Incentive bonus forms part of the salary and is taxable under the head 'Salary', with deductions limited to those specified under Section 16 of the Income Tax Act.

Following are the two questions referred:

"i) Whether on the facts and in the circumstances of the case, the Tribunal has not erred in law in allowing 40% deduction from the incentive bonus granted by the employer when the incentive bonus is assessable under the head "Salaries" ?

ii). Whether on the proper construction of Section 16 of the Income Tax Act, further deduction @ 40% from the incentive bonus is allowable in addition to specific deduction allowable under that section ?"

2. Heard Mr. O.K. Joshi, Learned Advocate for the revenue, none appears for the assessee.

3. Earlier a Division Bench of this Court in a case reported in 7995 (1) GLR/

Page 308 (CIT, Shillong - Vs - Ram Krishna Banik) held that these are basically question of facts and not question of law. Following this judgment in the case in hand it was held that it is question of fact. As against this judgment, the revenue went up to the Apex Court and filed SLP and in the judgment of the SLP which is reported in 248 ITR page (Commissioner of Income Tax-Vs- Anil Kr. Hazarika) it has been held as follows :-

ORDER

"The respondent-assessee has been served but has not chosen to put in an appearance.

The High Court, by the order under challenge, declined to call for a reference of the questions of fact and covered by the decisibn of that court in the case of CIT V, Ram Krishna Banik (1995) 215 ITR 901.

The questions read thus : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal has not erred in law in allowing 40 percent deduction from the incentive bonus granted by the employer when the incentive bonus is assessable under the head "Salaries" ?

(2) Whether on the proper construction of Section 16 of the Income Tax Act, further deduction at 40 percent from the incentive bonus s allowable in addition to specific deduction allowable under that section ?"

The decision in the case of CIT V. Ram Krishna Banik (1995) 215 ITR 901 (Gauhati) also holds that identical questions are questions of fact. We are of the view that the questions are questions of fact.

We are of the view that the questions are questions of law and that the High Court should have directed the Tribunal to refer the same to it for its consideration.

Accordingly, the appeal is allowed. The order under challenge is set aside and the Tribunal is directed to refer the questions quoted above to the High Court for its consideration, after drawing up a statement of case.

" No order as to costs."

4. So, the case as referred has to be decided in the light of decisions of different courts.

5. In ITR 117 Page l (Gestetner Duplicators P. Ltd. -Vs-Commissioner of Income-Tax, West Bengal), the question which arose before the Supreme Court was that whether the salary and Commission paid to the salesman in terms of contractual employment is included in salary and whether it is deductible. The Supreme Court in the judgment has held as follows:

(a) "It is thus clear that if under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary and, therefore, such remuneration or recompense must fall within the expression 'salary'."

(b) "The instant case is, therefore, an instance where the remuneration or recompense payable for the service rendered by the salesman is determined partly by reference to the time spent in the service and partly by reference to the volume of work done. But it is clear that the entire remuneration so determined on both the basis clearly partakes of the character of salary."

6. Following this decision of the Apex Court, the Andhra Pradesh High Court in 183 ITR Page 29 (K.A. Choudhary) -Vs-Commissioner of Income Tax and Others) has decided as follows :-

"The contention of the petitioner is that the incentive bonus does not form part of