IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 27 of 2003()
1. THE COMMISSIONER OF INCOEM TAX,
... Petitioner
Vs
1. SHRI JOHN VARGHESE,
... Respondent
For Petitioner :SRI.GEORGE K. GEORGE, SC FOR IT
For Respondent :SRI.A.KUMAR
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :28/10/2009
O R D E R
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
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I.T.A.Nos. 27 of 2003 &
513 of 2009
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Dated this the 28th day of October, 2009
J U D G M E N T
Ramachandran Nair,J:
The question raised in the connected cases
pertaining to assessment of L.I.C.Development Officers is
whether the Tribunal was justified in holding that 35% of
the Incentive Bonus paid by the L.I.C. to the development
officers is exempted from income tax based on the
Incentive Bonus Scheme, 1997 and Reimbursement of
Expenses Scheme, 1997 framed by the L.I.C. of India.
The issue came up before this Court on an earlier
occasion and in the decision reported in C.I.T v.
T.K.Ginarajan, Development Officer, L.I.C. of India
(253 ITR 463), this Court held that incentive bonus
constitutes salary and the deduction admissible to
salaried employees is only standard deduction provided
under Section 16(1) of the Income Tax Act, 1961.
I.T.A. Nos.27 of 2003 and 513 of 2009
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However, it was left open to the LIC to provide
reimbursement of actual expenditure incurred in the
carrying on the activities of the Development Officers.
The L.I.C. has framed the above schemes wherein without
providing for reimbursement of actual expenditure, they
have provided that 35% of the incentive bonus paid is
treated as actual expenditure. Even though originally the
assessing officers allowed the claim, it was later re-
opened by the Commissioner under Section 263. The
Tribunal, however, set aside the orders of the
Commissioner and held that the LIC Scheme should be
followed for the purpose of the assessment of incentive
bonus given to the Development Officers. We sought a
clarification from the Central Board which has conveyed
its opinion that the LIC Scheme on incentive bonus is not
consistent with the provisions of the Income Tax Act and
Rules. In other words, there is conflict between the two
Departments of the very same ministry viz., the Finance
I.T.A. Nos.27 of 2003 and 513 of 2009
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Ministry. In our view, this is not a matter which should be
left to the court for decision or before departmental
authorities and it should be sorted out by the Ministry
itself. We are further of the view that it would not be fair
to reopen the assessments completed granting tax
benefits in terms of the scheme framed by the LIC. We,
therefore, dismiss the appeals giving freedom to the
Central Board to take up the matter with the LIC so that
the scheme is suitably amended consistent with the
provisions of the Income Tax Act and Rules.
C.N.Ramachandran Nair,
Judge.
V.K.Mohanan,
Judge.
MBS/
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C.N.RAMACHANDRAN NAIR
&
V.K.MOHANAN, JJ.
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I.T.A.NO. OF 200
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I.T.A. Nos.27 of 2003 and 513 of 2009
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J U D G M E N T
DATED: -9-2009
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