ORDER
PHOOL SINGH, J. M. :
This appeal is preferred by Shri Nandlal H. Ramani against the order dt. 8th Aug., 1990, recorded by CIT(A)-V, Ahmedabad, by which his appeal relating to asst. yr. 1987-88 was dismissed.
2. Only two grounds have been agitated by the assessee out of which the first ground is effective one which reads as under :
1. The learned CIT(A) erred in law and on facts in rejecting the claim of the appellant for deduction of 50% expenses from incentive bonus as per CBDT circular.
3. Relevant facts for disposal of this ground of assessee are not in dispute. The assessee, Nandlal H. Ramani, was working as Development Officer in the LIC of India at Ahmedabad in the year under consideration, i.e., asst. yr. 1987-88, year ending on 31st March, 1987. He filed return of income showing net taxable income of Rs. 91,320 which was revised to Rs. 88,920 on 26th Feb., 1988. During the course of assessment proceedings, the ITO concerned (hereinafter referred to as AO) observed that assessee had received Rs. 1,56,155 as incentive bonus commission from LIC in the year under consideration and the assessee has claimed deduction of Rs. 78,078 (50% of Rs. 1,56,155) treating the incentive bonus commission as business income. The claim of the assessee was processed by the AO who was of the opinion that the amount of Rs. 1,56,155 received by the assessee as incentive bonus is part of salary by virtue of s. 17(1) (iv) of the IT Act, 1961 (hereinafter referred to as the Act) and further held that assessee was not entitled to any deduction much less 50% thereof as claimed as no deduction other than standard deductions provided under s. 16(i) of the Act were permissible. The claim of the assessee for deduction of 50% expenses from incentive bonus was, therefore, rejected against which the assessee preferred appeal. It was contended before the CIT(A) that the AO has wrongly placed reliance upon the Departmental instructions and the same are not binding upon the appellate authorities. Reliance was placed on 3 decisions of Tribunal, viz. :
ITO vs. Shri P. V. Ashar ITA No. 582/Ahd/84 (Ahmedabad Bench);
ITO vs. Narendra V. Patel (1985) 21 TTJ (Bom) 60 : (1985) 21 Taxman 45 (Bom);
ITO vs. Rajkumar Sethi (1982) 14 TTJ (Chd) 160 : (1982) 1 ITD 907 (Chd)
The learned CIT(A) considered the submission of the assessee and referred to the decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary vs. CIT (1990) 183 ITR 29 (AP) in which incentive bonus was treated by their Lordships as part of salary. The learned CIT(A) following the analogy of that decision which was based on decision of Honble Supreme Court and other High Courts decision, concluded that incentive bonus was part of salary and no expenses were allowable out of that except standard deduction(s). The assessee, feeling aggrieved from the said findings of learned CIT(A), has come in appeal before us.
4. Shri Mukesh M. Patel, Advocate, who appeared before us has argued at length and pointed out that Tribunal Benches of Ahmedabad had been following the decisions which were laid down in the case of ITO vs. Rajkumar Sethi (supra) decided by the Tribunal, Chandigarh Bench, and the decision of Tribunal, Bombay Bench in the case of ITO vs. Narendra V. Patel (supra) as these cases along with case of K. Rami Reddy vs. ITO (1984) 8 ITD 633 (Hyd) had been referred to by Tribunal, Ahmedabad Bench in the case of Kiranbhai H. Sheelat vs. ITO (1993) 46 TTJ (Ahd) 476. He further pointed out that the controversy to argue the matter arose as in the case of ITO vs. P. M. Suthar (ITA Nos. 2641 to 2645/Ahd/1990 relating to asst. yrs. 1983-84 to 1986-87 and 1988-89) [reported at (1995) 52 TTJ (Ahd) (TM) 260] there was difference of opinion in the Tribunal, Ahmedabad B Bench as Shri B. M. Kothari, learned Accountant Member, decided the similar issue in favour of assessee following the decision of the Tribunal, Ahmedabad Bench in the case of K. H. Shelat vs. ITO (supra) but Shri Abdul Rajack, the learned Judicial Member dissented and he was of the opinion that the decision of Honble Andhra Pradesh High Court in the case of K. A. Chaudhary (supra) is on the point in issue and that has to be followed by the Tribunal as the same has got binding effect on the Tribunal Benches as no other contrary decision of any other High Court except this on the issue, has been referred to by any of the party and accordingly he decided the issue in favour of Revenue treating the incentive bonus as part of the salary and further opined that no deduction of any expenditure was to be allowed for earning the same except those provided in s. 16 of the Act on reference made to Third Member, the view of J. M. was found acceptable and appeal was decided in favour of Revenue accordingly.
