COMMISSIONER OF INCOME TAX V. BALVANTRAI ALIAS SURESHBHAI SHANTILAL DESAI

TAXAP/794/2007

AI Insights

The case involves an appeal by the Commissioner of Income Tax against Balvantrai alias Sureshbhai Shantilal Desai concerning the assessment year 2003-04. The primary issue was the allowability of a deduction out of an Incentive Bonus that formed part of the salary, which the assessee claimed was exempt under a previous decision of the Gujarat High Court. However, this decision was later overruled by the Supreme Court in T.K. GINARAJAN VS. CIT, which clarified that only deductions under Section 16 of the Income-tax Act, 1961 are permissible for salaried individuals. The High Court of Gujarat, referencing this Supreme Court decision, allowed the Revenue's appeal, thereby rejecting the assessee's claim for the deduction.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 699617 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 16-12-2014
• Assessment Year: misc
• Other Referred Cases: T.K. GINARAJAN VS. CIT, CIT VS. KIRANBHAI H. SHELAT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: TUSHAR HEMANI
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Deduction; Development Officer; Incentive bonus; Income Tax; LIC of India; Salary
• Section: 142(1); 143(2); 17(1); 16

Judgement Text

"O/TAXAP/794/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 794 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus BALVANTRAI ALIAS SURESHBHAI SHANTILAL DESAI....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR TUSHAR P HEMANI, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 16/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is an appeal by the appellant- Revenue, seeking to assail the order of the learned ITAT, Ahmedabad Bench ‘C’ (for short, ‘The Tribunal’), Dated : 11.09.2006, rendered in ITA Page 1 of 5 O/TAXAP/794/2007 JUDGMENT No.1718/Ahd/2006 for A.Y. 2003-04, whereby, the Tribunal dismissed the appeal of the Revenue. 2. The brief facts leading to the filing of the present appeal are that the assessee- Respondent, herein, filed his return of income for the A.Y. under consideration on 22.03.2004, declaring his total income at Rs.11,56,860/-. The case of the assessee was selected for scrutiny and he was issued notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961 (for short, ‘the Act’). Subsequently, the concerned AO made certain additions / disallowances and assessed the income of the assessee at Rs.14,26,070/-. The assessee, hence, approached the CIT(A) by way of an appeal, which came to be allowed in part. Being aggrieved with the same, the Revenue preferred an appeal before the Tribunal, wherein, the Tribunal passed the impugned order. Hence, the present appeal. 3. At the time of admitting the present appeal, this Court framed the following question of law; “Whether on the facts and in law the Appellate Tribunal is right in upholding the order of the CIT(A) on the issue of allowability of deduction out of Incentive Bonus forming part of salary without appreciating the fact that the assessee has received reimbursement of expenses separately which have not been included in salary income?” Page 2 of 5 O/TAXAP/794/2007 JUDGMENT 4. Mr. Mehta, learned Advocate for the appellant-Revenue, at the outset, submitted that the question framed in this appeal is no more res integra and the same is answered in favour of the Revenue by the Apex Court vide its decision in “T.K. GINARAJAN VS. CIT”, [2013] 356 ITR 618 (SC), wherein, the apex Court has observed that in the case of salaried persons, the only permissible deduction is under Section 16 of the Income-tax Act, 1961. The Apex Court, further, observed and held that the incentive bonus paid to the employee by the employer is nothing but salary covered by the exhaustive definition of salary in Section 17(1) of the Act, and therefore, incentive bonus paid to Development Officers by the Life Insurance Corporation of India would form part of salary and would thus be exigible to income-tax. 5. From the record it appears that, in the case on hand also, the assessee was serving as Development Officer with LIC of India and as per the computation of income supplied by him along with the return filed for the A.Y. 2003-04, he had received Rs.14,48,624/- towards gross salary. Out of the same, he claimed exemption of an amount of Rs.3,48,883/- received by him towards Conveyance & Additional Conveyance allowance to the total Incentive Bonus Commission by relying on a decision of this Court in the case of “CIT VS. KIRANBHAI H. Page 3 of 5 O/TAXAP/794/2007 JUDGMENT SHELAT”, [1999] 235 ITR 635 (Guj.). However, now, the Apex Court has overruled the aforesaid decision of this Court and has held that only permissible deduction available to a salaried person is under Section 16 and under no other provision of the Act. 6. Mr. Hemani, learned Advocate for the respondent-assessee, is not in a position to point out any other judgment of the Apex Court, taking a contrary view to the one taken by it in the case of “T.K. GINARAJAN VS. CIT”(Supra). 7. Under the circumstances, since, the issue is already answered by the Apex Court in favour of the Revenue, we do not propose to make any further observations in this regard and the present appeal deserves to be allowed. 8. In the result, present appeal is ALLOWED. The orders passed by the CIT(A) as well as the Tribunal stand quashed and set aside. It is held that on the facts and in law the Appellate Tribunal is not right in upholding the order of the CIT(A) on the issue of allowability of deduction out of Incentive Bonus forming part of salary without appreciating the fact that the assessee has received reimbursement of expenses separately which have not been included in salary income. The question is answered in FAVOUR of the appellant- Revenue and AGAINST the respondent-assessee, accordingly. Page 4 of 5 O/TAXAP/794/2007 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 5 of 5 "