Delhi High Court

Ambrish Jalswal vs Astt. Cit on 30 June, 2003

Equivalent citations: (2004) 87 TTJ Del 777

ORDER

Rambahadur, J.M.

These two appeals by the assessed arise out of the consolidated order of the Commissioner (Appeals), Bareilly, dated 6-11-1997 for the assessment years 1995-96 and 1996-97. They are taken together and, disposed of by this common order for the sake of convenience.

2. Ground No. I which is common in both the appeals, relates to the alleged non-justification of the Commissioner (Appeals) in restricting the deduction for additional conveyance allowance to Rs. 20,000 as against Rs. 43,229 claimed for assessment year 1995-96 and Rs. 40,000 as against Rs. 82,061 for the assessment year 1996-97. In both the cases, the assessing officer observed that the information was sought from the LIC of India which has intimated that the assessed has not furnished any details or given any undertaking that he has actually incurred expenses to the extent of Rs. 43,229 and Rs. 82,061 wholly and exclusively for the purpose of employment. During the scrutiny proceedings also the fact was brought to the notice of the assessed vide different order-sheet entries and also vide detailed notice dated 4-2-1997. The assessed replied that the various allowances including the additional conveyance allowance are paid to the development officers of the LIC of India on the basis of appraisal itself which just means that such allowance are determined on the basis of the work done or turnover of insurance premia given by the development officer. Further it has been observed by the assessing officer that the internal circulars of the LIC of India clearly stipulate that in order to get benefit of conveyance allowance/additional conveyance allowance, the Development Officer has to give (i) monthly details of metre reading of his Vehicle and (ii) has to produce bills of repairs and petrol, etc. every month to the employer which has not been given. Against this partial allowance of the additional conveyance allowance, the assessed went in appeal before the Commissioner (Appeals) who has held that the additional conveyance allowance in the particular case is not actual reimbursement of expenditure incurred though it cannot be denied that some expenses for traveling on duty is inherent. To be entitled to exemption under section 10(14) it was for the assessed to furnish all necessary evidence that he had actually incurred so much expenditure. Such details have not been furnished or maintained by the assessed. Therefore, estimate has to be made. There is no doubt that while giving the additional conveyance allowance, the employer must keep in mind the reasonableness of actual traveling by the employee. In the absence of any details, the Commissioner (Appeals) estimated Rs. 20, 000 and Rs. 40,000, respectively as reasonable amounts which could have been actually incurred towards traveling by the assessed for the assessment years 1995-96 and 1996-97. Feeling dissatisfied against this order of the Commissioner (Appeals) the assessed is in appeal before the Tribunal.

3. We have heard both the parties, Shri Ambrish Jaiswal, the assessed himself and Shri R.R. Prasad, learned departmental Representative for the revenue. On the basis of written submissions, the assessed contended that the assessing officer had restricted the deduction for additional conveyance allowance to Rs. 10,000 only as against Rs. 43,229 claimed to have been incurred by the assessed. The said deduction was raised to Rs. 20,000 by the learned Commissioner (Appeals). Both the authorities have failed to take into account the LIC's internal circulars in the matter. He has relied on the CO Circular Ref. No. Mktg./ZD/10/87 dated 3-3-1987 which very explicitly states the various amounts up to which the amount reimbursed on account of additional conveyance allowance presumably incurred to contact and develop the agents for procuring new business has been prescribed. Therefore, he has prayed for exemption of Rs. 35,000 instead of Rs. 20,000 in one case. In other case also similar request has been made. On the other hand, the learned departmental Representative Shri R.R. Prasad relied on the order of the Commissioner (Appeals) and contended that no details have been furnished by the assessed and that is why the estimate has been made. The assessed was required to furnish necessary evidence for incurring actual expenses. Hence, no interference with the order of the Commissioner (Appeals) is called for.

4. After having heard both the parties and perusing the record, we are of the view that no interference in the order of the Commissioner (Appeals) is called for since his order is well reasoned and necessary evidence has not been furnished by the assessed. Hence, this ground is rejected.

5. Ground No. 2 common in both the appeals, relates to the alleged non-justification of the Commissioner (Appeals) in not allowing expenses at 40 per cent against incentive bonus and in treating the same as part of salary. It has been observed by the assessing officer that the assessed has not maintained any accounts of such expenses of traveling, gifts to prospective and existing policyholders and others, postage, telephones, etc. and this goes to show that the assessed does not have in his possession any evidence whatsoever in regard to the genuineness of such expenses for the purpose of earning bonus. The claim of 40 per cent expenses has been made on the basis of decisions of the Tribunal which cannot be said to be general in nature and depend on facts and circumstances of each case. Hence, he has disallowed the claim against which the assessed went in appeal before the Commissioner (Appeals) who has also confirmed the order of the assessing officer against which the assessed is in appeal before us.