5. The contention of the learned advocate, Shri Mukesh M. Patel, was that this happened due to the fact that decision of the Special Bench constituted by the Honble President, Tribunal to resolve this issue was not brought to the notice of the Members who were seized with this controversy. He filed the copy of decision of Tribunal, Special Bench comprising of the then President, Vice-President, South Zone, and one of the Judicial Members by which ITA Nos. 1318 and 1319/Hyd/86 (asst. yrs. 1981-82 and 1982-83) in the case of Shri P. Dayakar vs. ITO B-Ward, Warangal, were decided vide order dt. 23rd March, 1989 and that Special Bench concluded that the amount (paid) by the LIC as incentive bonus to Development Officer is to be treated as part of salary, but the Development Officer was held entitled to 40% of incentive bonus as claimed by way of expenses. He also brought to our notice the decision of Tribunal, Madras A Bench in the case of Shri K. Chandrasekaran vs. ITO in ITA No. 1186/Mad/1987 for asst. yr. 1983-84 in which decision of Special Bench was followed.
6. These two decisions have been compiled and reported in the News Bulletin of Insurance Field Workers Vol. IV, No. 8, August, 1990 (copy enclosed). On the strength of this decision of Special Bench of Tribunal and another decision of Madras Bench of Tribunal, it has been contended by the learned counsel that if decision of Special Bench of Tribunal would have been brought to the notice of the learned Members of Tribunal seized with the case of P. M. Suthar referred to above that matter should have not been decided in favour of Revenue as the Special Bench decision has considered the decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary (supra) and then decided the issue in favour of assessee. He accordingly pleaded that matter is to be decided in view of the decision of Special Bench of Tribunal which has since been followed by another Bench of Tribunal, Madras in the case of K. Chandrasekaran vs. ITO (supra).
7. The other submission of the learned counsel is that this issue had been subject-matter of controversy before the Tribunal as early as in 1984 and Tribunal Hyderabad Bench B in the case of K. Rami Reddy vs. ITO (supra) had decided the matter in favour of assessee treating the incentive bonus itself as an allowance and the part relating to expenses which necessarily and exclusively incurred for the performance of the duty of employee had to be treated as special allowance covered by s. 10(14) and 40% of the incentive bonus was treated as reasonable expenditure on the basis of guidelines laid down by the CBDT. The same view was of Special Bench of Tribunal in the case of P. Dayakar vs. ITO (supra) and plea of the learned counsel is that part of incentive bonus was spent by Development Officer of LIC only, wholly necessarily and exclusively for the performance of duty and it was to be treated as special allowance covered under s. 10(14).
