‘Performance Bonus’ cant be treated as Salary: ITAT allows Exemption [Read Order]

Performance Bonus - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench in the case of Sudip Rungta vs. DCIT while relying upon the precedent held that ‘performance bonus’ does not constitute a part of ‘salary’ and hence the exemption for House Rent Allowance was granted to the assessee.

The assessor submitted Form 16 to the Assessing Officer (AO) in order to claim the exemption under Section 10(13A) of House Rent Allowance for the assessment year 2011-12. On analyzing the facts the Assessing Officer (AO) questioned the assessee pertaining to the rent paid and the exemption claimed under Section 10(13A). While elaborating the facts the assessee said that:

  1. Total rent paid by the assessee was Rs. 8,20,000/-
  2. The basic salary as per Form 16 was Rs. 30,00,00/-

Further, the assessee also stated that under Section 10(13A) which pertains to an exemption of the ‘basic salary’ has no other category is included in it, thus the rent paid over the salary must be allowed to be exempted. However, the Assessing Officer (AO) contended that the ‘performance bonus’ is part of the salary and he did not allow the exemption.

Wherefore, the issue raised, in this case, was whether the ‘performance bonus’ is a part of the ‘salary’ of an individual or not?

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench comprising of A.T. Varkey, Judicial Member and A.L. Saini, Accountant Member in the light of the decision given by Hon’ble Kerala High Court in the case of CIT vs. Ghosal which had the similar facts held that the performance bonus is not the part of salary and the assessee is entitled to the exemption under Section 10 (13A) of the Income Tax Act.

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