1992 (7) TMI 65

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....Act, 1961 ? " The facts in brief are that the assessee, a limited company, debited a sum of Rs. 5,52,000 in the profit & loss account for the year ended March 31, 1976, under the head 'Provision for bonus to staff and workmen'. The plea of the assessee before the Income-tax Officer was that though no bonus was payable by it under the Payment of Bonus Act, 1965, the company decided to pay some amount to its staff and workmen on the ground of commercial expediency. Since the assessee maintains accounts on the mercantile basis, the provision of Rs. 5,52,000 was made in the accounts. The claim was rejected by the Income-tax Officer as well as by the Commissioner of Income-tax (Appeals). The assessee's plea before the Tribunal also failed. Th....

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.... Of course, the representative of the assessee has produced a chart showing that similar payments had been made in the earlier years but it was conceded by him that all these were under the Payment of Bonus Act itself ; in fact, customary payment of bonus was not the plea of the assessee before the assessing authorities where the claim was stated to be on the ground of commercial expediency. However, no evidence has been brought forward in support of the allegation that the workers had demanded any bonus and not even resolution of the assessee-company is forthcoming from which we could have found out as to how far the payment was for commercial expediency or deductible with reference to section 28 or section 37(1) or the second proviso to s....

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....ion and (c) the general practice in similar business or profession. The three conditions must be satisfied before payment not required by the Bonus Act is regarded as reasonable and deductible under section 36(1)(ii). The two provisos must be read together to correctly understand the permissible deduction in terms of clause (ii) of sub-section (1) of section 36. In fact, the legislative intent underlying the amendment is to encourage the management to pay bonus not only to the extent statutorily fixed as payable but also in excess of that limit, provided the payment is otherwise justifiable as a reasonable payment. To say that the second proviso to clause (ii) of section 36(1) has no application in respect of employees covered by the Bon....