1987 (12) TMI 4 - HC - Income Tax

Court rules incentive bonus as part of salary, denying deduction claim under Income-tax Act.

The court dismissed the petitioner's writ petition regarding the deduction of expenses incurred in earning an incentive bonus, ruling that the bonus ... Salary Issues involved: Interpretation of the term 'salary' under section 17 of the Income-tax Act in relation to incentive bonus received by an employee.Summary:The petitioner, a development officer at the Life Insurance Corporation of India, received an incentive bonus of Rs. 9,536 during the relevant assessment year. He claimed a deduction of Rs. 4,768 as expenses incurred in earning the bonus. However, the Income-tax Officer, appellate authority, and Commissioner rejected the deduction, considering the bonus as part of the petitioner's salary for which standard deduction was allowed.The petitioner argued that the incentive bonus should be treated as income from profession, allowing for the deduction of related expenses. Despite relying on a decision of the Income tax Appellate Tribunal, the authorities maintained that the bonus is indeed part of the salary, citing the broad definition of 'salary' under section 17 of the Income-tax Act. The court referenced previous cases and the Payment of Wages Act, indicating that bonus is encompassed within the definition of wages.Ultimately, the court dismissed the writ petition, emphasizing that the petitioner received the incentive bonus while in employment, aligning with the definition of 'salary' under the Income-tax Act. The petitioner's contention was deemed without merit, leading to the rejection of the claim for deduction. No costs were awarded in this judgment.