Sudesh Gupta, New Delhi V. ITO Ward-44 (2), New Delhi

ITA 3011/DEL/2008

• Counselvise Citation: 301120114 RSA 2008
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-09-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 30-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Opportunity of being heard; Difference of opinion; Change of opinion; Set aside
• Section: 10(14); 147; 10

Judgement Text

FIT FOR PUBLICATION IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE PRESIDE NT & SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS. 3010 & 3011/DEL/2008 ASSESSMENT YEARS: 1996-97 &1997-98 MR. SATISH GUPTA VS. INCOME TAX OFFICER, L/H OF LT. SH. SURESH GUPTA, WARD 44(2), 367 E, POCKET II, MAYUR VIHAR, NEW DELHI. NEW DELHI. PAN NO. - (APPELLANT) (RESPONDENT) APPELLANT BY : SH. D.V. TANEJA, FCA RESPONDENT BY : SH. B.R.R. KUMAR, SR. DR ORDER PER A.D. JAIN, J.M. THESE ARE ASSESSEES APPEALS FOR ASSESSMENT YEARS 1996-97 & 1997-98 AGAINST THE CONSOLIDATED ORDER DA TED 15.07.2008 PASSED BY THE LD. CIT(A)-XXX, NEW DELHI. THE FACTS IN BOTH THE APPEALS BEING IN PARI MATERIAL IN TER SAY, FOR FACILITY, THERE BEING TAKEN FROM ITA 3010/DEL/2008, FOR A.Y. 1996-97. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 2 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN: - 1. LD. CIT(A) ERRED IN FACTS AND IN LAW IN REJECTING REQUEST FOR ADDITIONAL GROUND A LEGAL GROUND ON FACTS ALREADY ON RECORD. 2. LD. CIT(A) ERRED IN FACTS AND IN LAW IN CONFIRMING ORDER OF LD. AO AND COMPLETELY OVER LOOKED THE OBJECTION CHALLENGING THE VALIDITY AND JURISDICTIONAL FOUNDATION FOR ISSUANCE NOTICE. 3. THAT LD. CIT(A) ERRED IN FACTS AND IN LAW IN CONFIRMING ASSESSMENT FRAMED U/S 148/143(3). 4. THAT PROCEEDINGS INITIATED U/S 147 AND CONFIRMATION OF ASSESSMENT ON A MERE CHANGE OF OPINION ON THE FACTS ALREADY DISCLOSED BY APPELLANT IS BAD IN LAW. 5. THAT CASE LAWS CITED BY THE APPELLANT HAS BEEN COMPLETELY IGNORED AND CASE LAWS CITED BY LD. AO IN THE ASSTT. ORDER ARE DISTINGUISHABLE AND CONFIRMATION OF ASSESSMENT ORDER IS BAD IN LAW. 6. THAT CONVEYANCE ALLOWANCE, ADDITIONAL CONVEYANCE ALLOWANCE AND INCENTIVE BONUS ARE ALLOWABLE AS PER PROVISION OF I.T. ACT AND DECIDED CASE LAWS AND CERTIFICATES ISSUED BY LIC AND CONFIRMATION OF PART ADDITIONAL ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 3 CONVEYANCE ALLOWANCE AND ENTIRE EXPENSES ON INCENTIVE BONUS ARE BAD IN LAW. 7. THAT CONFIRMATION OF ASSESSMENT FRAMED AND ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW. 3. THE ONLY GROUND EFFECTIVELY PRESSED IS GROUND NO . 6, WHICH CHALLENGES THE ACTION OF THE LD. CIT(A) IN CO NFIRMING PART OF THE DISALLOWANCE CONCERNING ADDITIONAL CONVEYANC E ALLOWANCE AND THE ENTIRE EXPENSES ON INCENTIVE BONU S. NO ARGUMENT HAS BEEN ADDRESSED WITH REGARD TO ANY OF T HE OTHER GROUNDS, WHICH PERTAIN TO THE AOS ACTION IN REOPEN ING THE ASSESSEES COMPLETED ASSESSMENTS. THE REOPENING HA S BEEN UPHELD BY THE TRIBUNAL VIDE ORDER DATED 29.10.2009, AS AVAILABLE ON RECORD. 4. THE FACTS, AS PER THE STATEMENT OF FACTS FILED A RE THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD DISCLOS ED RECEIPT OF ADDITIONAL CONVEYANCE ALLOWANCE OF RS. 5 9,113/-, FOR A.Y. 1996-97, ADDITIONAL CONVEYANCE ALLOWANCE OF RS . 59,114/-, FOR A.Y. 1997-98, CONVEYANCE ALLOWANCE OF RS. 16,200/- FOR A.Y. 1997-98 AND INCENTIVE BONUS OF RS . 70,276/-, FOR A.Y. 1997-98. THE AO DISALLOWED THESE CLAIMS, HOLDING THAT THESE AMOUNTS HAD NOT BEEN EXPANDED WHOLLY AND EXCLUSIVELY FOR THE ASSESSEES BUSINESS/OFFICE PURP OSES. