PRAKASH KUMAR JHA V. COMMISSIONER OF INCOME_TAX

MA/429/1999

AI Insights

The case involves Prakash Kumar Jha, a Development Officer at the Life Insurance Corporation of India, who appealed against the decision of the Income Tax Appellate Tribunal, which denied him a 40% deduction on an incentive bonus of Rs. 5,40,000 received in the Assessment Year 1995-96. The primary legal question was whether this bonus qualifies as 'salary' under Section 17(1)(iv) of the Income Tax Act, 1961, which would affect the deductibility of expenses related to it. The High Court of Patna, after considering precedents and the specific provisions of the Income Tax Act, upheld the Tribunal's decision, categorizing the bonus as salary and denying the deduction.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 726353 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 28-09-2010
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax Vs. Kiranbhai H. Shelat & Anr. (235 ITR 635), Commissioner of Income-Tax, Bihar, Patna Vs. Ramjee Prasad (Tax Case No. 13 of 1991), Tax Case No. 30 of 1990
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; ARCHANA SINHA
• Assessee Lawyers: AJAY RASTOGI
• Keywords: Deduction of expenses; Incentive bonus; Income tax appellate tribunal; Salary
• Section: 154; 260A; 17(1)(iv)

Judgement Text

" IN THE HIGH COURT OF JUDICATURE AT PATNA M.A. No. 429 of 1999 ============================================ Prakash Kumar Jha, Development Officer, son of Gaya Prasad Jha, resident of Vidya Pati Nagar, Near East of Hospital Gumti, P.S Madhubani, District Madhubani ……………….. …………………………………………. Assessee/Appellant Versus 1. Commissioner of Income Tax, Muzaffarpur and 2. Assistant Commissioner, Darbhanga Circle, Darbhanga …………….. Respondents APPEARANCE For the appellant: Mr. Ajay Rastogi, Advocate. For the respondents: Mr. Harshwardhan Prasad and Mrs. Archana Sinha, Advocates. CORAM: HONOURABLE THE CHIEF JUSTICE And HONOURABLE MR. JUSTICE JYOTI SARAN ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 9. 28/09/2010 This appeal preferred under Section 260A of the Income Tax Act 1961 (hereinafter referred to as `the Act’) raises a question of law “whether the incentive bonus earned by the assessee, a Development Officer of the Life Insurance Corporation of India, is a `salary’ as defined in Section 17(1)(iv) of the Act and whether the Income Tax Appellate Tribunal is justified in holding that the assessee is not entitled to deduction of expenses to the extent of 40% of such 2 incentive bonus.” The appellant Prakash Kumar Jha is a Development Officer in the Life Insurance Corporation of India (hereinafter referred to as `the Corporation’). In the previous year relevant to the Assessment Year 1995- 96, the appellant was paid incentive bonus in the sum of Rs. 5,40,000.00/-. The appellant returned the amount of incentive bonus under the head `Income from other sources’ after deducting 40% of the amount. The Assessing Officer did not allow the said deduction. The rectification application filed under Section 154 of the Act was rejected on 26th December 1995. The appellant challenged the said order before the Commissioner of Income Tax (Appeals) in Appeal No. 22/A-III/95-96. The Commissioner of Income Tax (Appeals), by his order dated 9th September 1996 allowed the appeal and directed the Assessing Officer to allow the deduction as claimed by the appellant. The said order was reversed by the Income Tax Appellate Tribunal on 12th May 1999 by order made in I.T.A. No. 21/Pat/1997. Therefore, the present appeal. Learned Advocate Mr Ajay Rastogi has appeared for the appellant. He has relied upon the judgment of the Gujarat High Court in the matter of Commissioner of Income-Tax Vs. Kiranbhai H. Shelat & Anr. (235 ITR 635). He has submitted that as held by the Gujarat High Court the appellant is entitled to a deduction of the amount actually spent by him to the maximum of 30% of the bonus. 3 Learned Advocate Mrs. Archana Sinha has appeared for the department. She has contested the appeal. She has submitted that the matter is set at rest by this Court in the matter of Commissioner of Income- Tax, Bihar, Patna Vs. Ramjee Prasad (Tax Case No. 13 of 1991). For the reasons recorded by us in our judgment and order dated 28th September 2010 passed in Tax Case No. 30 of 1990, we hold that the amount of incentive bonus received by the appellant was a `salary’ within the meaning of Section 17(1)(iv) of the Act and that he was not entitled to 40% deduction claimed by him. The appeal is dismissed. There shall be no order as to costs. Dilip ( R. M. Doshit, CJ.) ( Jyoti Saran, J.) "