2005 (1) TMI 24

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....at 40 per cent, as expenses out of incentive bonus which was disallowed by the Assessing Officer in view of the definition of section 17(1)(iv) of the Act and confirmed by the Deputy Commissioner of Income-tax (Appeals), Rohtak?" A perusal of the record shows that while working as Development Officer in services of the Life Insurance Corporation of India (for short, "the Corporation"), the assessee had received a sum of Rs. 58,090 as incentive bonus for the financial year 1985-86. In the return filed for the assessment year 1986-87, he claimed deduction of Rs. 29,045 as expenditure incurred for earning the incentive bonus. The Assessing Officer rejected the assessee's claim for deduction. The Deputy Commissioner of Income-tax (Appeals), ....

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.... the Corporation, the assessee had received incentive bonus. He claimed deduction by asserting that he had incurred expenditure towards business promotion activities which enabled him to earn incentive bonus. According to him, the incentive bonus was a part of business income and not salary. In B.M. Parmar's case [1999] 235 ITR 679 (P & H), a similar question came up for consideration. After analysing the relevant provisions of the Income-tax Act, 1961 (for short, "the Act") and noticing the judgment of the Gujarat High Court in Kiranbhai H. Shelat's case [1999] 235 ITR 635, on which reliance has been placed by Shri Akshay Bhan to support his submission, a Division Bench of this court observed as under: "The first question which needs to....

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....were appointed. In this light, the extra income earned by the Development Officers cannot be said to be assessable under the head 'Profits and gains of business or profession'." The Division Bench referred to the provisions of sections 2(24)(iiia) and 10(14) of the Act and held: "In the case of a Development Officer, the incentive bonus does not appear to be a special allowance payable to him for meeting expenses wholly, necessarily and exclusively incurred by him in the performance of his duties. In the Incentive Bonus Scheme of 1978, there is no mention that incentive bonus is payable so as to meet the expenses incurred by the Development Officers in the performance of their duties. They have been made eligible to receive incentive ....