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 4 5. THE CIT(A), VIDE ORDER DATED 14.11.2002, DISMISS ED THE ASSESSEES APPEAL. VIDE ORDER DATED 17.02.2006 (CO PY ON RECORD), THE ASSESSEES APPEALS FOR ASSESSMENT YEAR S 1996- 97 & 1997-98 IN ITA NOS. 138 & 139/DEL/2003 WERE SE T ASIDE TO THE CIT(A) BY THE ITAT FOR DECISION AFRESH IN TH E LIGHT OF SECTION 10(14) OF THE I.T. ACT AND CBDT LETTER DATE D 12.03.1997, ADDRESSED TO THE CHAIRMAN, LIFE INSURAN CE CORPORATION OF INDIA, UNDER F.NO. 149/25/1996 TPL . WHILE DOING SO, THE TRIBUNAL OBSERVED, INTER-ALIA, AS FOL LOWS: - 3. GROUNDS OF APPEAL NO. 2 & 3 ARE DIRECTED AGAINST THE ASSESSEE NOT BEING ALLOWED DEDUCTION OF RS. 1,21,683/- AND RS. 2,25,977/- RESPECTIVELY THE ASSESSMENT YEARS 1996-97 AND 1997-98. ACCORDING TO THE ASSESSEE THE ASSESSED INCOME SHOULD BE REDUCED BY THESE AMOUNTS BEING EXPENDITURE ACTUALLY INCURRED IN PERFORMANCE OF THE DUTIES OF OFFICE OF EMPLOYMENT. ALTERNATIVELY, THE ASSESSEE CONTENDED THAT THE REIMBURSEMENT OF SUCH EXPENDITURE INCLUDING INCENTIVE BONUS MADE BY THE EMPLOYER LIFE INSURANCE CORPORATION OF INDIA SHOULD BE TREATED AS INCOME EXEMPT U/S 10(14). IN SUPPORT OF THESE CONTENTIONS, THE LD. AR OF THE ASSESSEE HAS RELIED UPON FORM NO. 16 ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 5 ISSUED BY LIC WHEREBY A SUM OF RS. 59,113/- HAS BEEN TREATED AS EXEMPT U/S 10 FOR A.Y. 1996-97 AND ANOTHER SUM OF RS. 1,45,590/- IS TREATED AS EXEMPT FOR A.Y. 1997-98. THE LD. AR OF THE ASSESSEE ARGUED THAT THE CERTIFICATE ISSUED BY LIC IN FORM NO. 16 WAS CONCLUSIVE FOR EXEMPTION U/S 10(14). FOR THAT PURPOSE, HE ALSO PLACE RELIANCE ON INSTRUCTION NO. 1738 DATED 28.11.1986 AND LETTER DATED 12.03.1997 ISSUED BY CBDT. REFERENCE WAS ALSO MADE TO ITAT SMC BRANCH ORDER IN THE CASE OF MR. ACHARYA. 4. ON CAREFUL CONSIDERATION OF VARIOUS CONTENTIONS OF THE ASSESSEE, WE FIND THAT THERE IS SEA CHANGE IN THE PROVISIONS OF SEC. 10(14) INTRODUCED BY THE FINANCE ACT, 1995 WITH EFFECT FROM 01.07.1995. THEREFORE, FROM 01.07.1995 IN ORDER TO BE TREATED AS EXEMPT U/S 10(14), THE REIMBURSEMENT OF ANY EXPENDITURE INCURRED BY THE EMPLOYEE MUST BE ONE THAT HAS BEEN PRESCRIBED UNDER RULE 2BB OF I.T. RULES, 1962. SECONDLY, AS FAR AS CBDT LETTER DATED 12.03.1997 IS CONCERNED, FROM NO. 16 DOES NOT FULFIL THE REQUIREMENTS AND THERE HAS TO BE A CERTIFICATE FROM LIC THAT THE PAYMENT HAS BEEN MADE AGAINST THE EXPENSES INCURRED BY THE DEVELOPMENT ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 6 OFFICER BY WAY OF REIMBURSEMENT OF EXPENSES. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD DO IN FITNESS OF THINGS IF BOTH THESE APPEALS ARE RESTORED TO THE FILE OF THE LD. CIT(A) FOR DECISION AFRESH IN THE LIGHT OF SEC. 10(14) AND CBDT LETTER DATED 12.03.1997 ADDRESSED TO CHAIRMAN, LIC OF INDIA UNDER F.NO. 149/25/96-TPL. THE LD. CIT(A) SHALL ALLOW ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER AND TO FURNISH SUCH CERTIFICATE FROM LIC AS THE ASSESSEE MAY CHOSE TO FURNISH BEFORE THE LD. CIT(A) IN SUPPORT OF HIS CONTENTIONS. THEREAFTER, THE ISSUE BE DECIDED AFRESH IN ACCORDANCE WITH LAW. 6. IN THE SECOND RUN, VIDE ORDER DATED 15.07.2008 ( THE ORDER UNDER APPEAL HEARING), THE LD. CIT(A) AGAIN C ONFIRM THE ADDITIONS MADE BY THE AO ON ACCOUNT OF CONVEYANCE ALLOWANCE, ADDITIONAL CONVEYANCE ALLOWANCE AND INCE NTIVE BONUS, OBSERVING AS FOLLOWS: - I HAVE ALSO CAREFULLY CONSIDERED THE ORDER OF THE AO, APPELLANTS ARGUMENTS, THE CASE LAWS CITED BY HIM IN SUPPORT OF HIS CLAIM OF DEDUCTION FOR CONVEYANCE ALLOWANCE, ADDL. CONVEYANCE ALLOWANCE AND INCENTIVE BONUS, YET I AM NOT CONVINCED WITH HIS CONTENTION. IN FACT EVEN IN THE DECISIONS OF HONBLE ITAT THAT ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 7 HAS BEEN RELIED UPON BY THE APPELLANT, DO NOT SUPPORT HIS CLAIM. AS FAR AS DISALLOWANCE OF CONVEYANCE