1987 (2) TMI 114

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t year 1981-82. 2. We have heard the parties and we proceed to determine the grounds taken up in appeal by the respective parties as under. The solitary ground in the appeal of the revenue relates to the deletion of the addition of Rs. 20,771 made under the first proviso to section 36(1) (ii) of the Income-tax Act, 1961 ('the Act') on account of production incentive paid to employees. On17-7-1978, the assessee formulated, what has been christened as. 'Production Incentive Scheme'. The assessee's previous year is the financial year and the books of account are maintained on mercantile system of accounting. The assessee-company under this scheme paid Rs. 20,771 to the factory workers on the basis of the production targets achieved by them. D....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s as it was paid under the Production Incentive Scheme appearing at pages 4 to 5 of the paper book laying down the conditions linking the payment to production of the items which are manufactured by the assessee. The assessee-company is manufacturer of picture tubes. It was contended that the factotum of payment is not in dispute, the purpose of payment for the business is not doubted and the disallowance is merely because it had been alleged that production incentive is bonus, which is incorrect. Therefore, there is no case for an interference in the order of the learned Commissioner (Appeals). He relied upon the judgment of the Supreme Court in the case of Titaghur Paper Mills Co. Ltd. v. Their workmen [1959] Suppl. 2 SCR 1012 particularl....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t it is related to production targets and not to profits. Therefore, the premise on which the IAC (Assessment) proceeded was erroneous because the payment was not in any manner bonus as ordinarily understood in the ordinary sense but is covered by the provisions of the first proviso the section 36(1) (ii). The learned commissioner (appeals) gave a correct finding that such production incentive payments were not in the nature of bonus payable under the provisions of the Payment of Bonus Act. If that is clear then the issue becomes very simple. The assessee has actually paid the production incentives on actual extra production by the workmen and in view of the Hon'ble Supreme Court judgment referred to, it has to be considered as additional w....