COMMISSIONER OF INCOME-TAX VS MANGILAL JAIN, 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 3788 (1996)

Income-tax ---

----Reference---Deduction---Whether L.I.C. Development Officer is entitled to claim 40 per cent. deduction as expenses from incentive bonus or commission---Conflict of opinion among High Courts---Question to be referred---Indian Income Tax Act, 1961, S.256(2).

Held, that whether the assessee, a Development Officer in the L.I.C., was entitled to claim deduction of 40 per cent. as expenses out of incentive bonus or commission was a question of law.

Where there is a conflict of opinion among High Courts, a referable question of law arises.

CWT v. Gayatridevi (Smt.) (1996) 222 ITR 797 (MP.) ref.

Choudary (K.A.) v. CIT (1990) 183 ITR 29 (AP.) ref.

D.D. Vyas for the Commissioner. S.C. Goyal and V.K. Jain for the Assessee

JUDGMENT

A. R. TIWARI, J.---The applicant (Commissioner of Income-tax, Bhopal) has filed these applications under section 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking a direction to the Tribunal to state the cases and to refer the common question of law as contained in the applications and extracted below in respect of the two assessees, M.L. Jain, non-applicant, in Miscellaneous Civil Case No.203 of 1992, Miscellaneous Civil Case No.207 of 1992 and Miscellaneous Civil Case No.216 of 1992 for the assessment years 1983-84, 1984-85 and 1985-86 and non applicant/assessee, S.C. Nigam, in Miscellaneous Civil Case No.208 of 1992, Miscellaneous Civil Case No.209 of 1992 and Miscellaneous Civil Case No.210 of 1992 for the assessment years 1983-84 and 1984-85 and 1985-86 arising out of the orders, dated July 16, 1991, passed by the Tribunal in I.T.As. Nos.583, 584 and 585/(Ind) of 1988 after rejection of the application registered as R.As.Nos.301, 302 and 303/(Ind) of 1991 on November 28, 1991, and orders dated June 10, 1991, passed by the Tribunal in I.T.As. Nos.467, 468 and 469/(Ind) of. 1987 after rejection of the applications registered as R.A. Nos.146, 147 and 148/(Ind) of 1991 on November 22, 1991, respectively, for the above mentioned assessment years presented under section 256(1) of the Act, for our opinion:

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that incentive bonus and additional conveyance allowance granted to the Development Officer of the L.I.C. was not a part of salary and that the assessee was entitled to claim 40 per cent expenses out of it ?"

Right at the threshold it need to be stated that the applications and proposed common question also contained the receipt of additional conveyance allowance by the non-applicants holding the post of the Development Officer in the Life Insurance Corporation, but the orders of the Tribunal did not contain the controversy in this regard. Even the questions proposed under section 256(1) of the Act before the Tribunal were limited to incentive bonus and had not covered the additional conveyance allowance.

The aforesaid question, therefore, is not proper and in the case of acceptance of the prayer contained in these applications, is required to be reshaped and reformulated.

The facts lie in a narrow compass. The non-applicant/assessee received incentive bonus and claimed deduction of 40 per cent as expenses incurred to earn the same. This claim was negatived by the Income-tax Officer and the, first appellate authority. The Tribunal, however, accepted the contentions of the non-applicant/assessee and allowed the appeals. The applicant felt aggrieved by the orders of the Tribunal and as such filed the applications under section 256(1) of the Act. The applications were, however, rejected on the assumption that there was no referable question of law. Thereafter, the applicant filed these applications in this Court.

We have heard Shri D.D. Vyas, learned counsel for the applicant/Department; Shri S.C. Goyal, learned counsel for the non applicant/assessee-M.L. Jain and Shri V.K. Jain, learned counsel for the non-applicant/assessee---S.C. Nigam, in all these cases.

Counsel for the applicant submitted that the orders of the Tribunal give rise to the question of law, which may of course be reshaped and reformulated. He submits that there are conflicting decisions on the point involved as is clear from ITAT and Sixth ITO v. Narendra Patel (1985) 11 ITD 587 (Bom.) and K.A. Choudany v. CIT (1990) 183 ITR 29 (AP).

Counsel for the non-applicants, on the other hand, submitted that the orders of the Tribunal are based on an appreciation of facts and thus, do not give rise to any question of law.

The core question is whether the assessees are entitled to get deduction of 40 per cent by way of expenses incurred in earning the incentive bonus or commission or entitled only to get standard deduction.

It is noticed that a proviso to section 10(14) of the Act is inserted by the Direct Tax Laws (section Amendment) Act, 1989, effective from April 1, 1989, which read as under:

"Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office of employment unless such allowance is related to the place of his posting or residence;"

This Court has held that in the case of conflict of opinion in Miscellaneous Civil Case No.69 of 1991---CWT v. Smt. Gayatridevi (1996) 222 ITR 797, decided on February 27, 1996, a referable question does arise and is required to be answered by this Court so as to settle, the controversy.

We, therefore, hold that a proper question of law does arise out of the orders referred to above.

With the consent of the parties, the question proposed is reshaped and reformulated as under:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to claim 40 per cent. expenses out of the amount received by him by way of incentive bonus or commission ?"

In view of the aforesaid position, we allow these applications in terms indicated above, but with no orders as to costs. Accordingly, we call, upon the Tribunal to state the cases and refer the aforesaid common question of law in each case for our opinion.

Counsel fee for each side in each case is fixed at Rs.750, if certified.

Transmit a copy of this order to the Tribunal immediately. The Tribunal is directed to make an endeavour to comply with the direction issued by us within ten months from the date of receipt of the copy of this order by it.

Retain this order in Miscellaneous Civil Case. No.203 of 1992 and place its copy each in the connected miscellaneous civil cases as particularised above for ready reference.

M.B.A./1600/FC Order accordingly.