Honble ARORA, J. – The Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, under Section 256 (1) of the Income Tax Act, in the case of the assessee for the Assessment year 1986-87, referred the following question of law for the opinion of this Court-

``Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in directing to allow 50% deduction of incentive bonus received by the assessee from the L.I.C. of India relying on Boards Circular No. 14/9/65-IT (A-I) dated 22-9-65 which in fact is applicable to L.I.C. agent and not to the Development Officer. The cases of the Development Off- cer are governed by the Boards Circular F.No. 200/127/84- IT (A) dated 29-9-87/14-10-87.

(2). The assessee was working as the Development Officer with the L.I.C. of India. During the previous year relevant to Assessment Year 1986-87, the assessee received a sum of Rs. 68,206/- as incentive bonus from the L.I.C. and he claimed 40% deduction (Rs. 27,282/-) on this incentive bonus. The Income Tax Officer, Sirohi, by his order dated 24-3-87, relying upon the judgment of the Jaipur Bench of the Tribunal in ITA No. 490/JP/94 (I.T.O. vs. K.M. Baheti disallowed this claimed deduction. While disallowing the deduction, the Assessing Officer held that the incentive bonus received by the assessee is the part of the salary in the hands of the assessee and no deduction is permissible since the Standard Deduction under Section 16(i) of the Act has already been allowed. The Income Tax Officer further held that the assessee is an employee of the L.I.C. of India and any receipt by the assessee from the L.I.C. of either nature will be included and taxed under the head ` Income from salary under Section 15 of the Act.

(3). The assessee, dissatisfied with the order dated 24-3-87 passed by the Income Tax Officer disallowing the deduction, preferred an appeal before the Assistant Commissioner, Income Tax (Appeals), Udaipur. The Assistant Commissioner (Appeals), by his order dated 29-12-88, relying upon the judgment of the Income Tax Appellate Tribunal, Chandigarh, as well as on the judgment of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur in I.T.A. No. 334 of 1987 and 335 of 1987 in the case of Moti Lal Mohnot, Pali vs. Income Tax Officer, decided on 21-11-86, allowed the appeal filed by the assessee and directed the Income Tax Officer to allow deduction as claimed by the assessee. The Revenue, aggrieved of the order dated 29-12-88, passed by the Assistant Commissioner Income Tax (Appeals), Udaipur, preferred an appeal before the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur. The appeal filed by the Revenue was heard by the Tribunal at Jodhpur and the Tribunal, by its order dated 19-1-90, dis- missed the appeal filed by the Revenue on the ground that the majority of the decisions of the Jaipur Bench of the Tribunal are in favour of the assessee and against the Revenue. Dissatisfied with the order dated 19-1-90 passed by the Tribunal dismissing the appeal filed by the Revenue, the Revenue moved an application under Section 256(1) of the Act to the Tribunal to refer the questions of law mentioned in the application for the opinion of the High Court. The Income Tax Appellate Tribunal, by its order dated 15-4-91 referred the question, mentioned in para No. 1 above, for the opinion of this Court.

(4). It is contended by the learned counsel for the Revenue that the in- centive bonus paid to the assessee by the L.I.C. falls within the meaning of `salary and it would be chargeable to tax under the head `salary and the only deduction permissible under the law are those specified in Section 16 of the Act. In support of his contention, learned counsel for the Revenue has placed reliance over CIT vs. B. Chinnaiah and Others (1), CIT vs. Govind Chandra Pani (2), K.A. Chouary vs. CIT and Others (3), K.Krishna Murthy and Others vs. CIT, A.P., Hyderabad and Others (4), Gestetner Duplicators Pvt. Ltd. vs. CIT, West Bengal (5), CIT, U.P.

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