1984 (10) TMI 120

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....ng to the assessment years 1978-79 and 1979-80. The assessee is a co-operative society which carries on the business of running a spinning mill. The Income-tax Officer stated for the assessment year 1978-79 that bonus had been paid at 11.33 per cent. This came to Rs. 3,90,819. He allowed as a deduction bonus at 8.33 per cent at Rs. 2,87,366 and disallowed the balance of Rs. 1,03,453. This disallow....

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....and since the mills of the assessee-company had worked at a loss, only the minimum bonus of 8.33 per cent was an admissible deduction. He, therefore, upheld the disallowance. 3. The assessee is in appeal before us and it was contended that the bonus payment in each of the years was only 8.33 per cent in terms of settlement under sec. 18(1) of the Industrial Disputes Act dated 15-10-1978 for the....

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....of the mills in the relevant year ". In the second year, the terms are in Tamil and are to similar effect. The additional payment was made for cordial and smooth working of the Mills due to the co-operation of labour. It was, therefore, not a payment linked with the profit but a payment out of commercial expediency which would have the effect of securing co-operation in the succeeding year also....

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.... promoting the business and to earn profits, the assessee can claim deduction under s. 10(2)(xv) of the Act even though there was no compelling necessity to incur such expenditure. IT is relevant to refer at this stage to the legislative history of s. 37 of the I. T. Act, 1961, which corresponds to s. 10(2)(xv) of the Act. An attempt was made in the I. T. Bill of 1961 to lay down the "necessity" o....