ALLOWANCE, ADDL. CONVEYANCE ALLOWANCE AND INCENTIVE BONUS ARE CONCERNED, THE LAW IS NOW SETTLED THAT THE CONVEYANCE ALLOWANCE, ADDL. CONVEYANCE ALLOWANCE AND INCENTIVE BONUS RECEIVED BY THE DEVELOPMENT OFFICER OF LIC IS NOTHING BUT PART OF SALARY WITHIN THE MEANING OF SEC. 17 AND, THEREFORE, INCOME HAS TO BE COMPUTED U/S 16 AND ONLY DEDUCTION WHICH ARE DEDUCTIBLE U/S 16 ARE TO BE ALLOWED AGAINST SUCH INCOME. MOREOVER, IN VIEW OF DIRECTIONS OF THE ITAT, I RELY UPON THE FOLLOWING CLARIFICATION ISSUED BY THE CBDT IN A LETTER WRITTEN TO THE CHAIRMAN, LIC DT. 12.03.1997 WHEREIN IT WAS CLARIFIED AS UNDER: - YOUR CIRCULAR NO. MKTG (2D)/4/97 DATED 18.02.1997 ENCLOSED WITH YOUR LETTER HAS BEEN EXAMINED BUT THE ADVICE CONTAINED THEREIN DOES NOT APPEAR TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. UNLESS AN ALLOWANCE IS NOTIFIED U/S 10(14)(I), NO PORTION OF IT CAN QUALIFY FOR TAX EXEMPTION. ON THE OTHER HAND, THE MINISTRY OF LAW ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 8 HAVE ADVISED THAT IT IS NOT POSSIBLE TO NOTIFY THE INCENTIVE BONUS UNDER THE SAID PROVISION. HOWEVER, SUCH PROMOTION (SIC. 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 LIC MAKES THE PAYMENT AGAINST THE EXPENSES INCURRED BY THE DEVELOPMENT OFFICERS BY WAY OF REIMBURSEMENT OF EXPENSES . IN THAT CASE, SUCH REIMBURSEMENT WILL NOT FORM A PART OF THE SALARY OF THE DEVELOPMENT OFFICERS AND ONLY THE TAXABLE INCENTIVE BONUS WILL APPEAR IN THEIR SALARY CERTIFICATES. IN THE ABOVE LETTER CLEAR GUIDELINES HAVE BEEN ISSUED IN THE MATTER OF INCENTIVE BONUS BUT THE SAME LOGIC APPLY TO THE OTHER ALLOWANCES ALSO, THAT FIRSTLY TO QUALIFY FOR DEDUCTION, THE EXPENSES HAVE TO BE ACTUALLY INCURRED IS TO BE VERIFIED BY THE EMPLOYER AND ONLY THEN THE REIMBURSEMENT IS TO BE MADE. LASTLY THE LETTER EMPHASIS THAT IN CASE LIC ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 9 MAKES THE PAYMENT AGAINST THE EXPENSES INCURRED BY THE DEVELOPMENT OFFICER BY WAY REIMBURSEMENT WILL NOT FORM A PART OF THE SALARY AND ONLY TAXABLE INCENTIVE BONUS WILL APPEAR IN THEIR SALARY CERTIFICATES. I AM, THEREFORE, CONVINCED THAT THE CLAIM OF THE APPELLANT FOR ALLOWING DEDUCTION OF CONVEYANCE ALLOWANCE, ADDL. CONVEYANCE ALLOWANCE AND INCENTIVE BONUS HAS BEEN RIGHTLY REJECTED BY THE AO. THE ADDITIONS MADE BY THE AO ON ACCOUNT OF CONVEYANCE ALLOWANCE, ADDL. CONVEYANCE ALLOWANCE AND INCENTIVE BONUS ARE, THEREFORE, CONFIRMED. 7. VIDE ORDER DATED 29.10.2009 (COPY PLACED ON RECO RD), THE ITAT PARTLY ALLOWED THE ASSESSEES APPEALS, OBS ERVING AS UNDER: - 8. COMING TO THE MERITS OF THE CASE, THE DISALLOWANCE IN BOTH THE YEARS PERTAINING TO CONVEYANCE ALLOWANCE, ADDITIONAL CONVEYANCE ALLOWANCE AND INCENTIVE BONUS. AFTER HEARING BOTH THE PARTIES AND VARIOUS HIGH COURT JUDGMENTS, WE ARE OF THE VIEW THAT THE CERTIFICATES GIVEN BY LIC WERE GIVEN TO ASSESSEE TOWARDS THE EXPENSES INCURRED IN PERFORMANCE OF DUTIES OF OFFICE OF EMPLOYMENT OF THE ASSESSEE WHICH, IN OUR VIEW, IS COVERED BY SEC. 10(14). HOWEVER, INCENTIVE BONUS IN RESPECT OF ASSTT. YEAR 1997-98 IS TO BE HELD AS ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 10 SALARY INCOME, WHICH SHOULD BE ADDED ACCORDINGLY. IN VIEW THEREOF, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 8. THE ASSESSEE FILED MISCELLANEOUS APPLICATION NO. 390/DEL/2010 AND THE DEPARTMENT FILED MA NO. 218/DE L/2010 (COPIES PLACED ON RECORD) BEFORE THE TRIBUNAL. THE SE APPLICATIONS WERE DISPOSED OF BY THE TRIBUNAL VIDE ORDER DATED 13.05.2011 (COPY PLACED ON RECORD), OBSERVING THUS; 3. THE ASSESSEE HAS FILED COY OF TRIBUNALS CONSOLIDATED ORDER DATED 17.02.2006 IN ASSESSEES OWN CASE, RENDERED IN ITA NOS. 138 & 139/DEL/03 FOR THE