Incentive bonus from business procurement treated as professional income, allowing related expenditure deduction against salary-linked earnings.

Incentive bonus earned by a Life Insurance Corporation Development Officer was treated as arising from canvassing and procuring business, which was distinct from ordinary salaried employment. To that extent, the officer was regarded as acting in an agent-like capacity and the bonus was characterised as income from profession rather than pure salary income. The expenditure claimed for earning the bonus was found not unreasonable and was therefore allowable as a deduction against that incentive bonus. The Revenue's objection based on Section 17 of the Income-tax Act, 1961, accordingly failed.

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Issues: Whether incentive bonus received by a Development Officer of the Life Insurance Corporation was taxable as salary income attracting only the deductions permitted under Section 16 of the Income-tax Act, 1961, or whether expenditure incurred for earning such bonus was allowable as a deduction.

Analysis: The incentive bonus was held to arise from the assessee's efforts in canvassing and procuring business, a part of the activity distinct from his ordinary salaried employment. The Tribunal followed the view that, to that extent, the assessee functioned as an agent and the bonus constituted income from profession rather than pure salary income. On the facts, the claimed expenditure was also not found to be unreasonable.

Conclusion: The deduction of expenditure against the incentive bonus was allowable and the Revenue's objection based on Section 17 of the Income-tax Act, 1961 failed.

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