The other plea of the learned counsel for the assessee was that theory of real income be pressed into service as incentive bonus is an additional amount of remuneration which is given to Development Officer on the basis of additional field work which results in bringing of additional premium of LIC from new customers. The definition of the term of “salary” in s. 17 is very wide and includes profits, inter alia, and in addition to salary, incentive bonus is to be treated as part of salary but the word “salary” has not to be understood in the ordinary sense of the term in view of the fact that incentive bonus in the case of Development Officer also does not represent salary in the sense of the term but was included under the salary because of the wide definition given in s. 17 of the Act. As incentive bonus represents additional profits earned by assessee by extra work then those profits should not be treated in the ordinary sense but net of those profits shall be includible under the head “salary” for computation. To support this theory of real income the learned counsel placed reliance on the decision of Tribunal, Bombay B Bench (3rd Member) in the case of ITO vs. Narendra V. Patel (supra) in which it was laid down that as in the manner to work out the profits and gains of business, the account has to be taken of all losses and expenses incurred, the same analogy can be applied in the case of computation of income under the head “salaries” also. It was further observed that the incentive bonus/commission which is offered over and above the salary and perks may not be treated as salary in the commercial sense. It is treated as income chargeable under the head to tax “salaries” because of widened definition of salary in s. 17.
8. The learned counsel for assessee has again placed reliance on the decision of Tribunal, Ahmedabad in the case of Kiranbhai H. Shelat vs. ITO (supra) in which the same view was adopted that incentive bonus represents additional profits earned by assessee by extra work and to be assessed under the head “salaries” but as far as these profits are concerned, the net amount and not the gross amount would be includible and expenses incurred in the earning the incentive bonus by Development Officer were allowable as deduction. On the basis of all these facts the learned counsel summed up that view adopted by the Tribunal Benches prior to the decision of Third Member was the logical view based on the earlier decisions of Tribunal Benches of Chandigarh, Bombay, Hyderabad, and further Special Bench decision of Hyderabad which has also decided the matter in favour of assessee after considering the decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary (supra) and those decisions have to be given weight in comparison to the decision of Third Member decision in the case of ITO vs. P. M. Suthar (supra) in which the decision of Special Bench referred to above was not discussed and the Special Bench decision has to be followed in comparison to the decision of Third Member.
9. As against all these pleas raised by the learned counsel for assessee, the learned Departmental Representative submitted that all the pleas of the learned counsel for assessee are not tenable in view of the latest series of decisions of different High Courts. First of all he placed reliance on the decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary (supra) in which the amount of incentive bonus was treated as part of salary and contended further that once that amount is part of salary then treatment to the amount of salary is to be given as provided under ss. 15 and 16 of the Act and nothing more can be added. The learned Departmental Representative further pointed out that not only this the matter stands decided against the assessee by other High Courts also and he placed reliance on the decisions of Honble Orissa High Court in the case of CIT vs. Govind Chandra Pani (1995) 213 ITR 783 (Ori) in which their Lordships held that incentive bonus earned by Development Officer from LIC is assessable as salary within the ambit of s. 17 of the Act and has to be computed under s. 16. Their Lordships further laid down that only deductions which could be claimed were those which are allowed by s. 16 only. In another case of CIT vs. B. Chinniah & Ors. (1995) 214 ITR 368 (AP) the Honble Andhra Pradesh High Court has again treated incentive bonus paid to Development Officer of LIC as part of salary and concluded that only those deductions are allowable which are provided under s. 16. It was further laid down that deductions under s. 10(14) were not permissible as the same have not been notified by Central Government. The decision of the same High Court in the case of K. A. Choudhary (supra) has also been followed by their Lordships. The learned Departmental Representative contended that in view of the decisions of different High Courts the issue has to be decided in view of those decisions which are in favour of Revenue.
10. Regarding the decisions of different Benches of Tribunal and that of Special Bench in the case of P. Dayakar vs. ITO (supra), the learned Departmental Representative pointed out that in view of the decision of Honble High Court on the point in issue, the decision of Tribunal Benches and even that of Special Bench have to be ignored as view of the Honble High Court supersedes the decision of Tribunal Benches including that of Special Benches. He further submitted that theory of real income which was the basis of the decision rendered by Tribunal Benches has again not to be attached any importance as Honble High Courts have not recognised the same impliedly in view of the fact that only those deductions as prescribed under s. 16 of the Act were held allowable and expenses as claimed by assessee do not fall anywhere in the provisions of s. 16. The learned Departmental Representative concluded his arguments by submitting that as decisions of different High Courts on the point in issue is in favour of Revenue, no deviation is expected from the said view laid down by Honble High Courts.