6. It has been held by the learned Commissioner (Appeals) that the incentive bonus received by the development officer is nothing but part of salary within the meaning of section 17 and therefore, income has to be computed under section 16 and only deductions which are deductible under section 16 are to be allowed against such income. The deduction at 40 per cent of incentive bonus is not allowable deduction under section 16. It is another matter whether the incentive bonus is covered under section 10(14) of the Income Tax Act. The learned Commissioner (Appeals) has relied on Board's Instruction No. 149/24/96/T-L dated 19-12-1996 which has clarified that request for notifying the incentive bonus paid to the development officer under sub-cl. (1) of clause (14) to section 10 of the Income Tax Act, 1961 cannot be acceded to. However, the same circular added that portion of allowance certified that having actually incurred in the performance of duties shall be exempt under the above provisions. In the present case, the assessing officer has asked to furnish details of actual expenditure incurred and the assessed has not been able to produce any evidence of actual expenditure incurred.

7. The assessed contended that he should be given exemption @ 40 per cent of the incentive bonus since it is not a part of the salary. On the other hand, the learned departmental Representative has relied on the judicial pronouncement of the Hon'ble Bombay High Court in the case of CIT v. Gopal Krishna Suri 2001) 248 ITR 819 (Bom), in which it has been held that under the circumstances the amount paid as incentive, the amount paid as remuneration as also the amount paid after deducting the disincentives constitutes salary in the hands of the employees. Such payments do not have any other legal character. Secs. 16 and 17 of the Income Tax Act are wide enough to take within their ambit all the above payments which are made only by virtue of the development officer being the employee of the LIC. These payments are in the nature of commission which is calculated at the percentage of premium generated. Hence, they are exigible to tax as part of salary income. Once these payments are exigible to tax as salary then such employees cannot claim any deduction other than standard deduction under section 16 of the Income Tax Act. Hence, after having heard the assessed himself in person and the learned departmental Representative and relying on the judicial pronouncement as cited above, we are of the view that no interference in the order of the Commissioner (Appeals) is called for since incentive bonus partakes the character of salary. The same is confirmed.

8. Ground No. 3 which is common in both the appeals reads as under :

"3. Because the learned Commissioner (Appeals) failed to appreciate the fact that unless the appellant puts in more labour and more expenses for convassing new cases, he cannot earn "incentive bonus", and the learned Commissioner (Appeals) also failed to appreciate the fact that the incentive bonus keeps on fluctuating depending upon the business brought by the appellant for the LIC of India, and the incentive bonus is not linked to "salary", but is directly relatable to the business done by the appellant. "

This ground is covered by the ground No. 2. Hence it is also rejected.

9. Ground No. 4 common in both the appeals, relates to the alleged non-justification of the Commissioner (Appeals) in not allowing depreciation on the car used for earning the incentive bonus. Simply going to office and coming back home, is definitely covered by the standard deduction under section 16(1) of the Act, but it was wrong to give the same treatment to depreciation on the car used for procuring business for the principals, the LIC of India. The assessing officer disallowed the depreciation on the car owned by the assessed on the ground that the car is being used for the purpose of his employment and not for business and depreciation under section 32 is not allowable against which the assessed went in appeal before the Commissioner (Appeals) who has confirmed the order of the assessing officer against which the assessed is in appeal before us.

10. It has been held by the Commissioner (Appeals) that the incentive bonus constitutes the salary income of the assessed and not business income. There is no business income except income from salary and other sources. Therefore, depreciation under section 32 with regard to the car owned by the assessed is not admissible.

11. The assessed who appeared himself, contended that there is a direct contradiction in the orders of the IT authorities at various levels inasmuch as they have held that incentive bonus is a part of salary only entitled for no additional deduction except prescribed under section 16 while accepting the fact that had details of expenses been maintained by the assessed, the admissibility of expenses against such amounts could have been considered. On the other hand, the learned departmental Representative supported the orders of the authorities below. Since incentive has been held to be a part of the salary, depreciation on the car cannot be allowed because the car has been used for earning the salary. This ground is also rejected.

12. In the result, both the appeals are dismissed.