Rectification of incentive bonus deduction claim upheld where jurisdictional precedent had already settled the issue.

A claim for deduction from incentive bonus received by a Development Officer of LIC could be rectified under section 154 once the jurisdictional HC had already held that no such deduction was allowable. The Tribunal erred in treating the issue as debatable despite that binding precedent, because a matter settled by the jurisdictional HC is not open to being characterised as controversial within the State. The rectification made by the Assessing Officer was therefore sustainable, and the question was answered in favour of the Revenue and against the assessee.

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Issues: Whether the Tribunal was justified in holding that the Assessing Officer could not rectify the intimation under section 154 of the Income-tax Act, 1961, on the footing that the claim for deduction out of incentive bonus was a debatable issue, despite an existing decision of the jurisdictional High Court.

Analysis: The assessee had claimed deduction against incentive bonus received as a Development Officer of the Life Insurance Corporation. Although no adjustment had been made at the stage of processing under section 143(1)(a), the Assessing Officer later withdrew the claim by invoking section 154. The decisive consideration was that, by the time the Tribunal decided the matter, the jurisdictional High Court had already held that no deduction was allowable out of such incentive bonus. Once that binding decision was available, the issue could no longer be treated as debatable within Rajasthan, and the Tribunal was bound to follow the view of the jurisdictional High Court.

Conclusion: The Tribunal was not right in treating the issue as debatable; the rectification under section 154 was sustainable. The question was answered in the negative, in favour of the Revenue and against the assessee.

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