Ranmalbhai R. Rajatia, RAJKOT-GUJARAT V. The Income Tax Officer, Wd-2(2), RAJKOT-GUJARAT

ITA 726/RJT/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4243 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Corroborative evidences
• Section: 10(14); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 726/RJT/2014 / ASSESSMENT YEARS: 2010-11 SHRI RANMALBHAI R. RAJATIA LIC OF INDIA HARIKRUPA STATION ROAD KESHOD. VS THE ITO, WARD-2(2) JUNGADH. ASSESSEE BY : WRITTEN SUBMISSIONS REVENUE BY : SHRI PRAVEEN VERMA, SR.DR / DATE OF HEARING : 26/10/2018 /DATE OF PRONOUNCEMENT : 01/11/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST O RDER LD.CIT(A)-IV, RAJKOT DATED 8.10.2014 PASSED FOR THE ASSESSMENT YE AR 2010-11. 2. ASSESSEE HAS RAISED A NUMBER OF GROUNDS IN ITS A PPEAL MEMO, HOWEVER, ONLY ISSUE INVOLVED IN ALL THESE GROUNDS I S THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.3,30,893/- M ADE BY THE AO WITH THE HELP OF SECTION 10(14) OF THE INCOME TAX ACT, 1 961. 3. BRIEF FACTS IN THIS REGARD ARE THAT THE ASSESSEE IS A DEVELOPMENT OFFICER WITH LIFE INSURANCE CORPORATION OF INDIA LT D. (LIC FOR SHORT). HE FILED RETURN OF INCOME ON 25.5.2010 DECLARING TO TAL INCOME AT ITA NO.726/RJT/2014 - 2 - RS.13,81,040/-. THIS INCOME INCLUDES AN AMOUNT OF RS.11,02,977/- REPRESENTING INCENTIVE BONUS RECEIVED FROM LIC. RE TURN OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICES UN DER SECTION 143(2) ALONG WITH 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE ASSESSMENT THE AO NOTICED THAT THE ASSES SEE HAS CLAIMED 30% DEDUCTION OUT OF INCENTIVE BONUS RECEIVED. ON FURT HER EXAMINATION, THE AO OBSERVED THAT INCENTIVE BONUS RECEIVED BY THE AS SESSEE WAS NEITHER AN ALLOWANCE NOR ANY REIMBURSEMENT OF EXPENSES. TH E LD.AO, THEREFORE, SOUGHT EXPLANATION FROM THE ASSESSEE IN THIS REGARD . ASSESSEE SUBMITTED IN VIEW OF JUDGMENT OF HONBLE GUJARAT HIGH COURT I N THE CASE OF KIRANBHAI H. SHELAT AND OTHERS, 235 ITR 635 CLAIM O F THE ASSESSEE WAS ADMISSIBLE. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO, AND HELD THE INCENTIVE BONUS TO BE PART OF SALARY AND TO BE ASSESSED UNDER THE HEAD SALARY. THE AO BASED HIS FINDING AS PER THE CERTIFICATE ISSUED BY THE LIC OF INDIA AND CBDT CIR CULAR DATED 13.5.2009. THE LD.AO DISALLOWED THE CLAIM OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL BEFOR E THE LD.CIT(A), THE ASSESSEE COULD NOT SUCCEED, HENCE, THE ASSESSEE IS NOW BEFORE THE TRIBUNAL. 