TMI Blog2010 (8) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT Arun Mishra J.- This appeal has been admitted onMay 10, 2001on three questions. It is conceded at the Bar that question No. 1 does not arise. Necessary questions are questions Nos. 2 and 3. They are quoted below : "(ii) Whether in view of the fact that the bonus to the extent of 12\xba per cent. of the salary and wages was paid under an agreement with the employees, there is justification in law to still hold that the payment of bonus could be allowed only to the extent of 8.33 per cent. ? (iii) Whether the order datedJanuary 28, 2000(P/5) of the Income-tax Appellate Tribunal disallowing the claim of the bonus to the extent of Rs. 1,58,090 is perverse ? 2.,The facts in short are that the Assessing Officer for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as there was no profit but loss was suffered, however, bonus was paid in view of the agreement entered into between the management and workers. Consequently, excess bonus ought to have been allowed. It is also submitted by him that the proviso to section 36(1)(ii) of the Act of 1961 stands deleted now. 4. Counsel for the petitioner has relied upon the decision of the apex court in Shahzada Nand and Sons v. CIT [1977] 108 ITR 358, the decision of the High Court of Calcutta in CIT v. Shaw Wallace and Co. Ltd. [1991] 190 ITR 455 and the decision of the High Court of Kerala in CIT v. P. Alikunju, M.A. Nazir, Cashew Industries [1987] 166 ITR 611. 5. Shri Sanjay Lal, counsel for the respondents has submitted that once the nature of expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of the Payment of Bonus Act, 1965 (21 of 1965), apply, shall not exceed the amount of bonus payable under that Act : Provided further that the amount of the 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." 8. It is apparent from the aforesaid provision that the deduction in respect of bonus paid to an employee to which the provisions of the Payment of Bonus Act apply, shall not exceed the amount of bonus payable under that Act. The second prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any souvenir, brochure, tract, pamphlet or the like published by a political party." 11. It is apparent from section 37(1) of the Act of 1961 that any expenditure not being expenditure of the nature described in sections 30 to 36 of the Act of 1961 and not being in the nature of capital expenditure or personal expenses of the assessee shall be allowed in computing the income chargeable under the head of profits and gains of business or profession. 12. In the instant case, nature of expenditure, i.e., bonus is clearly covered under section 36 of the Act of 1961.Thus, it could not have been allowed as expenditure under the provisions of section 37 of the Act of 1961. 13. The apex court recently in Southern Technologies Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been laid down in the context of the Income-tax Act, 1922 that the reasonableness of the payment has to be examined under section 10(2)(x) of the Act. The akin provision to section 37 of the Act of 1961 was section 10(2)(xv). It was also held that such an expenditure would not fall within the purview of section 10(2)(xv). In Subodhchandra Popatlal v. CIT/EPT [1953] 24 ITR 566 (Bom), the apex court has laid down the law to the similar effect on due consideration of the provisions of sections 10(2)(x) and 10(2)(xv) of the Act of 1922. The CIT v. Travancore Titanium Products Ltd. (No. 2) [1993] 203 ITR 714 (Ker), it has been held that for such an expenditure section 37 would not be attracted. Reference has also been made to the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act of 1961. Though, the High Court of Calcutta appears to have followed the decision of the High Court of Kerala in P. Alikunju's case [1987] 166 ITR 611, but in P. Alikunju's case [1987] 166 ITR 611, the rea- sonable bonus was allowed in the second proviso to section 36(1)(ii) of the Act of 1961 on existence of the three conditions provided therein not under section 37 of the Act of 1961. One of the important ingredients of the second proviso of section 36(1)(ii) is that there has to be profit. In the instant case, there was no profit but loss was suffered. 18. We are unable to persuade ourselves to follow the decision of the High Court of Calcutta in CIT v. Shaw Wallace and Co. Ltd. [1991] 190 ITR 455, wherein it has been observed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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