The Hindu : Business : Development officers vis-à-vis agents

Online edition of India's National Newspaper
Monday, Apr 25, 2005

Business

Business

Development officers vis-à-vis agents

Incentive bonus is also treated as salary

I am a development officer receiving an amount described as conveyance allowance or incentive bonus. Ad hoc deduction as available for other categories of insurance agencies is not available to development officers because of the intransigent attitude of the Income-tax Department with the result that this class of taxpayers have to establish actual expenditure to get deduction. Development officers like me have to maintain a car doing extensive travel. I have a driver also and have to spend considerable amount on repairs to the vehicles due to travel on bad roads. In addition, the assessing officer says that I should keep a log book for getting even conveyance allowed as a deduction. Even granting that the deduction can be limited only to actual expenditure, should not such expenditure be understood in a reasonable manner without vouchers for all the expenses and without log book?

The lot of development officers has been the subject matter of litigation with most High Courts taking the view that an ad hoc deduction is not available from incentive bonus as for agents. It is because development officers are employees deriving income from salary, while agents are not employees with their income assessable under professions/ business, from which deductions are possible. This is a matter which should have been got settled between LIC (and now other insurance companies) and the Government.

As matters stand, incentive bonus for development officers is also treated as salary, from which no deduction other than standard deduction is permissible under the law. But conveyance allowance and additional conveyance will be exempt under section 10(14) as for example, decided in CIT v A.K. Ghosh (2003) 263 ITR 536 (MP). Though there is no uniformity in decisions of the Court, this is the broad consensus acceptable to revenue. There should ordinarily be no need for log book for conveyance, since conveyance allowance including additional conveyance allowance is fixed with reference to the expected travel for improvement of business.

S. RAJARATNAM

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