K.A. Choudary vs Commissioner of Income Tax and Others

Upendralal Waghray, J.—The petitioner who is a development officer employed by the Life Insurance Corporation of India received a sum of Rs. 9,536 from his employer by way of incentive bonus during the previous year relevant to the assessment year 1981-82. In his return filed under the Income Tax Act, he claimed a deduction of Rs. 4,768 by way of expenses earning the said incentive bonus. The Income Tax Officer declined to give the deduction claimed on the ground that the incentive bonus was a part of the salary for which standard deduction was allowed. This order was confirmed by the appellate authority as well as the Commissioner in revision. Thereafter, the petitioner has filed this writ petition seeking a direction that the incentive bonus shall not be included as a part of his salary during the said and the subsequent assessments.

The contention of the petitioner is that the incentive bonus does not form part of the salary and has to be treated as income from profession for earning which the expenses incurred shall be allowed as a deduction. Before the authorities under the Income Tax Act, a decision of the Income Tax Appellate Tribunal, Chandigarh Bench, was relied upon which was not accepted by them. It is contended by counsel for the Revenue that the incentive bonus paid to the petitioner as an employee is nothing but part of his salary. The definition of "salary" u/s 17 of the Income Tax Act is wide enough to include the incentive bonus paid to an employee. The circumstance that, u/s 36(1), sub-clause (ii), such a payment is given as a deduction to the employer also will not militate against the fact that the incentive bonus forms part of the salary. The petitioner could not have earned this amount if he were not in the employment of the Life Insurance Corporation. In support of this contention, a decision of the Supreme Court in Gestetner Duplicators Pvt. Ltd. Vs. Commissioner of Income Tax, West Bengal, was relied upon. This court also, in the decision in M. Krishna Murthy and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad and Others, , has taken a similar view in respect of incentive bonus while considering the applicability of section 40A of the Income Tax Act. The Allahabad High Court has also in the decision reported in Commissioner of Income Tax Vs. Hind Lamps Ltd., , taken a similar view about incentive bonus being a part of salary. We are unable to say that the incentive bonus received by the petitioner is nothing else but what an employee has received from the employer. The definition of "wages" under the Payment of Wages Act, 1936, also indicates that bonus is included in the said definition. Having regard to the language of section 17 of the Income Tax Act and the circumstance that the petitioner has received the said amount as incentive bonus while employment, we do not consider that the contention of the petitioner has any merits.

The writ petition is, therefore, dismissed. We make no order as to costs.