In rejoinder the learned counsel for assessee pointed out that decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary (supra) has already been discussed by the Special Bench decision in the case of P. Dayakar (supra) and still the assessees contention was allowed. About the decision of Honble Orissa High Court in the case of Govind Chandra Pani (supra) the contention of the learned counsel was that assessee in that case came with the contention that incentive bonus was income from other sources and none appeared on behalf of assessee. About the decision of Honble Andhra Pradesh High Court in the case of CIT vs. B. Chinniah & Ors. (supra) the learned counsel pointed out that Honble High Court has decided the matter after taking into consideration the provisions of s. 10(14) which were made effective since 1st April, 1989, by Direct Tax Laws (Amendment) Act, 1987, even though the matter being decided by their Lordships relates to asst. yr. 1983-84 and thus the matter cannot be taken as decided in correct perspective as their Lordships relied upon the provisions of s. 10(14) which were not in force in relevant assessment year. The learned counsel further contended that these two cases do not have discussions about the admissibility of deductions on account of expenses incurred by Development Officers in earning the extra profit by way of incentive bonus but in both the decisions the matter has been set at rest by concluding that once incentive bonus is part of salary, only those deductions which are provided under s. 16 shall be allowed. He is of the opinion that Tribunal Benches and Special Bench have discussed the legality or otherwise of the expenses incurred by the Development Officers in earning the incentive bonus and rightly concluded the same as allowable by applying the theory of real income and those decisions still hold good on the point in issue before us.
11. We have heard the rival submissions at length. The issue involved before us has got two parts and the first point to be considered is whether incentive bonus earned by Development Officer is part of salary under the IT Act or not. The second point involved is whether the amount of incentive bonus is fully taxable or whether any deduction on account of alleged expenses incurred by Development Officer could be allowed under any provisions of the Act or by invoking the theory of real income.
12. So far as the first point is concerned the matter stands decided that incentive bonus paid by LIC to Development Officer is part of salary of the assessee and for that, decision of Honble Andhra Pradesh High Court in the case of K. A. Choudhary vs. CIT (supra) is an authority which has been followed by the Special Bench in the case of P. Dayakar (supra). Not only this, in latest decision of Orissa High Court in the case of CIT vs. Govind Chandra Pani (supra) their Lordships after discussing the law point concluded that incentive bonus received by Development Officer from employer, the LIC partakes character of salary as defined under s. 17 of the Act. In the case of CIT vs. B. Chinniah & Ors. (supra) the same view has been laid down by their Lordships following the decision of Andhra Pradesh High Court in the case of K. A. Choudhary vs. CIT (supra). The learned counsel for assessee also conceded to this settled preposition that amount of incentive bonus received by assessee has to be treated as the part of salary.
13. Now comes the second part of the issue as to whether this amount of incentive bonus is to be treated as taxable as a whole or any amount of expenses allegedly incurred by the assessee requires to be deducted out of it. To appreciate this controversy we have to go through the decision of Special Bench of Tribunal in the case of P. Dayakar vs. ITO (supra) which is backbone of the arguments of learned counsel. The deductions on account of expense @ 40% were allowed on the basis of provisions of s. 10(14) of the Act treating that expenditure was directly related to procure new business. The same view of the Tribunal was there in the case of K. Rami Reddy vs. ITO (supra) that part of incentive bonus which relate to expenses wholly, necessarily and exclusively incurred in the performance of his duty of employment had to be treated as a special allowance covered by s. 10(14) and were held as deductible. For this, we have to go through the provisions of s. 10(14) as were in existence at the relevant time and the same reads as under :
“Sec. 10(14) Any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of cl. (2) of s. 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, to the extent to which such expenses are actually incurred for that purposes.”