VERY SAME ASSESSMENT YEARS 1996-97 AND 1997-98. THE BENCH WHILE SETTING ASIDE THE APPEALS TO AO, HAD GIVEN CERTAIN DIRECTIONS REGARDING FURNISHING OF CERTIFICATES ETC. FROM LIC. THEY WERE PRODUCED BEFORE AO AND ARE ENCLOSED IN THE PAPER BOOK ALONG WITH THE TRIBUNALS ORDER. THE ASSESSEES MA IS TO BE EFFECT THAT WHILE DECIDING THE MERITS OF THE ASSESSEES CASE, THE ABOVE TRIBUNALS ORDER FOR THE SAME ASSESSMENT YEARS HAS NOT BEEN CONSIDERED WHICH WAS ON THE RECORD ALONG WITH LIC CERTIFICATES. BESIDES, REVENUE ALSO HAS COME UP IN MA THAT IN PARA 8 ONLY A.Y. 1997-98 IS MENTIONED ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 11 WHEREAS THE CONSOLIDATED ORDER WAS FOR A.Y. 1996-97 AS WELL AS 1997-98. 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THAT WHILE DECIDING THE ISSUE ON MERITS TRIBUNALS ORDER DATED 17.02.2006 FOR THESE ASSESSMENT YEARS HAS NOT BEEN CONSIDERED. IN VIEW THEREOF, WE ARE INCLINED TO PARTLY RECALL THE ORDER OF THE TRIBUNAL IN RESPECT OF DECIDING THE MERITS OF THE ISSUE ABOUT ALLOWABILITY OF CONVEYANCE ALLOWANCE, ADDITIONAL CONVEYANCE ALLOWANCE AND INCENTIVE BONUS DECIDED IN PARA 8 ABOVE, WHICH WILL TAKE CARE OF REVENUES MA AS WELL. WE ORDER ACCORDINGLY. THE REGISTRY IS DIRECTED TO POST THE CAPTIONED APPEALS FOR HEARING OF RECALLED ISSUE IN DUE COURSE BY ISSUING NOTICES OF HEARING TO BOTH THE PARTIES. 5. IN THE RESULT, BOTH THE MISC. APPLICATIONS OF THE ASSESSEE AS WELL AS THE REVENUE ARE ALLOWED IN ABOVE TERMS. 9. IT IS IN THE AFORESAID TERMS OF THE TRIBUNAL ORD ER DATED 13.05.2011 THAT THESE APPEALS ARE ONCE AGAIN BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE CLAIM OF INCENTIVE BONUS HAS WRONGLY BEEN DISALLOWE D BY THE TRIBUNAL VIDE ITS ORDER DATED 29.10.2009 (SUPRA); T HAT IN ITS ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 12 ORDER DATED 17.02.2006 (SUPRA), THE TRIBUNAL HAD CL EARLY HELD SUCH INCENTIVE BONUS TO BE ALLOWABLE; THAT SUCH INC ENTIVE BONUS WAS REIMBURSED BY THE LIC TO THE ASSESSEE; TH AT FORM NO. 16 HAD BEEN DULY ISSUED IN THIS REGARD; THAT TH E SAID FORM NO. 16 HAD NOT BEEN FOUND BY THE TRIBUNAL IN ITS OR DER DATED 17.02.2006 (SUPRA), TO BE SUFFICIENT; THAT IT WAS T HEREFORE, THAT THE ASSESSEE HAD BEEN DIRECTED TO OBTAIN NECESSARY CERTIFICATES IN THIS REGARD FROM THE LIC AND THE CI T(A) WAS DIRECTED TO AFFORD ADEQUATE OPPORTUNITY TO THE ASSE SSEE TO PROVE ITS CLAIM; THAT THE REQUISITES (COPY PLACED O N RECORD) HAD BEEN DULY ISSUED TO THE ASSESSEE BY LIC; THAT THERE IN, LIC HAD CERTIFIED THAT PAYMENT OF, INTER ALIA, INCENTIVE BO NUS OF RS. 70,276/- HAD BEEN MADE TO THE ASSESSEE DEVELOPMENT OFFICER DURING F.Y. 1996-97, RELEVANT TO A.Y. 1997-98 AND T HAT THE PAYMENT HAD BEEN SHOWN AS NON-TAXABLE PART OF INCOM E IN THE SALARY CERTIFICATE, I.E., FORM NO. 16, AS THE PAYME NT HAD BEEN MADE AGAINST THE EXPENSES INCURRED BY THE ASSESSEE DEVELOPMENT OFFICER IN PERFORMANCE OF DUTIES OF OFF ICE OF EMPLOYMENT AND THAT THE AMOUNT REPRESENTED REIMBURS EMENT OF EXPENSES AND THAT THE LD. CIT(A), IN THE ORDER U NDER APPEAL, HOWEVER, DID NOT CONSIDER THESE CERTIFICATES. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 13 11. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY REL IED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE INC ENTIVE BONUS HAS RIGHTLY BEEN DISALLOWED, THE SAME NOT BEI NG COVERED UNDER THE PROVISIONS OF SEC. 10(14) OF THE I.T. ACT. 12. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. VIDE ORDER DATED 17.02.2006 (S UPRA), THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF THE CIT (A), TO BE DECIDED AFRESH IN THE LIGHT OF SEC. 10(14) OF THE A CT AND CBDT LETTER DATED 12.03.1997, ADDRESSED TO THE CHAIRMAN, LIC OF INDIA. IT WAS OBSERVED BY THE TRIBUNAL THAT AS PER SECTION 10(14) OF THE ACT, AS AMENDED W.E.F. 01.07.1995 BY THE FINANCE ACT, 1995, THE REIMBURSEMENT OF ANY EXPENDI TURE INCURRED BY THE EMPLOYEE, IN ORDER TO BE TREATED AS EXEMPT U/S 10(14), MUST BE AN EXPENDITURE PRESCRIBED UNDER RUL E 2BB OF THE I.T. RULES, 1962; AND THAT THERE HAS TO BE A CE RTIFICATE FROM LIC TO THE EFFECT THAT THE PAYMENT HAS BEEN MADE AG AINST THE EXPENSES INCURRED BY THE DEVELOPMENT OFFICER, BY WA Y OF REIMBURSEMENT OF EXPENSES. WHILE REMITTING THE MAT TER TO THE FILE OF THE CIT(A), THE TRIBUNAL DIRECTED THAT THE CIT(A) SHALL ALLOW OPPORTUNITY TO THE ASSESSEE TO FURNISH SUCH C ERTIFICATE FROM LIC AS THE ASSESSEE MAY CHOOSE TO FURNISH BEFO RE THE CIT(A) IN SUPPORT OF HIS CONTENTIONS. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 14 13. VIDE THE IMPUGNED ORDER, THE CIT(A) AGAIN CONFI RMED THE ADDITIONS. 14. IN ITS ORDER DATED 29.10.2009 (SUPRA), THE TRIB UNAL TOOK NOTE OF THE FACT THAT THE AFORESAID CERTIFICATES, A S GIVEN BY THE LIC, WERE GIVEN TO THE ASSESSEE TOWARDS THE EXPENSE S INCURRED IN PERFORMANCE OF DUTIES OF THE OFFICE OF EMPLOYMENT OF THE ASSESSEE AND THAT THESE EXPENSES WERE INCURR ED BY SEC.10(14) OF THE ACT. OF THESE EXPENSES, INCENTIV E BONUS RELATING TO A.Y. 1997-98 WAS, HOWEVER, OBSERVED TO BE SALARY INCOME. THE IMPUGNED ORDER DOES NOT MAKE MENTION O F THE SAID CERTIFICATES HAVING BEEN FILED BEFORE THE CIT( A), THOUGH THE REMARKS COLUMN OF THE COPY OF THE WRITTEN SUBMI SSIONS FILED BY THE ASSESSEE BEFORE THE CIT(A), AS FURNISH ED BEFORE US, MENTIONS CERTIFICATE OF LIC ENCLOSED CONFIRMIN G REIMBURSEMENT OF EXPENSES. THE TRIBUNAL ORDER DAT ED 29.10.2009 (SUPRA) WAS, HOWEVER, PASSED ON HEARING THE ARGUMENTS OF BOTH THE PARTIES. THE ORDER RECORDS T HE DEPARTMENT AS HAVING BEEN DULY REPRESENTED. THEREI N, THE DEPARTMENT WAS NOT OBSERVED TO HAVE RAISED ANY DISP UTE THAT THESE CERTIFICATES WERE NOT FILED BEFORE THE CIT(A) IN PURSUANCE OF THE TRIBUNAL ORDER DATED 17.02.2006 (S UPRA). NO ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 15 SUCH DISPUTE WAS ALSO RAISED BY THE DEPARTMENT, EIT HER IN THEIR MA NO. 218/DEL/2010 (SUPRA), FILED SUBSEQUENT TO TH E PASSING OF THE TRIBUNAL ORDER DATED 29.10.2009 (SUPRA), OR IN ANY OTHER APPLICATION. THEREFORE, IT REMAINS UN-CONTROVERTED THAT THE SAID CERTIFICATES WERE FILED BEFORE THE CIT(A) PURSUANT TO THE TRIBUNAL ORDER DATED 17.02.2006 (SUPRA). THE FACT IS THAT THE CIT(A) DID NOT CONSIDER THESE CERTIFICATES WHILE PA SSING THE IMPUGNED ORDER. 15. SINCE THE TRIBUNAL, IN ITS ORDER DATED 29.10.20 09 (SUPRA), WHILE CONSIDERING THESE CERTIFICATES, HELD THAT INC ENTIVE BONUS FOR A.Y. 1997-98 WAS TO BE TREATED AS SALARY INCOME , IN SPITE OF HAVING HELD THEM TO BE COVERED BY SEC. 10(14) OF THE ACT, AS THE CERTIFICATES WERE GIVEN BY LIC TOWARDS EXPEN SES INCURRED IN PERFORMANCE OF THE DUTIES OF THE OFFICE OF EMPLOYMENT OF THE ASSESSEE DEVELOPMENT OFFICER, THE ASSESSEE FILED A MISCELLANEOUS APPLICATION (SUPRA) BEFORE THE TRIBUNAL. THEREIN, THE ASSESSEE CONTENDED THAT THE TRIBUNAL ORDER DATED 29.10.2009 (SUPRA) WAS NOT IN ACCORDANC E WITH EITHER THE OBSERVATIONS OF THE TRIBUNAL IN ITS ORDE R DATED 17.02.2006 (SUPRA), OR THE CERTIFICATE ISSUED BY TH E LIC REGARDING REIMBURSEMENT OF EXPENSES OF RS. 70,276/- , OR FORM ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 16 NO. 16, SHOWING EXEMPT PORTION OF INCENTIVE BONUS A T RS. 70,276/-. 16. THE TRIBUNAL, VIDE ORDER DATED 13.05.2011 (SUPR A), PARTLY RECORD ITS ORDER DATED 29.10.2009 (SUPRA), HOLDING THAT WHILE DECIDING THIS ISSUE ON MERITS, THE TRIBUNAL ORDER D ATED 17.02.2006 (SUPRA) HAD NOT BEEN CONSIDERED. 