4. BEFORE US, THE ASSESSEE FILED WRITTEN SUBMISSION S, IN WHICH IT IS SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS ALLOWAB LE AS PER CBDT CIRCULAR DATED 19.12.1996 AND THE GUIDELINES ISSUED BY HONBLE SUPREME COURT IN THE CASE OF COLLECTOR OF CENTRAL EXCISE VS . M/S.DHIREN CHEMICALS INDUSTRIES. IT IS FURTHER PLEADED THAT S IMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN THE CASE OF ATUL AMRUTIL AL MITHANAI VS. ITO, IN ITA NO.718/RJT/2014, WHEREIN THE TRIBUNAL HAS SE T ASIDE SIMILAR ISSUE TO THE FILE OF AO FOR RECONSIDERATION IN ACCO RDANCE WITH THE CBDT ITA NO.726/RJT/2014 - 3 - CIRCULAR AND THE DECISION OF THE TRIBUNAL IN THE CA SE OF NITINBHAI T. BHUPATANI VS. ACIT, IN TAX APPEAL NO.13/RJT/2016 AN D OTHERS ORDER DATED 18.4.2018. ON THE OTHER HAND, THE LD.DR WHILE SUPPORTING ORDERS OF THE REVENUE AUTHORITIES BELOW SUBMITTED THAT THE RE IS NO PROVISION IN THE INCOME-TAX ACT TO PROVIDE ANY DEDUCTION FOR EAR NING INCENTIVE BONUS, WHICH IS ASSESSABLE UNDER THE HEAD SALARY INCOME, THEREFORE, CLAIM OF THE ASSESSEE IS NOT ALLOWABLE. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE TH ROUGH THE RECORD. ON THIS ISSUE, WE WOULD LIKE TO TAKE NOTE O F DECISION OF THE TRIBUNAL IN THE CASE OF NITIN T. BHUPTANI (SUPRA) R ELIED UPON THE ASSESSEE TO SUPPORT TO ITS CASE. THE RELEVANT PORTION OF TH E DECISION READS AS UNDER: AT THIS STAGE, BEFORE ADVERTING TO THE SPECIFIC CL AIM MADE BY THE ASSESSEE, WE WOULD LIKE TO TAKE NOTE OF LICS SCHEME FORMULAT ED FOR CONSIDERING CERTAIN DEVELOPMENT OFFICERS EMPLOYED WITH IT AS SE NIOR BUSINESS ASSOCIATES (SBAS FOR SHORT). THE SBAS WERE REQUIRE D TO MAINTAIN THE BUSINESS AT THEIR PREMISES AND LIC WOULD REIMBURSE EXPENDITURE. WE HAVE TAKEN COGNIZANCE OF SUCH SCHEME IN THE CASE OF NITINBHAI T. BHUPTANI VS. ACIT, CIR.4, RAJKOT IN ITA NOS.13/RJT/2 016 AND OTHERS. SHRI BHUPTANI WAS DEVELOPMENT OFFICER. WE HAVE TAK EN COGNIZANCE OF THESE APPEALS, AND THEREAFTER DECIDED IDENTICAL ISS UES. THE SCHEME REPRODUCED IN THE TRIBUNALS ORDER DATED 18.4.2018 READS AS UNDER: SIMILARLY DURING THE ACCOUNTING PERIOD THERE WAS S ENIOR BUSINESS ASSOCIATES SCHEMES AS UNDER. ELIGIBILITY CRITERIA: A DEVELOPMENT OFFICER WILL BE CONSIDERED ELIGIBLE T O APPLY AS SENIOR BUSINESS ASSOCIATE IF HE/SHE (I) HAS COMPLETED 5 YEARS SERVICE. (II) HAS WORKED AT A COST RATIO OF 3% OR LESS IN TH E LAST COMPLETED APPRAISAL YEAR. THE COST RATIO SHOULD BE RECKONED AND ROUNDED OFF TO THE NEAREST FIRST DECIMAL PLACE; FOR EXAMPLE, IF THE COST RATIO WORKS TO 3.04%, IT SHOULD BE TAKEN AS 3% AND IF IT WORKS TO 3.05%, IT SHOULD BE TAKEN AS 3.1%. ITA NO.726/RJT/2014 - 4 - (III) IS HAVING HIS/HER OWN OFFICE AND (IV) IS WILLING TO WORK AS A SENIOR BUSINESS ASSOCI ATE. FUNCTIONS: BESIDES PERFORMING HIS/HER BASIC DUTIES AND OBLIGAT IONS AS A DEVELOPMENT OFFICE, SUCH SELECTED SENIOR BUSINESS ASSOCIATES SH ALL BE AUTHORIZED TO CARRY OUT MARKET ORIENTED/CUSTOMERS ORIENTED FUNCTIONS TH ROUGH ONLINE PORTAL FROM HIS/HER OFFICE. INITIALLY, THE SENIOR BUSINESS ASSO CIATE SHALL BE AUTHORIZED TO: 1.COLLECT RENEWAL PREMIUMS FROM ALL POLICYHOLDERS. 