THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.109 OF 1996 Dated:30.11.2011 Between: The Commissioner of Income Tax, Andhra Pradesh – II, Hyderabad .. Applicant And Sri G.Venkatram Reddy, Karimnagar .. Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.109 OF 1996 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax – II, Hyderabad, got the following question referred to the opinion of this Court under Section 256(1) of the Income Tax Act, 1961. Whether, on the facts and in the circumstances of the case, the ITAT was justified in law in holding that the assessee, a salaried employee of LIC, was entitled to deduction of 40% on the incentive bonus received from his employer? During the course of arguments, it is brought to our notice that a similar question was considered by the Division Bench in Commissioner of Income Tax v B. Chinnaiah[1]. It was held therein as under. … In view of the above judgments, it cannot but be held that “incentive bonus”, whether treated as part of the salary or perquisite, is taxable under the head “Salary” and the permissible deductions under the said head are as specified under Section 16 of the Act. It is nobody’s contention that 40 percent of the bonus, deducted by the assessee as expenditure and upheld by the Tribunal, falls under any of the items under section 16. Thus the expenditure is other than permissible deduction under section 16 of the Act. It has already been observed above that the only permissible deductions under the head “Salary” are those mentioned in section 16 and if any expenditure does not fall within the meaning of section 16, it cannot be allowed. … The Division Bench answered the question in the negative against the assessee and in favour of the Revenue. Accordingly, the instant reference is also answered in the negative in favour of the Revenue and against the assessee. The Referred Case is accordingly disposed of. ________________ (V.V.S. RAO, J) _____________________ (B.N.RAO NALLA, J) 30.11.2011 KH [1] (1995) 214 ITR 368