Incentive bonus deduction treated as allowable where Tribunal followed coordinate Bench rulings and rejected withdrawal under salary provisions.

40% of the incentive bonus received by a Life Insurance Corporation field officer was disputed as salary or commission in lieu of salary under section 17 of the Income-tax Act, 1961, with the Revenue seeking withdrawal of the deduction earlier allowed. The Tribunal followed earlier coordinate Bench decisions cited by the assessee on similar incentive bonus receipts and held that the 40% deduction could not be disallowed. The assessing authority's withdrawal of the deduction was therefore not sustained, and the assessee's appeals were allowed.

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Issues: Whether 40% of the incentive bonus received by a Field Officer of the Life Insurance Corporation was liable to be treated as salary under section 17 of the Income-tax Act, 1961, and consequently whether the deduction allowed by the assessing authority could be withdrawn.

Analysis: The receipt was characterised by the revenue as salary or commission in lieu of salary, relying on the terms of employment and the nature of the scheme. The assessee relied on earlier Tribunal decisions allowing a 40% deduction from incentive bonus in similar cases. Although the departmental case was supported by references to the salary provisions and the allowance structure, the Tribunal preferred to follow the coordinate Bench decisions cited on behalf of the assessee.

Conclusion: The 40% deduction from the incentive bonus could not be disallowed, and the withdrawal of the deduction was not sustained. The appeals were allowed in favour of the assessee.

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