2.COLLECT PROPOSAL DEPOSITS TRANSACTION FROM AGENTS UNDER HIS/HER ORGANIZATION. 3.REGISTER PROPOSAL OF AGENTS WORKING UNDER HIS/HER ORGANIZATION. 4.SUBMIT PROPOSAL OF AGENTS WORKING UNDER HIS/HER O RGANIZATION THROUGH ELECTRONIC MEDIA (E PROPOSAL). THE FOLLOWING ADD ON FUNCTIONS WILL BE ALLOWED TO A SENIOR BUSINESS ASSOCIATES. 1.ISSUE OF POLICY STATUS REPORTS. 2.ISSUE OF REVIVAL /LOAN/SURRENDER VALUE QUOTATIONS . 3.ISSUE OF FORMS. 4.ISSUE OF CERTIFICATES TO THE POLICYHOLDERS FOR IN COME TAX PURPOSE. 5.ULIP STATEMENTS. BENEFITS AND ALLOWANCE: FOR THE PURPOSE OF ALLOWING BENEFITS AND ALLOWANCES , SUCH SENIOR BUSINESS ASSOCIATES WOULD BE DIVIDED INTO 3 CATEGORIES AS SH OWN BELOW. CATEGORY PLACE OF POSTING I CITIES OF MUMBAI, KOLKATA, CHENNAI, DELHI & NOIDA, FARIDABAD, GHAZIABAD, GURGAON AND NAVI MUMBAI. II CITIES WITH POPULATION EXCEEDING 12 LAKHS, EXCEPT T HOSE MENTIONED IN (I) ABOVE, ANY CITY IN THE STATE OF GO A AND GANDHI NAGAR. III OTHER PLACES. THE POPULATION FIGURES FOR THE ABOVE PURPOSE SHALL BE AS PER THE LATEST CENSUS REPORT. FURTHER, THE CITIES SHALL ALSO INCLUDE THEI R URBAN AGGLOMERATION. THE CLASSIFICATION OF CITIES FOR THE PURPOSE OF PAYMENT OF BENEFITS SHALL BE AS SHOWN BELOW. CATEGORY-I CATEGORY-II CATEGORY-III ITA NO.726/RJT/2014 - 5 - KOLKATA- INCLUDING MUNICIPAL AREAS COMPRISING CITY OF KOLKATA (INCLUDING BEHALA, ALIPUR, COSSIPUR, TOLLYGUNGE), HOWRAH, BARRACKPORE (INCLUDING NORTH BARRACKPORE), GARDEN REACH BARRANAGORE SOUTH SUBURBAN MUNCIPAL AREA DUM DUM (INCLUDING SOUTH DUM DUM), KAMARHATTI, PANIHATI, KNARDA, TITAHGARH, GARULIA, BHATPARA, NAIHATI, BALLY, UTTARPARA, KONNAGAR, RISHRA, CORAMPERE, BALDYABALL, CHAMPDAM, BHADRESHWAR, CHADANNAGAR, HOOGLY, CHINSURA, BUDGE BUDGE, HABRA, BARUIPUR, BARASAT AND ULUBERIA. AGRA, AHMEDABAD, BANGALORE, BHOPAL. COIMBATORE (INCLUDING SULUR), GANDHINAGAR, GOA (ENTIRE STATE),HYDERABAD, INDORE, JAIPUR, KANPUR, KOICHI, LUCKNOW, LUDHIANA, MADURAI ( INCLUDING TIRUNAGAR), NAGPUR, PATNA, PUNE (INCLUDING PIMPRI & CHINCHWAD). SURAT, VADODARA, VARANASI, VISHAKHAPATNAM (INCLUDING GAJUWAKA). ALL OTHER PLACES. CHENNAI MUMBAI -INCLUDING AREAS COMPARISING WITHIN THE LIMITS OF MUMBAI MUNCIPAL CORPORATION (GREATER MUMBAI), DOMBIVLLI, KALYAN, THANE, BHAWANDI, UTHASNAGAR BASSEIN MUNCIPALITIES AND NAVI MUMBAI NEW DELHI-FARIDABAD, GHAZIABAD, GURGAON, NOIDA. THE FOLLOWING BENEFITS WILL BE PROVIDED TO SUCH SEN IOR BUSINESS ASSOCIATES FOR MARKETING AND CUSTOMERS RELATED SERVICES: 1. ONE TIME INTEREST FREE ADVANCE FOR MAKING ALTERNATI ONS IN THE OFFICE INFRASTRUCTURE, RENOVATION, PURCHASE OF FURNITURE E TC. AS SHOWN BELOW: PARTICULARS CATEGORY-I CATEGORY-II CATEGORY-III MAXIMUM AMOUNT OF ADVANCE (RS.) 1,50,000 1,25,000 1,00,000 REPAYMENT TERM 4 YEARS ( 48 