2008 (12) TMI 204

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....ntial questions of law: "(A) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to come to the conclusion that the amount of Rs. 18,73,192 paid by the assessec to its workers over and above the Payment of Bonus Act is in the nature of customary bonus ? (B) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 18,73,192 paid by the assessee to its workers is allowable as deduction under section 36(1)(ii) of the Income-tax Act ?" 2. The Income-tax Appellate Tribunal was concerned with the assessment years 1985-86, 1988-89 and 1990-91. The questions aforestated were referable to the assessment year 1988-89 and the iss....

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....relevant assessment year 1988-89. There is no dispute regarding the proposition of law as stated by the Division Bench in Rajaram Bandekar and Sons (Shipping) P. Ltd. [1999] 237 ITR 628 but the assessee would be fully covered under the second proviso to section 36(1)(ii) of the Act, which reads as under : "Provided further that the amount of bonus (not being bonus referred to in the first proviso) or commission is reasonable with reference to: (a) the pay of the employee and the conditions of his service; (b) the profits of the business or profession for the previous year in question ; and (c) the general practice in similar business or profession." 4. The Tribunal noted that the sum paid by the assessee to the employees as b....

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.... was never questioned by the Department. This order was challenged by the Revenue by filing an appeal. In the grounds of appeal submitted on behalf of the Department not even a whisper was raised that the findings recorded were incorrect and consequent benefit of payment of bonus amounting to Rs. 18,73,192 was incorrect on that basis. 7. Learned counsel appearing for the respondent also placed reliance upon the judgment of the Kerala High Court in the case of CIT v. P. Alikunju, M. A. Nazir, Cashew Industries [1987] 166 ITR 611 where the court took a view that all the three conditions postulated under clauses (a) to (c) of the second proviso must be satisfied in order that the payment which is not required by the Bonus Act is to be regar....