The definition of salary u/s 17 of the Income Tax Act is an inclusive definition and the word 'includes' is used to enlarge the meaning of the word 'salary'.

JUDGMENT :

G.B. Patnaik, J. - On an application being filed u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has formulated the following questions for the opinion of this court :

" (i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the incentive bonus received by the assessee can be assessed as income from profession and deduction at the rate of 40 per cent. be allowed on account of expenses ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee being an employee of the Life Insurance Corporation of India and deriving both salary and incentive bonus could not be assessed u/s 16 of the Income Tax Act, 1961, in respect of his incentive bonus receipt ?

(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right to endorse the view of the Appellate Assistant Commissioner of Income Tax in holding that the term 'salary' as defined in Section 17 would not include 'incentive bonus' ?"

2. Questions Nos. 2 and 3 are really one and the same question and, therefore, after hearing learned standing counsel for the Revenue, we reframe only one question in relation to questions Nos. 2 and 3 already, formulated by the Tribunal, the same being :

" Whether the incentive bonus which the assessee as the Development Officer gets from the employer, Life Insurance Corporation, can be held to be 'salary' within the ambit of Section 17 of the Income Tax Act and as such would be chargeable under the head 'salary' u/s 16 of the Act ?"

3. For the assessment year 1984-85, the Assessing Officer had received a return from the assessee showing the total income at Rs. 16,210. On discussion with the assessee, the Income Tax Officer found that the assessee had received a sum of Rs. 26,466 as incentive bonus. Treating the same to be income from other sources, the assessee had claimed 40 per cent. of the same as deduction. The Income Tax Officer did not accept the claim of the assessee and held that the incentive bonus does form a part of the salary and once it is treated to be salary, then no other deduction other than the deduction provided in Section 16 of the Act can be allowed. With these conclusions, the Income Tax Officer completed the assessment proceeding. Against the aforesaid order of the Income Tax Officer, the assessee preferred an appeal which was heard by the Assistant Commissioner of Income Tax. The appellate authority agreed with the contention of the assessee and held that the incentive bonus was not a part of salary as the definition of "salary" as given in Section 17 of the Act has avoided the use of the word "bonus". It further held that the claim of the assessee claiming deduction of 40 per cent. towards expenses from the incentive bonus received should be allowed. The assessee's appeal thus being allowed, the Revenue carried the matter in second appeal to the Tribunal. The Tribunal by a rather cryptic order having dismissed the appeal and confirmed the conclusion of the appellate authority, the Revenue filed an application u/s 256(1) of the Income Tax Act and, ultimately, the Tribunal referred the questions as already stated.

4. Mr. Ray, learned standing counsel appearing for the Revenue, contends that the incentive bonus which is received by an employee of the Life Insurance Corporation is nothing but remuneration or recompense for the services rendered by the employee but is determined at a fixed percentage of the turnover achieved by him and, therefore, it partakes of the character of salary within the ambit of Section 17 of the Act. According to learned standing counsel, the definition of salary u/s 17 being an inclusive definition, it enlarges the meaning of the word "defined" and the appellate authority was wholly in error in holding that the legislature having avoided the use of the word "any bonus" in Section 17 is indicative of the legislative intent that bonus would