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Issues:
1. Whether the payment made under a contractual obligation would be considered as a bonus under the Payment of Bonus Act, 1965. 2. Whether the amount paid to employees was an allowable expenditure on commercial expediency. Detailed Analysis: 1. The case involved a departmental appeal challenging the Commissioner (Appeals) order regarding the nature of the payment made under a settlement agreement between the company and its workers. The dispute arose over the quantum of bonus payable to workers for the accounting year 1977, leading to an agreement for payment of bonus at the rate of 19.15%. The Income Tax Officer (ITO) disallowed the excess bonus amount paid over the allocable surplus, contending it was against the provisions of the Payment of Bonus Act. The Commissioner (Appeals) disagreed, stating that the payment was made in accordance with a settlement agreement and not voluntarily or unilaterally by the company, thus falling outside the scope of the Bonus Act. The department argued that any agreement not in line with the Act would not be enforceable, citing a Tribunal decision. The Tribunal found that the payment was in accordance with the Payment of Bonus Act and set aside the Commissioner's decision. 2. The Tribunal delved into the provisions of the Payment of Bonus Act, specifically focusing on Section 34 and its amendments. Initially, Section 34 allowed employers and employees to enter into agreements for bonus payment under a different formula than that in the Act. However, subsequent amendments restricted this liberty and required such agreements to have government approval. The Tribunal noted that the agreement in question was subject to government approval, but the record did not clarify if such approval was granted. Therefore, the Tribunal remanded the matter to the ITO to determine if the agreement had government approval and if the bonus payment adhered to the Act's provisions. The Tribunal emphasized that the decision should align with the law applicable during the relevant accounting period and did not consider previous Tribunal orders cited by either party. In conclusion, the Tribunal partially allowed the departmental appeal for statistical purposes, directing a reassessment by the ITO based on the amended provisions of the Payment of Bonus Act and the requirement of government approval for bonus agreements.
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