17. ACCORDINGLY, WHAT HAS TO BE CONSIDERED AT THIS STAGE IS AS TO WHETHER ON CONSIDERING OF THE TRIBUNAL ORDER DATED 17.02.2006 (SUPRA), THE INCENTIVE BONUS FOR A.Y. 19 97-98 IS ALSO TO BE ALLOWED AS EXEMPT U/S 10(14) OF THE ACT ALONGSIDE THE CONVEYANCE ALLOWANCE FOR A.Y. 1997-98 AND THE A DDITIONAL CONVEYANCE ALLOWANCE FOR BOTH THE YEARS, I.E. A.YS. 1996-97 & 1997-98, WHICH WERE ALLOWED BY THE TRIBUNAL VIDE IT S ORDER DATED 29.10.2009 (SUPRA). IT WOULD BE APT TO HERE TAKE NOTE OF THE FACT THAT SUCH ALLOWANCE OF CONVEYANCE ALLOWANC E AND ADDITIONAL CONVEYANCE ALLOWANCE HAVE NOT BEEN STATE D TO HAVE CHALLENGED BY THE DEPARTMENT. 18. IN ITS ORDER DATED 17.02.2006, TO REITERATE, TH E TRIBUNAL HAD OBSERVED AS FOLLOWS: - 3 GROUNDS OF APPEAL NO. 2 & 3 ARE DIRECTED AGAINST THE ASSESSEE NOT BEING ALLOWED ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 17 DEDUCTION OF RS. 1,21,683/- AND RS. 2,25,977/- RESPECTIVELY THE ASSESSMENT YEARS 1996-97 AND 1997-98. ACCORDING TO THE ASSESSEE THE ASSESSED INCOME SHOULD BE REDUCED BY THESE AMOUNTS BEING EXPENDITURE ACTUALLY INCURRED IN PERFORMANCE OF THE DUTIES OF OFFICE OF EMPLOYMENT. ALTERNATIVELY, THE ASSESSEE CONTENDED THAT THE REIMBURSEMENT OF SUCH EXPENDITURE INCLUDING INCENTIVE BONUS MADE BY THE EMPLOYER LIFE INSURANCE CORPORATION OF INDIA SHOULD BE TREATED AS INCOME EXEMPT U/S 10(14). IN SUPPORT OF THESE CONTENTIONS, THE LD. AR OF THE ASSESSEE HAS RELIED UPON FORM NO. 16 ISSUED BY LIC WHEREBY A SUM OF RS. 59,113/- HAS BEEN TREATED AS EXEMPT U/S 10 FOR A.Y. 1996-97 AND ANOTHER SUM OF RS. 1,45,590/- IS TREATED AS EXEMPT FOR A.Y. 1997-98. THE LD. AR OF THE ASSESSEE ARGUED THAT THE CERTIFICATE ISSUED BY LIC IN FORM NO. 16 WAS CONCLUSIVE FOR EXEMPTION U/S 10(14). FOR THAT PURPOSE, HE ALSO PLACE RELIANCE ON INSTRUCTION NO. 1738 DATED 28.11.1986 AND LETTER DATED 12.03.1997 ISSUED BY CBDT. REFERENCE WAS ALSO MADE TO ITAT SMC BRANCH ORDER IN THE CASE OF MR. ACHARYA. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 18 4. ON CAREFUL CONSIDERATION OF VARIOUS CONTENTIONS OF THE ASSESSEE, WE FIND THAT THERE IS SEA CHANGE IN THE PROVISIONS OF SEC. 10(14) INTRODUCED BY THE FINANCE ACT, 1995 WITH EFFECT FROM 01.07.1995. THEREFORE, FROM 01.07.1995 IN ORDER TO BE TREATED AS EXEMPT U/S 10(14), THE REIMBURSEMENT OF ANY EXPENDITURE INCURRED BY THE EMPLOYEE MUST BE ONE THAT HAS BEEN PRESCRIBED UNDER RULE 2BB OF I.T. RULES, 1962. SECONDLY, AS FAR AS CBDT LETTER DATED 12.03.1997 IS CONCERNED, FROM NO. 16 DOES NOT FULFIL THE REQUIREMENTS AND THERE HAS TO BE A CERTIFICATE FROM LIC THAT THE PAYMENT HAS BEEN MADE AGAINST THE EXPENSES INCURRED BY THE DEVELOPMENT OFFICER BY WAY OF REIMBURSEMENT OF EXPENSES. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD DO IN FITNESS OF THINGS IF BOTH THESE APPEALS ARE RESTORED TO THE FILE OF THE LD. CIT(A) FOR DECISION AFRESH IN THE LIGHT OF SEC. 10(14) AND CBDT LETTER DATED 12.03.1997 ADDRESSED TO CHAIRMAN, LIC OF INDIA UNDER F.NO. 149/25/96-TPL. THE LD. CIT(A) SHALL ALLOW ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER AND TO FURNISH SUCH CERTIFICATE FROM LIC AS THE ASSESSEE MAY CHOSE TO FURNISH BEFORE THE LD. CIT(A) IN SUPPORT OF ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 19 HIS CONTENTIONS. THEREAFTER, THE ISSUE BE DECIDED AFRESH IN ACCORDANCE WITH LAW. 19. A PERUSAL OF THE ABOVE TRIBUNAL ORDER SHOWS THA T THEREIN, THE TRIBUNAL OBSERVED, INTER ALIA, THAT FR OM 01.07.1995, CONSEQUENT TO THE AMENDMENT BROUGHT BY THE FINANCE ACT, 1995, IN SEC. 10(14) OF THE ACT, THE REIMBURSEMENT OF ANY EXPENDITURE MUST BE AS PRESCRIBED UNDER RULE 2BB OF THE I.T. RULES. NOW, IT IS TO BE SEEN AS TO WHETHER THE INC ENTIVE BONUS FOR A.Y. 1997-98 AMOUNTS TO A REIMBURSEMENT AS PRES CRIBED BY THE SEC. 10(14) OF THE ACT READ WITH RULE 2BB OF THE RULES. 