TaxTMI 
TaxTMI 
2010 (8) TMI 329
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....lowed only to the extent of 8.33 per cent. ? (iii) Whether the order datedJanuary 28, 2000(P/5) of the Income-tax Appellate Tribunal disallowing the claim of the bonus to the extent of Rs. 1,58,090 is perverse ? 2.,The facts in short are that the Assessing Officer for the accounting period ending onMarch 31, 1985made an addition of Rs. 1,58,090 out of the bonus amounting to Rs. 4,73,893. According to the Assessing Officer, there was a loss in the business and when there was no allocable surplus, as per the provisions of the Payment of Bonus Act, 1965 (hereinafter referred to as the "Bonus Act"), it could not have paid more than 8.33 percent. Section 36(1)(ii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act o....
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....Court of Calcutta in CIT v. Shaw Wallace and Co. Ltd. [1991] 190 ITR 455 and the decision of the High Court of Kerala in CIT v. P. Alikunju, M.A. Nazir, Cashew Industries [1987] 166 ITR 611. 5. Shri Sanjay Lal, counsel for the respondents has submitted that once the nature of expenditure is covered under section 36 of the Act of 1961, it can-not be claimed under section 37 of the Act of 1961. Only those expenditure which are not covered under sections 30 to 36 can be claimed under section 37 of the Act of 1961. Once payment of bonus is covered under the provision of section 36 of the Act of 1961, it cannot be claimed under section 37 of the Act of 1961. 6. Counsel for the respondents has relied upon the decisions in Subodh-c....
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....; and (c) the general practice in similar business or profession." 8. It is apparent from the aforesaid provision that the deduction in respect of bonus paid to an employee to which the provisions of the Payment of Bonus Act apply, shall not exceed the amount of bonus payable under that Act. The second proviso makes it clear that further amount of bonus or commission not being the bonus referred to in the first proviso is reason-able with reference to the pay of an employee and the conditions of his service, the profits of the business or profession for the previous year, in question and the general practice in similar business or profession. 9. In the instant case, there was no profit but on the other hand loss was suffere....
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.... of profits and gains of business or profession. 12. In the instant case, nature of expenditure, i.e., bonus is clearly covered under section 36 of the Act of 1961.Thus, it could not have been allowed as expenditure under the provisions of section 37 of the Act of 1961. 13. The apex court recently in Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 has laid down that if an item falls under sections 30 to 36, but is excluded by the Explanation to section 36(1)(vii) then section 37 cannot come in. Section 37 applies only to items which do not fall in sections 30 to 36 of the Act of 1961. The apex court has laid down thus (page 611) : "As stated above, section 36(1)(vii) afterApril 1, 1989draws a distinction be....
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.... court has laid down the law to the similar effect on due consideration of the provisions of sections 10(2)(x) and 10(2)(xv) of the Act of 1922. The CIT v. Travancore Titanium Products Ltd. (No. 2) [1993] 203 ITR 714 (Ker), it has been held that for such an expenditure section 37 would not be attracted. Reference has also been made to the decision of the High Court of Madhya Pradesh in Malwa Vanaspati and Chemical Co. Ltd. v. CIT [1985] 154 ITR 655 (MP) ; [1985] 44 CTR 90 in which it has been held that section 37(1) of the Act of 1961, being a residual provision, the aid of which cannot be taken, unless and until it is established that none of the provisions of sections 30 to 36 are applicable to a given case. 16. Shri Sumit Nema, c....
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.... of 1961. One of the important ingredients of the second proviso of section 36(1)(ii) is that there has to be profit. In the instant case, there was no profit but loss was suffered. 18. We are unable to persuade ourselves to follow the decision of the High Court of Calcutta in CIT v. Shaw Wallace and Co. Ltd. [1991] 190 ITR 455, wherein it has been observed that three conditions are required and if conditions Nos. 1 and 2 of section 36(1) of the Act of 1961 stand satisfied hence, such an expenditure has to be allowed under section 37 of the Act of 1961. This runs contrary to the scheme of the section, the plain language of section 37 and what is not permissible under sections 30 to 36 is only allowable under section 37 as laid down by the ....