TMI Blog2013 (9) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in the course of a trade but was a capital nature – In the present case, the incentive received is considered as Capital in nature – Decided against the Revenue. Whether allowance made u/s 43B in respect of unpaid production incentive bonus covered under section 36 (i) (ii) of the I.T. Act –Held that:- The Company was claiming allowance of Rs.13,98,899/- on the unpaid productivity incentive bonus as on 31.3.1990 - Allowance is permissible on actual payment of production linked incentive bonus to the workmen of the Company, and not on the amount reserved for that purpose, which is kept as unpaid - Allowance under Section 37 of the Act in respective of productivity linked incentive bonus can be claimed as deduction, provided the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of manufacture and sale of sugar. For the year ending 31st March, 1990, relevant to the assessment year 1990-91, it filed its return on 16.10.1990, declaring a loss of Rs.4,00,64,360/-. In the profit loss account total sales were shown at Rs.15,20,83,667/- which included an amount of Rs.2,10,67,677/- received as 'incentive earned from sale of sugar'. The assessee gets this incentive by way of additional free sugar quota wherein excise duty is leviable at a reduced rate but the sugar is available for being sold at the market price. The resultant benefit is required to be used for repayment of term loans obtained from financial institutions for setting up the plant and other capital expenses in due time. This incentive scheme is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntive bonus. Out of this amount a sum of Rs.13,98,899/- remained upheld at the end of the year. The assessee contended that production incentive bonus has been paid by the Mill Society in accordance with the special scheme promulgated by the U.P. Cooperative Sugar Factory Federation Ltd. Lucknow under the power conferred to it under section 123 of the U.P. Cooperative Society Act and is paid for improved productivity and achievement of various production efficiency targets irrespective of profit of the industrial undertaking. It was also argued that the expenditure should be allowed under section 37(1) as having been incurred wholly and exclusively for the purpose of business. The Assessing Officer did not accept the assessee's arguments an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee. An application for recall of the order was filed on the ground that counsel for the respondent-assessee was not heard. The recall application was allowed by the Court on 4.8.2005. The matter has now come up for hearing after seven years. 5. We find that in the meantime, similar questions have come up before this Court, and were decided by Division Benches of the Court. 6. So far as the first question is concerned, this Court in Commissioner of Income Tax and Another Vs. Kisan Sahkari Chini Mills Ltd [(2010 328 ITR 27 (All)] followed the judgment of the Supreme Court in CIT Vs. Ponni Sugars Chemicals Ltd [(2008 306 ITR 392 (SC)], in which it was held that the main eligibility conditions for the scheme (Sampat Incent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 899/- on the unpaid productivity incentive bonus as on 31.3.1990. We agree with Sri R.K. Upadhayay that allowance is permissible on actual payment of production linked incentive bonus to the workmen of the Company, and not on the amount reserved for that purpose, which is kept as unpaid. 9. We thus hold that the allowance under Section 37 of the Act in respective of productivity linked incentive bonus can be claimed as deduction, provided the assessee-company paid the amount in the previous year, relevant to the assessment year in question. The allowance cannot be claimed for unpaid part of production linked incentive bonus. The allowance for such amount will be admissible in the year in which it was actually paid to the workmen. The qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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