To claim the benefit the assessee has to show that any special allowance or benefit was specifically granted to meet the expenses wholly, necessarily and exclusively in the performance of duties. But nothing has been brought from the side of assessee in the case before us that incentive bonus had been granted to meet the expenses wholly, necessarily and exclusively for performance of the duties. Rather the facts are otherwise. The assessee himself has filed before us the photostat extract from the booklets issued by General Secretary, National Federation of Ins. Field Workers of India, Ajmer Division, covering rules and regulations and perks concerning Development Officers of LIC. Page 2 of this booklet provides the benefits to be received by apprentice Development Officer in the following words :
“Once an Apprentice Development Officer is put on probation, he becomes eligible to earn the most important financial reward in the post of Development Officer, because the premium income brought in and number of lives assured by agents in his organisation and the composition of the organisation itself, make him earn not only confirmation but Incentive Bonus and Additional Conveyance Allowance.”
A perusal of the above shall show that incentive bonus is shown as financial reward to be given to Apprentice Development Officer and not any special allowance to meet any expenses wholly, necessarily and exclusively for purpose of performance of duties of an office. This booklet further gives out the formula of incentive bonus and further formula for modifying the quantum of basic incentive bonus. It shows that incentive bonus is to be determined as per formula given at page 3 of this booklet and it will be subject to increase or decrease. Nowhere it is mentioned that the amount of incentive bonus shall be related to the expenses to be incurred by Development Officer in performance of the duties. The conclusion shall be that incentive bonus, as this booklet indicates, has nothing to do with any allowance granted to assessee to meet any expenses in the performance of the duty as has been laid down by some Tribunal Benches also that the amount of incentive bonus is a reward or profit for extra work given by LIC. In view of it the benefit of s. 10(14) of the Act cannot be extended to the assessee as he failed to prove on record that the amount of incentive bonus has been granted by LIC to meet the expenses in the performance of duties.
14. Now comes the another point relating to fate of the decision of Special Bench and those of the Tribunals as well as the decisions of Honble High Courts. The Honble Supreme Court in the case of Union of India vs. Kamlakshi Financial Corpn. Ltd. AIR 1992 SC 710 had held :
“Principles of judicial disciplines require that the order of higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that order of the appellate authority is not “acceptable” to the Department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by competent Court.”
It is also the view of the Honble Supreme Court in the case of Asstt. Collector, Customs & Excise vs. Dunlop India Ltd. AIR 1985 SC 330 that –
“Judicial system only works if some one is allowed to have the last word and that last word, once spoken is loyally accepted. The better wisdom of Court below must yield to the higher wisdom of Court above.”
The ratio of view of their Lordships is that view of the lower Court(s) has to give way to the view of higher Court(s). We may further point out that Tribunal Benches at different parts of the country are referring the matters to different High Courts seeking their advice/opinion on any particular issue under the provisions of the Act and once that advice/opinion is rendered by any High Court, the judicial discipline requires that said decision has to be followed by the Tribunal in deciding the cases. In the case of CIT vs. Smt. Godavari Devi Saraf (1978) 113 ITR 589 (Bom) Honble Bombay High Court had laid down that until the contrary decision is given by any other competent High Court which is binding on the Tribunal, the Tribunal has to proceed on the footing that the law declared by High Court though of another State, is the final law of the land. The ratio of this decision was that the Tribunal situated at any State was to follow the decision of any High Court unless the decision of that High Court in which the Tribunal is situated comes with a different view and it was based on the rule of judicial discipline and further on the ground that IT Act is an all India statute and it was desirable to follow uniformity in income-tax matters.
