- .5 2010 Income tax Reference No of =1= IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- - . 5 2010 Income tax Reference No of : 26.8.2010 Date of decision . . . C I T Patiala --- Appellant Versus . . , R S Jain Development Officer Ludhiana --- Respondent --- : CORAM ’ . HON BLE MR JUSTICE ADARSH KUMAR GOEL ’ . HON BLE MR JUSTICE AJAY KUMAR MITTAL --- : Present . , Mr Rajesh Katoch Advocate - . for the appellant Revenue --- , . AJAY KUMAR MITTAL J On a direction of this Court passed in a petition moved by , 256(2) , 1961 ( the revenue under Section of the Income Tax Act for short - .5 2010 Income tax Reference No of =2= ), - “the Act” the Income tax Appellate Tribunal Chandigarh Bench ‘B’ ( ) Chandigarh in short “the Tribunal” has referred the following question : of law for the opinion of this Court “ , Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in cancelling the 263 order passed under section of Income Tax Act when the same was in consonance to the Board’s Instruction .1774? No ” The above question arose in the wake of the facts that the assessee who at the relevant time was working as Development Officer in Life Insurance Corporation filed return of income for the assessment 1986-87 . year claiming certain deductions out of incentive bonus The . assessing officer allowed the claim of the assessee The - ( ) Commissioner of Income tax in short “the CIT” after noticing that the 50% , assessee had claimed of incentive bonus as expenses in addition 16(1) , to standard deduction under Section of the Act afforded an opportunity of being heard to the assessee before invoking the 263 . provisions of Section of the Act The assessee submitted reply that - .5 2010 Income tax Reference No of =3= 263 the provisions of Section were not called for as the relations between him being a Development Officer and the Life Insurance . Corporation were not that of an employer and the employee It was submitted that there existed an agreement between the Corporation / and the Field Officers Development Officers of the said Corporation and in case their performance was not found up to the expected , . standard they could be penalized in terms of the said agreement The CIT did not accept the stand taken by the assessee and cancelled the assessment order passed by the assessing officer in exercise of power 263 . under Section of the Act It was held that there were clear , . . instructions from the Central Board of Direct Taxes i e Instructions No 1774 . . 200/172/84- ( ) 29.8.87/14.10.87 issued vide F No IT AI dated whereby . the incentive bonus had been held to be a part of the salary The assessee carried the matter in appeal before the . Tribunal The Tribunal following its earlier decision rendered on 27.12.1982 - . 186 in the case of Raj Kumar Sethi in Income tax Appeal Nos 187 . . . 135 136/ /1981, and and C O Nos and Chandi accepted the appeal of . the assessee and set aside the order of the CIT - .5 2010 Income tax Reference No of =4= No one has appeared on behalf of the assessee before . us The solitary point that arises for consideration in this reference is regarding nature of the income with regard to incentive - , bonus which was received by the assessee respondent who was a . Development Officer in the Life Insurance Corporation at Ludhiana A Division Bench of this Court in . . , , B M Parmar Development Officer Life . - Insurance Corporation of India v Commissioner of Income tax, (1999) 235 679 ITR had the occasion to consider the similar issue and had held that the incentive bonus which was being paid to the Development . Officer in Life Insurance Corporation would form part of his salary The : relevant observations made by the Division Bench are as under “ ( ) When an employee is allowed deduction under clause i of 16, Section he cannot claim a second deduction on the ground of having incurred certain expenditure in the . performance of his duties The assessee has not been able to show that he was not paid any traveling allowance while going to the field - .5 2010 Income tax Reference No of =5= . in connection with the insurance business He cannot claim a second reimbursement from the amount of incentive . , bonus He being an employee of the Life Insurance , Corporation of India is entitled to the allowances and benefits in respect of his duties as admissible to other . employees , On a consideration of the entire controversy it is held that incentive bonus is assessable under head “salaries” and not under the head “Profits and gains of . business or profession” It is further held that deduction 16( ) under section i of the Act is admissible under the head “Salaries” and no separate deduction on account of . expenditure is permissible ” , - Accordingly the Commissioner of Income tax was justified 263 in invoking Section of the Act and the Tribunal had erred in . cancelling the said order - .5 2010 Income tax Reference No of =6= , In view of the above we decide the question referred to . this Court in favour of the revenue and against the assessee The . Reference stands disposed of ( ) AJAY KUMAR MITTAL JUDGE ( ) ADARSH KUMAR GOEL 26, 2010 August JUDGE * * rkmalik - .5 2010 Income tax Reference No of =7=