2008 (7) TMI 386 - HC - Income Tax

Court rules in favor of assessee on incentive bonus treatment under Income-tax Act

The Division Bench of the court ruled in favor of the assessee and against the Revenue in a case involving the treatment of incentive bonus as part of ... Appeal to Supreme Court – Certificate of Fitness - whether incentive bonus earned by the assessee as Development Officer of LIC was part of salary within the ambit of section 17 of the Act and no deduction on account of expenses were permissible – held that - we are of the view that even if it is assumed that substantial question of law may arise, looking to the facts of this particular case and considering that low tax effect involved and further considering the Board’s “instructions” for the purpose of filing appeal or application, we do not think it just and proper to grant certificate of fitness in the present case. Section 268A of the Act does not render any assistance to the Revenue in the present case. Accordingly, the application for leave to appeal filed by the Revenue deserves to be rejected. It is accordingly rejected. Issues:1. Leave to appeal to the Supreme Court against a judgment regarding incentive bonus as part of salary under section 17 of the Income-tax Act.2. Requirement to establish uniform treatment of assessees by the Revenue.3. Unavailability of records for comparative tax effect.4. Interpretation of section 268A for filing appeals.5. Consideration of monetary limits for filing appeals under section 268A.Analysis:1. The judgment pertains to an application seeking leave to appeal to the Supreme Court against a judgment related to the treatment of incentive bonus as part of salary under section 17 of the Income-tax Act. The court noted that the question of law in Income-tax Reference No.132 of 1996 was whether the Tribunal was justified in considering the incentive bonus earned by the assessee as part of salary within the ambit of section 17 of the Act. The Division Bench of the court answered this question in favor of the assessee and against the Revenue in a common judgment encompassing multiple income-tax references.2. The court emphasized the need for the Revenue to establish uniform treatment of assessees, citing the decision in the case of Union of India v. Kaumudini Narayan Dalal. The court directed the Revenue to provide the tax effect in each assessee's case for references decided under the common judgment. However, due to unavailability of records, the Revenue was unable to fulfill this requirement, leading to a discussion on the filing of appeals in similar cases.3. The unavailability of records for determining the comparative tax effect raised concerns regarding the Revenue's actions in filing appeals in other cases covered by the common judgment. The court considered the arguments presented by the Revenue's counsel regarding the retrospective effect of section 268A inserted by the Finance Act, 2008, allowing the Revenue to file applications on the same issue for other assessment years or assessees.4. The interpretation of section 268A was crucial in determining the permissibility of the Revenue's appeal in the present case. The court deliberated on the submissions made by the Revenue's counsel regarding the necessity of a certificate of fitness for appealing to the Supreme Court. The counsel relied on judgments from different High Courts to support the argument for granting the certificate.5. In evaluating the monetary limits for filing appeals under section 268A, the court considered the low tax effect in the present assessee's case and the Board's instructions regulating the filing of appeals based on monetary limits. The court concluded that, despite the potential existence of a substantial question of law, the low tax effect and the Board's instructions did not warrant granting a certificate of fitness for the Revenue's appeal. Consequently, the application for leave to appeal was rejected based on these considerations.