20. SECTION 10(14)(I) OF THE ACT PROVIDES AS FOLLOW S: - 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 (14)(I) ANY SUCH SPECIAL ALLOWANCE OR BENEFIT, NOT BEING IN THE NATURE OF A PERQUISITE WITHIN THE MEANING OF CLAUSE (2) OF SEC. 17, SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT, AS MAY BE PRESCRIBED TO THE EXTENT TO WHICH ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 20 SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOSE; 21. RULE 2BB(I) OF THE I.T. RULES READS AS FOLLOWS: - 2BB (1) FOR THE PURPOSE OF SUB-CLAUSE (14) OF SEC. 10, PRESCRIBED ALLOWANCES, BY WHATEVER NAME CALLED, SHALL BE THE FOLLOWING, NAMELY : - A) ANY ALLOWANCE GRANTED TO MEET THE COST OF TRAVEL ON TOUR OR ON TRANSFER; B) ANY ALLOWANCE, WHETHER, GRANTED ON TOUR OR FOR THE PERIOD OF JOURNEY IN CONNECTION WITH TRANSFER, TO MEET THE ORDINARY DAILY CHARGES INCURRED BY AN EMPLOYEE ON ACCOUNT OF ABSENCE FROM HIS NORMAL PLACE OF DUTY; C) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCURRED ON CONVEYANCE IN PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT: PROVIDED THAT FREE CONVEYANCE IS NOT PROVIDED BY THE EMPLOYER; D) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCURRED ON A HELPER WHERE SUCH HELPER IS ENGAGED FOR THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT; E) ANY ALLOWANCE GRANTED FOR ENCOURAGING THE ACADEMIC, RESEARCH AND TRAINING PURSUITS IN EDUCATIONAL AND RESEARCH INSTITUTIONS; ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 21 F) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCURRED ON THE PURCHASE OR MAINTENANCE OF UNIFORM FOR WEAR DURING THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT. 22. THE RULE, THUS, CLEARLY LAYS DOWN THE PRESCRIBE D ALLOWANCES. IT IS SEEN THAT INCENTIVE BONUS DOES N OT COME UNDER ANY OF THE ALLOWANCES PRESCRIBED BY THE RULE. EVEN IN THE TRIBUNAL ORDER DATED 17.02.2006, IT HAS BEEN OB SERVED, INTER ALIA, THAT ..FROM 01.07.1995 IN ORDER TO BE TREATED AS EXEMPT U/S 10(14), THE REIMBURSEMENT OF ANY EXPENDI TURE INCURRED BY THE EMPLOYEE MUST BE ONE THAT HAS BEEN PRESCRIBED UNDER RULE 2BB OF I.T. RULES, 1962 . 23. HOWEVER, VIDE ORDER DATED 12.03.1997 (SUPRA), ADDRESSED TO THE CHAIRMAN, LIC, THE CBDT STATED AS FOLLOWS: YOUR CIRCULAR NO. MKTG (2D)/4/97 DATED 18.02.1997 ENCLOSED WITH YOUR LETTER HAS BEEN EXAMINED BUT THE ADVICE CONTAINED THEREIN DOES NOT APPEAR TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. UNLESS AN ALLOWANCE IS NOTIFIED U/S 10(14)(I), NO PORTION OF IT CAN QUALIFY FOR TAX EXEMPTION. ON THE OTHER HAND, THE MINISTRY OF LAW HAVE ADVISED THAT IT IS NOT POSSIBLE TO NOTIFY THE INCENTIVE BONUS UNDER THE SAID PROVISION. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 22 HOWEVER, SUCH PROMOTION (SIC. 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 LIC MAKES THE PAYMENT AGAINST THE EXPENSES INCURRED BY THE DEVELOPMENT OFFICERS BY WAY OF REIMBURSEMENT OF EXPENSES . IN THAT CASE, SUCH REIMBURSEMENT WILL NOT FORM A PART OF THE SALARY OF THE DEVELOPMENT OFFICERS AND ONLY THE TAXABLE INCENTIVE BONUS WILL APPEAR IN THEIR SALARY CERTIFICATES. 24. THUS, IN THE SAID LETTER, THE CBDT MADE IT CLEA R THAT IF THE LIC REIMBURSES EXPENSES INCURRED BY THE DEVELOP MENT OFFICER IN THE FORM OF INCENTIVE BONUS ACTUALLY SPE ND FOR DUTIES OF OFFICE, SUCH REIMBURSEMENT WILL NOT FORM PART OF THE SALARY OF THE DEVELOPMENT OFFICER AND WILL BE EXEMPT FROM TAX AND ONLY TAXABLE INCENTIVE BONUS WILL APPEAR IN THEIR SALARY CERTIFICATES. 