V.v.s.rao, J v. B.n.rao Nalla, J

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.17 of 1997 Dated:26.12.2011 Between: Commissioner of Income Tax,Guntur. …Applicant and Sri Ch.Perareddy, Nandyal. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.17 of 1997 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax, Guntur, got the followingtwo questions referred to the opinion of this Court under Section 256(2) of the Income Tax Act, 1961. 1. Whether on the facts and in the circumstances of the casethe ITAT is correct in holding that 40 per cent of the incentivebonus is an allowance of the nature mentioned u/s.10(14) andexempting the same under that provision? 2. Whether on the facts and in the circumstances of thecase, finding of the ITAT that the incentive bonus included anallowance either to the extent proved, or reasonably at 40percent of the incentive bonus, which is exempt u/s.10(14), is based on any material available on record? The brief fact of the matter is as follows. Therespondent/assessee at the relevant time was DevelopmentOfficer. For the relevant assessment year, he claimed deductionof 40% of incentive bonus received by him, which was rejected bythe Income Tax Officer. The assessee was successful in hisappeal before the first appellate authority. The Revenue carriedthe matter by way of further appeal before the Tribunal. TheAppellate Tribunal upheld the findings of the first appellateauthority. Aggrieved by the same, the Revenue sought referenceunder Section 256(2) of the Act. The questions referred to hereinabove are squarely coveredby a 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, both the questions are answered inthe negative 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) 26.12.2011 vs [1](1995) 214 ITR 368 ____________________ (B.N.RAO NALLA, J)