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2024 (3) TMI 666 - HC - Income TaxLiability for salary and wages arising out of the Justice Palekar Award - Whether allowable as expenditure in the present year or only in the year in which the agreement between the Management and the employees is entered into? - HELD THAT:- ITAT decided the issue in one paragraph by simply stating that the arguments of the learned DR that the impugned liability to pay salary and wages is a contractual liability out of the agreement with the employees and hence, the liability would arise only when it is ascertained find support from the decision of Swadeshi Cotton Mills Co. Ltd. [1979 (9) TMI 26 - ALLAHABAD HIGH COURT] - We have to note that the portion, which is quoted allegedly from the judgment, is not found in the copy of the judgment made available to this Court. This Court in Commissioner of Income Tax V/s. United Motors (India) Ltd. [1989 (9) TMI 73 - BOMBAY HIGH COURT] has held on identical facts that the payment by assessee in the aggregate sum to its workmen was for the services that were rendered by them during the previous year under consideration and since such expenditure was incurred for the purpose of earning the income of the previous year, it must be deducted in the previous year. Ex-gratia bonus paid to the employees over and above the eligible bonus under the Payment of Bonus Act - allowable expenditure u/s 37 (1) or not? - As in Commissioner of Income Tax V/s. Maina Ore Transport P. Ltd. [2008 (8) TMI 504 - BOMBAY HIGH COURT] a Division Bench of this Court, after considering Rajaram Bandekar & Sons (Shipping) Pvt. Ltd. (Supra), held that the Tribunal was justified in holding that the ex-gratia payment in excess of the limit prescribed under the Payment of Bonus Act, 1965, either under Section 36(1)(ii) or Section 37(1) of the Act was allowable as business expenditure. The Court also held that the Tribunal was justified in holding that ex-gratia amount paid over and above the amount paid in accordance with the Bonus Act was an allowable expenditure although the payment did not cover contractual payment or customary payment. We answer the questions of law in negative. We hold that the ITAT was not right in law in holding that the liability for salary and wages arising out of the Justice Palekar Award is not allowable as expenditure in the present year but only in the year in which the agreement between the management and the employees is entered into. We further hold that the ITAT was not right in law in holding that ex-gratia bonus paid to the employees over and above the eligible bonus under the Payment of Bonus Act is not allowable as expenditure u/s 37 (1) of the Act.
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