25. IT WAS IN KEEPING WITH THE ABOVE CONTENTS OF TH E CBDT LETTER DATED 12.03.1997 THAT THE TRIBUNAL, VIDE ITS ORDER DATED 17.02.2006 DIRECTED THE LD. CIT(A) TO GIVE OPPORTUN ITY TO THE ASSESSEE TO PRODUCE THE CERTIFICATE FROM LIC. THE ASSESSEE AS SEEN HEREINABOVE, DID FILED THE REQUISITE CERTIFICATE BEFORE THE CIT(A). THE CIT(A), HOWEVER, CONFIRMED THE DIS ALLOWANCE ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 23 OF INCENTIVE BONUS WITHOUT TAKING INTO CONSIDERATIO N THE SAID CERTIFICATE. 26. THIS ACTION OF THE CIT(A) IS ENTIRELY UNTANEABL E IN VIEW OF THE CLEAR MANDATORY DIRECTION CONTAINED IN THE TRIB UNAL ORDER DATED 27.02.2006. THE CERTIFICATE ISSUED BY THE LI C READS AS UNDER: - TO WHOMSOEVER IT MAY CONCERN WE CONFIRM THAT FOLLOWING PAYMENTS WERE MADE TO SH. S.K. GUPTA S/O LATE SH. BHIM SEN, DEVELOPMENT OFFICER ATTACHED WITH OUR BRANCH DURING THE F.Y. 1996-97, RELEVANT TO A.Y. 1997-98. THESE PAYMENTS WERE SHOWN AS NON-TAXABLE PART OF INCOME IN THE SALARY CERTIFICATE (FORM NO. 16) AS THE SAID PAYMENTS WERE MADE AGAINST EXPENSES INCURRED BY THE DEVELOPMENT OFFICER, IN PERFORMANCE OF DUTIES OF OFFICE OF EMPLOYMENT: CONVEYANCE RS. 16200 ADDITIONAL CONVEYANCE RS. 59114 INCENTIVE BONUS RS. 70276 RS. 145,590 THE ABOVE AMOUNT REPRESENTS REIMBURSEMENT OF EXPENSES. NO INCOME TAX WAS DEDUCTED AT SOURCE ON THE SAID AMOUNT COPY OF FORM NO. 16, IS ENCLOSED FOR READY REFERENCE. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 24 27. THE CERTIFICATE DULY MEET THE REQUIREMENT OF CB DT LETTER DATED 12.03.1997 (SUPRA), ADDRESSED TO THE CHAIRMAN , LIC. IT CERTIFIES REIMBURSEMENT OF INCENTIVE BONUS OF RS. 7 0,276/- TO THE ASSESSEE AGAINST EXPENSES INCURRED BY THE ASSES SEE IN PERFORMANCE OF DUTIES OF OFFICE OF EMPLOYMENT. IT STATES THAT THE PAYMENT WAS SHOWN AS NON-TAXABLE PART OF INCOME IN THE SALARY CERTIFICATE (FORM NO. 16), SINCE THE PAYMENT WAS MADE AGAINST EXPENSES INCURRED BY THE DEVELOPMENT OFFICE R IN PERFORMANCE OF DUTIES OF OFFICE OF EMPLOYMENT. 28. NOW, SINCE AS PER THE CERTIFICATE, IT IS REIMBU RSEMENT OF EXPENSES INCURRED BY THE DEVELOPMENT OFFICER IN PER FORMANCE OF DUTIES OF OFFICE OF EMPLOYMENT, WHICH HAS BEEN M ADE TO THE ASSESSEE, SUCH REIMBURSEMENT OF INCENTIVE BONUS FAL LS SQUARELY WITHIN THE REQUIREMENTS OF THE CBDT LETTER DATED 12.03.1997 (SUPRA). IT MAY BE EMPHASIZED HERE THAT THOUGH, AS OBSERVED HEREINABOVE, THE PRE-REQUISITE IS THE P RESCRIPTION OF THE EXPENDITURE UNDER RULE 2BB OF THE RULES, AS PER THE AFORESAID CBDT LETTER DATED 12.03.1997, THE MINISTR Y OF LAW HAS ADVISED THAT IT IS NOT POSSIBLE TO NOTIFY INCE NTIVE BONUS U/S 10(14)(I). IT IS THEREFORE, THAT THE CONTENTS OF THE SAID LETTER ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 25 ARE TO BE TAKEN AS THEY ARE FOR THE PURPOSE OF ALLO WANCE OF INCENTIVE BONUS. 29. IN VIEW OF THE ABOVE, THE ORDER OF THE LD. CIT( A) SO FAR AS REGARDS THE DISALLOWANCE OF INCENTIVE BONUS IS NOT SUSTAINABLE AND IT IS SET ASIDE AND THE ASSESSEES CLAIM REGARD ING INCENTIVE BONUS OF RS. 70,276/- FOR A.Y. 1997-98 IS ALLOWED. 30. SO FAR AS REGARDS THE CLAIM OF CONVEYANCE ALLOW ANCE AND ADDITIONAL CONVEYANCE ALLOWANCE, THE SAME ARE A LSO ALLOWABLE IN VIEW OF SIMILAR CERTIFICATES ISSUED BY THE LIC, AS NOTED BY THE TRIBUNAL IN PARA 8 OF THE ORDER DATED 29.10.2009 (SUPRA). 31. AS STATED AT THE BEGINNING OF THIS ORDER, THE F ACTS FOR BOTH THE YEARS ARE, MUTATIS MUTANDIS, SIMILAR. THE REFORE, OUR ABOVE OBSERVATIONS ARE APPLICABLE EQUALLY TO BOTH T HE APPEALS. ITA NOS. 3010 & 3011/D/2008 MR. SATISH KUMAR GUPTA 26 32. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 02.12.201 1 SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN ) PRESIDENT JUDICIAL MEM BER DATED: 02.12.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR