CBDT that it was for the UC of India to reimburse the actual expenditure involved in the performance of the duty by the Development Officers and to that extent the same was not to be shown as salary. 9. Compartmentalization of income under various heads and computation of the taxable portion strictly in accordance with the formula of deductions, rebates and allowances are to be done only as per the scheme provided under the Act. As held by this Court in Karamchari Union, Agra vs. Union of India and Others9, the Income-Tax Act, 1961 is a self contained code and taxability of the receipt of any amount or allowance has to be determined on the basis of the meaning given to the words or phrases given in the Act. Thus, we do not agree with the view taken by the High Court of Gujarat in Kiranbhai's case 822 SUPREME COURT REPORTS [2013) 7 S.C.R. A (supra). The same does not lay down the correct principle of law . . 10. Though learned counsel for the appellant made a persuasive attempt to place reliance on the decision of this 8 [Court in ][State ][of ][West Bengal and Others ][vs. ][Texmaco ]Limited'[0], we are afraid the same is of no assistance to the appellant. The incentive bonus referred to in the said decision is the special scheme of the company. The question considered in the said decision was as to whether the said bonus would form part of salary as defined under the West C Bengal State Tax on Professions, Trades, Callings and Employments Act, 1979. This Court held, placing reliance on the definition of 'salary' in the said Act that only in case there was remuneration on a regular basis, the same was exigible to tax under the said Act. On facts, it was found that there was D no regular payment of incentive bonus. That is not the factual or legal position in the case of the appellant under the Act and, therefore, the said decision is not relevant at all for the purpose of this case. 11. The appellant being a salaried person, the incentive bonus received by him prior to 01.04.1989 has to be treated as salary and he is entitled only for the permissible d