INSTALLMENTS) 4 YEARS ( 48 INSTALLMENTS) 4 YEARS ( 48 INSTALLMENTS) ITA NO.726/RJT/2014 - 6 - INSTALLMENT PER MONTH (RS.) 3125 1 ST - 2565 2 ND - TO 48 TH - 2605 L ST -2240 2 ND - TO 48 TH -2080 2. THEY WILL BE REIMBURSED AN AMOUNT AS SHOWN BELOW, P ER MONTH TOWARDS OFFICE MAINTENANCE SUBJECT TO CERTAIN MINIMUM NUMBE R OF RENEWAL PREMIUM TRANSACTIONS, PROPOSAL DEPOSITS TRANSACTION , REGISTRATION OF PROPOSAL AND SUBMISSION OF E PROPOSALS. PARTICULARS CATEGORY-I CATEGORY-II CATEGORY-ILL MAXIMUM AMOUNT OF REIMBURSEMENT ALLOWED PER MONTH (RS.) 25,000 20,000 15,000 THE AMOUNT AS SHOWN ABOVE WILL BE REIMBURSED SUBJECT TO CERTAIN MINIMUM TRANSACTION IN A MONTH, WHICH WOULD BE AS SHOWN BEL OW: PARTICULARS 1 ST QUARTER (APRIL TO JUNE) 2 ND QUARTER (JULY TO SEPTEMBER) 3 RD QUARTER (OCTOBER TO DECEMBER) 4 TH QUARTER ( JANUARY TO MARCH) RENEWAL PREMIUM 200 P.M. 250 P.M. 350P.M. 400 P.M. PROPOSAL DEPOSITS 40 P.M. 60 P.M. 70 P.M. 70 P.M. SUBMISSION/ REGISTRATION OF E PROPOSAL 30 P.M. 60 P.M. 60 P.M. 60 P.M. THE SENIOR BUSINESS ASSOCIATE WHO FULFILLS THE ABOVE BE NCHMARK SHALL BE ALLOWED REIMBURSEMENT TOWARDS OFFICE MAINTENANCE ALONG WITH REIMBURSEMENT TOWARDS VARIOUS TRANSACTIONS FOR THAT MONTH. IN CASE HE DOES NOT FULFILL THE BENCHMARK. HE SHALL BE ONLY ALLOWED REIMBURSEMENT TOWARDS VARIOUS TRANSACTIONS. HOWEVER AT THE END OF THE QUA RTER THE SR. DIVISIONAL MANGER IN-CHARGE SHALL REVIEW THE TOTAL TRANSACTION S MADE AND IN CASE THE SENIOR BUSINESS ASSOCIATES HAS FULFILLED THE QUARTE RLY TARGET BASED ON THE MONTHLY TARGET OF THE CONCERNED MONTHS. HE/SHE SHAL L BE PAID THE REIMBURSEMENT TOWARDS OFFICE MAINTENANCE INCLUDING THE MONTH/S FOR WHICH HE COULD NOT ACHIEVE THE BENCHMARK. IT MAY BE NOTED THAT THE DEFICIT FOR A PARTICULAR QUARTER SHALL NOT BE CARRIED FORWARD TO THE NEXT QUARTER. ADDITIONAL REIMBURSEMENT: ITA NO.726/RJT/2014 - 7 - THE ADDITIONAL REIMBURSEMENT ALLOWED TO SUCH SENIOR BUSINESS ASSOCIATES FOR COLLECTION OF RENEWAL PREMIUM/PROPOSAL DEPOSITS, SU BMISSION AND REGISTRATION OF E PROPOSAL SHALL BE AS SHOWN BELOW: I) A TRANSACTION FEE OF RS. 5/- PER POLICY FOR COLLECTION OF RENEWAL PREMIUM PROPOSAL DEPOSITS. THE TRANSACTION FEE IN CASE OF PROPOSAL DEPOSITS WI LL BE PAID WHEN THE BOC IS ADJUSTED TO NB PREMIUM. II) A TRANSACTION FEE OF RS. 107- PER POLICY FOR CO LLECTION OF PROPOSAL DEPOSITS, SUBMISSION AND REGISTRATION OF E-PROPOSAL. NO ADDITIONAL REIMBURSEMENT WILL ALLOWED TO A SENIO R BUSINESS ASSOCIATE FOR PERFORMING THE ADD-ON FUNCTIONS. IN THE EVENT OF A DEVELOPMENT OFFICER JOINING AS A SENIOR BUSINESS ASSOCIATE IN THE MIDDLE OF THE MONTH, THE REIMBURSEMENT TOWAR DS OFFICE MAINTENANCE SHALL BE ALLOWED FROM THE FIRST OF THE FOLLOWING MO NTH. HOWEVER, HE/SHE SHALL BE ALLOWED REIMBURSEMENT TOWARDS VARIOUS TRANSACTIO