Not only this, even our Honble High Court in the case of CIT vs. Sarabhai Sons Ltd. (1983) 143 ITR 473 (Guj) and in another case of CIT vs. Sarabhai Sons (P) Ltd. (1993) 204 ITR 728 (Guj) laid down the same view that one High Court should follow the other High Court with a view to maintain uniformity in income-tax matters. No doubt Honble Bombay High Court in the case of CIT vs. Thane Electricity Supply Ltd. (1994) 206 ITR 727 (Bom) have deviated from the view of Honble Gujarat High Court in the case referred to above but that view will not be of any help to the assessee as point before us is very specific. We are faced with different decisions of Tribunal Benches including one of Special Bench of Tribunal vis-a-vis the decision of Honble High Courts and the demand of judicial discipline in view of the above pronouncement of apex Court is that decision rendered by Honble High Courts have to be followed in comparison to the decision of Tribunal Benches regardless of the fact that matters have not been thrashed at length by Honble High Courts provided facts were identical and matter in issue was the same. In all the cases relied upon by the Revenue the facts were identical and issue before their Lordships was whether any deduction on the alleged expenses incurred by the assessee, a Development Officer of LIC, incurred to earn incentive bonus were deductible from the amount of incentive bonus which was undisputedly part of salary and the decision of their Lordships was in the negative, i.e., in favour of Revenue and against the assessee. Their Lordships have laid down that if incentive bonus is part of salary only those deductions will be permissible which are provided under s. 16(i) of the Act and none else. Once these are the specific findings nothing can be allowed to be added as against this.
14.1 The argument of the learned counsel about the application of theory of real income in the case of assessee will also be treated as impliedly overruled in view of the specific findings of their Lordships that only those deductions which are prescribed under s. 16(i) of the Act will be allowable under the salary of the assessee treating the amount of incentive bonus as part of salary. Reliance of the learned counsel on the decisions of Tribunal which were based on the theory of real income, will not be of any help to the assessee.
15. The plea of the learned counsel regarding the decision of Honble Andhra Pradesh High Court in the case of CIT vs. Chinniah & Ors. (supra) that provisions of s. 10(14) which were not in existence in asst. yr. 1983-84 have been made basis for reaching a conclusion by their Lordships is also not going to help the assessee as their Lordships have already decided the issue in favour of Revenue at p. 372 concluding that only those deductions are permissible which are specified under s. 16 of the Act and later on their Lordships discussed the provisions of s. 10(14) which is not the case of the assessee before us. The conclusion on the basis of above, shall be that we shall have to follow the view as laid down by their Lordships and the issue stands decided against the assessee and in favour of Revenue on the basis of those case laws decided by their Lordships.
16. In the grounds of appeal the assessee has taken plea about the view taken by CIT(A) against the assessee on the basis of CBDT circular. It is relevant to point out that the assessee himself has placed reliance on the Circular No. 1546, dt. 6th Jan., 1984, before AO to justify the claim of the deduction on account of expenses allegedly incurred by him. The AO mentioned about CBDT, New Delhi, Instruction No. 1774, dt. 14th Oct., 1984, which is of clarificatory nature as is evident from copy furnished before us by learned counsel for assessee. It is made clear that earlier Instructions No. 1546 which was an extension of CBDT earlier Instructions F. 14/91 65-IT(AI), dt. 22nd June, 1965, was in respect of LIC agent and not in favour of Development Officer.
17. Accordingly, the AO refused to extend the benefit of Instruction No. 1546, dt. 6th Jan., 1984, and rightly so as that was not meant for assessee. It is also not going to help the assessee.
18. The result is that assessees ground is without any force and the ground is rejected.
19. Second ground of the assessee relates to addition of Rs. 11,700 made by AO on account of low household expenses and confirmed by CIT(A).
20. The assessees family consists of himself, his wife, two daughters and two sons. He has shown the total withdrawal at Rs. 13,299. The AO treated this amount as inadequate and estimated household expenses at Rs. 25,000 resulting an addition of Rs. 11,700. It stood confirmed by the CIT(A) on the ground that assessee failed to bring any evidence on record in support of his contention that part of household expenses were being contributed by his sons. We are in agreement with the findings of both the authorities and confirm the said findings.
21. In the result, the appeal of assessee is dismissed.