Bonus computation principles: no notional deduction of section 23A income-tax, and rehabilitation allowance cap sustained on the evidence.

In bonus computation, income-tax under section 23A could not be deducted unless it was actually levied, so a notional deduction was disallowed. The article also notes that the rehabilitation allowance could be capped at rupees one lakh where the surrounding material, including the employer's prior position and lack of convincing proof of sustained rehabilitation expenditure, did not show the tribunal's approach to be erroneous. On that basis, the bonus award at 10 per cent of basic earnings remained undisturbed.

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Issues: (i) whether income-tax under section 23A of the Indian Income-tax Act could be deducted in the bonus computation when no such tax was actually levied; and (ii) whether the allowance for rehabilitation could be restricted to rupees one lakh for the year in question.

Issue (i): whether income-tax under section 23A of the Indian Income-tax Act could be deducted in the bonus computation when no such tax was actually levied.

Analysis: Deduction under section 23A depended upon the statutory conditions for levy being satisfied. Where no income-tax was in fact levied under that provision, it could not be treated as a deductible item even on a notional basis in working out available surplus under the bonus formula.

Conclusion: The claim for deduction of income-tax under section 23A was rightly disallowed.

Issue (ii): whether the allowance for rehabilitation could be restricted to rupees one lakh for the year in question.

Analysis: The expert evidence suggested a much larger rehabilitation requirement, but the tribunal relied on the surrounding circumstances, including the employer's own earlier stand and the absence of convincing evidence of actual rehabilitation efforts over the years. On that material, the restriction to rupees one lakh was not shown to be erroneous.

Conclusion: The allowance of rupees one lakh towards rehabilitation was sustained.

Final Conclusion: The award of bonus at 10 per cent of basic earnings remained undisturbed, and the appeal failed in entirety.

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