Incentive wages for higher production and discipline were deductible as business expenditure, not treated as bonus.

Incentive wages paid to workmen for higher production, attendance, discipline and improved industrial relations were treated as business expenditure on commercial expediency and not as bonus. The payment arose under an agreement with the workmen and was linked to a percentage of earnings, not to the company's profits. On that basis, the disallowance was set aside and the deduction claim was allowed.

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Issues: Whether the amount paid as incentive wages to workmen was deductible as business expenditure or was liable to be disallowed as bonus.

Analysis: The payment was made under an agreement with the workmen to reward increased production, good attendance, discipline, and better industrial relations. It was calculated as a percentage of the workmen's earnings and not with reference to the company's profits. On these facts, the amount was held to be an incentive payment linked to business interests and not bonus.

Conclusion: The disallowance was set aside and the assessee's claim for deduction was allowed.

Final Conclusion: The appeal succeeded and the assessee obtained deduction for the incentive wages paid to the workmen.

Ratio Decidendi: A payment made to workmen as an incentive for improving production and industrial discipline, and not calculated by reference to profits, is deductible as business expenditure on commercial expediency and is not to be treated as bonus.

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