NS. THE SENIOR BUSINESS ASSOCIATE HAS TO CONTINUE TO MA INTAIN THE COST RATIO AT 3% IN THE SUBSEQUENT APPRAISAL YEARS. HOWEVER, ZONAL M ANGER IN-CHARGE CAN WAIVE THE COST RATIO UP TO 1% IN THAT APPRAISAL YEA R IN WHICH THE COST RATIO HAS EXCEEDED BY 3%. SUCH CONCESSION WILL BE ALLOWED ON 2 OCCASION AFTER WHICH NO REIMBURSEMENT SHALL BE ALLOWED TOWARDS OFFICE MA INTENANCE. HOWEVER THE SENIOR BUSINESS ASSOCIATE WILL BE ALLOWED ADDITIONA L REIMBURSEMENT FOR RENEWAL PREMIUM/PROPOSAL DEPOSIT TRANSACTION/SUBMIS SION AND REGISTRATION OF E PROPOSAL. THE REIMBURSEMENT TOWARDS OFFICE MAINTE NANCE SHALL CONTINUE ONCE THE SENIOR BUSINESS ASSOCIATE MAINTAINS THE CO ST RATIO AT 3% OR BELOW. THUS, THESE RECEIPTS WERE REIMBURSEMENT OF EXPENSES INCURRED FOR ON BEHALF OF L1C FOR FUNCTION WHICH WERE NORMALLY PERFORMED BY L IC. 6. IN THE LIGHT OF THE ABOVE, LET US EXAMINE CLAIM OF THE ASSESSEE. THE ASSESSEE CLAIMED DEDUCTION OF RS.3,30,893/- IN RESPECT OF EXPENDITURE INCURRED OUT OF INCENTIVE BONUS. THE S AME WAS REJECTED BY THE AO ON THE GROUND THAT IT WAS NOT ALLOWABLE UNDE R SECTION 10(14) OF THE ACT, SINCE THE ASSESSEE HAS ASSESSED UNDER THE HEAD SALARY. IT CANNOT BE DISPUTED THAT AS A DEVELOPMENT OFFICER OF LIC, MAIN TASK IS TO DEVELOP BUSINESS FOR THE LIC. FOR THAT, THE DO HAS TO UNDERTAKE VARIOUS ITA NO.726/RJT/2014 - 8 - FUNCTIONS LIKE, (I) COLLECT RENEWAL PREMIUMS FROM A LL POLICYHOLDERS, (II) COLLECT PROPOSAL DEPOSITS TRANSACTION FROM AGENTS U NDER HIS/HER ORGANIZATION, (III) REGISTER PROPOSAL OF AGENTS WOR KING UNDER HIS/HER ORGANIZATION, AND (IV) SUBMIT PROPOSAL OF AGENTS WO RKING UNDER HIS/HER ORGANIZATION THROUGH ELECTRONIC MEDIA (E PROPOSAL), WHICH IS APART FROM WORK OF SELECTION AND APPOINTMENT OF AGENTS, TRAINI NG, GUIDING AND MOTIVATING AGENTS, ETC. THEREFORE, THE EXPENSES INC URRED BY THE ASSESSEE ARE TO BE WHOLLY, NECESSARILY AND EXCLUSIVELY IN PE RFORMANCE OF THE DUTIES OF A DEVELOPMENT OFFICER. HOWEVER, NO DE TAILS OR SUPPORTING EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE BEFORE US TO SUPPORT ITS CLAIM. ATLEAST THE ASSESSEE SHOULD HAVE FILED A CER TIFICATE FROM THE LIC FOR DETERMINING EXPENSES POSSIBLY TO BE INCURRED BY HIM FOR THE PURPOSE OF PROCURING LIC BUSINESS AND EARNING INCENTIVE BON US. NO SUCH CERTIFICATE HAS BEEN SUBMITTED AND ANY DETAILS TO S UPPORT ITS CASE. THEREFORE, WE REMIT THIS ISSUE BACK TO THE FILE OF THE LD.AO TO DECIDE THE CLAIM OF THE ASSESSEE IN VIEW OF THE CBDT CIRCULAR DATED 19.12.1996 AND DECISION OF THE TRIBUNAL IN THE CASE OF SHRI NITIN T. BHUPTANI (SUPRA). WITH THIS DIRECTION, WE ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 1 ST NOVEMBER, 2018. SD/- (WASEEM AHMED) ACCOUNTANT MEMBER SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 01/11/2018