TaxTMI 
TaxTMI 
2008 (8) TMI 504
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....965, either under section 36(1)(ii) or section 37(1) of the Act is allowable as business expenditure? (2) Whether the Income-tax Appellate Tribunal was justified in holding that ex-gratia amount paid over and above the amount paid as per the Bonus Act was an allowable expenditure although the payment did not cover contractual payment or customary payment?" Factual factors: 2. The assessee, a company earns income from hiring of trucks, dumpers and barge. The assessment year is 1993-94. The respondent has made payment of ex-gratia in the sum of Rs. 2,37,702 to its employees (in excess of the limit of 8.33 per cent. under the Payment of Bonus Act). The respondent claims the deduction of the said amount in computing its total income. The Dep....
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.... by a decision of the Bombay High Court in the case of CIT v. Raghuvanshi Mills Ltd. (Income-tax Reference No. 169 of 1987 dated October 25, 1993). 5. At the behest of the Revenue, the Income-tax Appellate Tribunal made the present reference under section 256(1) for opinion on the points mentioned in paragraph 1 above. 6. Heard the learned counsel Shri S. R. Rivonkar for the appellant/Revenue and Shri Sudin M. S. Usgaonkar learned counsel for the respondent-asses-see. 7. Shri Usgaonkar for the respondent submits that apart from the decision of this court in the case of Raghuvanshi Mills Ltd., there are decisions of other High Courts too taking the same view. The learned counsel placed reliance on the following decisions: CIT v. Shaw Wal....
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.... 37 since it has been incurred wholly or exclusively for the purpose of business. It further held that the payment has been made to maintain industrial harmony and in order to run the business. 9. We may usefully refer to the decision of the apex court in the case of Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai, AIR 1976 SC 1455. (the hon'ble Justice V. R. Krishna Iyer and N. L. Untwalia JJ.) The apex court considered the provisions of the Payment of Bonus Act, 1965 particularly, the preamble section 17 which pertains to adjustment of customary or interim bonus and section 34 in respect of effect of laws and claims inconsistent with the said Act. It is observed as below (headnote): "The Bonus Act speaks, and speaks as a whole code, on th....
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....nus Act. . . . Further it is clear from the long title of the Bonus Act of 1965 that it seeks to provide for bonus to persons employed 'in certain establishments' not in all establishments. Moreover, customary bonus does not require calculation of profits, available surplus because it is a payment founded on long usage and justified often by spending on festivals and the Act gives no guidance to fix the quantum of festival bonus; nor does it expressly wish such a usage. The conclusion seems to be fairly clear, unless the court strains judicial sympathy contrarywise, that the Bonus Act dealt with only profit bonus and matters connected therewith and did not govern customary traditional or contractual bonus. The omission to mention the name....
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....mmissioner of Income-tax (Appeals), Panaji, as well as the Income-tax Appellate Tribunal have verified that such ex-gratia payment was made by the assessee. There is also no dispute that the Com-missioner of Income-tax, Panaji and the Income-tax Appellate Tribunal allowed consequential deductions from the assessee's income. 13. In the case of Raghuvanshi Mills Ltd. the Division Bench of this court (Coram: Dr. B. P. Saraf and D. R. Dhanuka JJ.) while deciding Income-tax Reference No. 169 of 1987 answered the following issues in the affirmative. "1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that bonus of Rs. 5,26,767 was paid by the assessee-company in excess of 8.33 per cent. was ....