1982 (3) TMI 176

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....per cent and that he will restrict it to 20 per cent and disallow the excess which came to Rs. 36,826. The Commissioner (Appeals) held that this 5 per cent is incentive wages falling outside the provisions of the Payment of Bonus Act, 1965 and hence allowed it as a deduction. The department appeals. 3. The principal ground raised is as follows: "2. The CIT (Appeals) has erred in holding that the bonus in excess of 20 per cent of basic emoluments of the employees was incentive wage. The term 'incentive wage' is used only to circumvent the Payment of Bonus Act." To understand the controversy, the circumstances under which these amounts had been paid have also to be borne in mind. There was an agreement between the assessee and the employee....

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....d 25 per cent of the employees' gross earnings. Sd/- Managing Director Sd/- Secretary Management's Representative The Arya Vaidya Pharmacy Employees Union, Kanjikode 4. The submission of the departmental representative, based on the grounds that there is in fact no difference between bonus and incentive wages, that what is paid in excess of 20 per cent is also bonus and that incentive wages is used only to circumvent the Payment of Bonus Act, is not acceptable to us. There is ample, real and substantial difference between bonus and incentives. There is a clear cut demarcation between the two. Bonus is the right of the employees. For that payment the employees need not depend upon the sweetwill and pleasure of the employer. The Governmen....

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....ples, except commercial expediency. It is an ad hoc ex gratia payment depending on the sweet will and pleasure of the employer. It may be that such sweet will and pleasure is induced in his mind by force of compelling circumstances. We state all this to show that bonus and ex gratia payments are different in character. In this case the 5 per cent was granted because it was a price paid by the employer for settlement of an industrial dispute. There are absolutely no material in this case to show that this 5 per cent incentive wage is a camouflage for bonus. It is also not a sound general proposition to state that in all cases incentive wage is a camouflage for bonus and that incentive wage is used only to circumvent the Payment of Bonus Act.....