1996 (2) TMI 582

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....16 being the amount advanced to the assessee's employees in the year 1971 and written off in the year under consideration is as admissible deduction either as business loss or under section 37 of the Act ?" The assessee is a company. In the assessment year 1974-75, the assessee filed a return showing a deduction of a sum of ₹ 15,216. According to the assessee, it is a loan paid to the employees in view of the agreement with the employees reached on October 6, 1971, in the presence of the Commissioner of Labour. Accordingly, the assessee agreed to pay workmen recoverable bonus equivalent to one month's basic salary and dearness allowance, but the Income-tax Officer disallowed the same on the ground that the assessee failed to satisfy ....

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.... Accordingly, learned counsel appearing for the assessee submitted that deduction should be given under section 37 of the Act as business expenditure. Thus, learned counsel for the assessee supported the order passed by the Tribunal. On the other hand, learned standing counsel for the Department, submitted that a plain reading of the agreement entered into between the employer and the employees would go to show that what was paid by the employer to the employees was originally a loan, but at a later stage it was treated as a bonus, adjustable as part of bonus payable in the subsequent year. It was, therefore, submitted that the finding of the Tribunal that what was paid to the employees by the employer is loan and not bonus, is not based up....

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....material on record to support this view taken by the Tribunal. According to learned counsel for the assessee in order to settle the dispute between the employer and the employees, the abovesaid amount was paid and bonus paid once cannot be recovered subsequently. In such circumstances, the payment of the abovesaid amount should be considered as a loan advanced to the employees. As against the statement made in the resolution passed by the board of directors, no evidence was produced to show that what was paid to the employees was a loan and it was written off. Under such circumstances, we are unable to subscribe to the view taken by the Tribunal that what was paid by the assessee to its employees is loan, which should be considered as busin....