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of <h1>Income Tax Act: Bonuses Exceeding Limits Deductible if Not Profits or Dividends, Section 36(1)(ii) Clarified.</h1> Section 36(1)(ii) of the Income Tax Act allows deductions for bonuses or commissions paid to employees, provided these payments are not in the form of profits or dividends. Such deductions are permissible even if they exceed the statutory limits under the Payment of Bonus Act, as long as they are made within the specified time limits. Payments can be claimed on an accrual basis, subject to Section 43B. In a case involving the Deputy Commissioner of Income Tax and a securities company, it was determined that customary bonuses do not trigger disallowance under Section 43B(C), thus not falling under Section 36(1)(ii).
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