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Shri Chandrasekhar D. Shende Versus The Dy. Commissioner Income Tax, Circle – 3, Malegaon

2016 (12) TMI 233 - ITAT PUNE

Disallowance u/s 43B on account of bonus - Held that:- The amount of incentive is being paid to the extent of salary. In such circumstances, where the said payment has been made in majority as equivalent to the salary due, cannot be termed as bonus. This is an incentive which has been paid by the assessee out of his business consideration and would not partake the nature of bonus, merely because the nomenclature applied by the assessee is bonus. The second aspect is that the said amount allegedl .....

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e assessee. Accordingly, the Assessing Officer is directed to allow the claim of assessee in entirety. - Decided in favour of assessee - ITA No.150/PN/2016 - Dated:- 18-11-2016 - MS. SUSHMA CHOWLA, JM For The Appellant by : None (written submissions) For The Respondent : Smt. Sumitra Banerji ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-1, Nashik, dated 04.11.2015 relating to assessment year 2011-12 against order passed under section 143(3) of the .....

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hat the bonus was not appearing in the balance sheet as on 31st March, 2011 as a liability and this indicated that the bonus was paid. 4] The learned CIT(A) failed to appreciate that the respective employees had also confirmed the receipt of bonus and thus, there was no reason to disallow the same u/s 43B. 3. The appeal of assessee was fixed for hearing but none appeared on behalf of the assessee. However, written submissions were filed on record, which have been considered for deciding the issu .....

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xpenditure under the head Bonus amounting to ₹ 9,40,000/-. The said expenditure was to the family members, who were working in the proprietary concern of assessee. During the course of assessment proceedings, the assessee was asked to furnish the details regarding payment of bonus. In response, the assessee pointed out that the provisions of section 43B of the Act were not applicable to the bonus account. He later pointed out that the said bonus amount was credited to the employees account .....

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fficer was of the view that the same was in contravention of provisions of section 43B of the Act and hence, the same is not to be allowed as deduction in the hands of assessee. In view thereof, the assessee was show caused and the reply of assessee in this regard was the same and the Assessing Officer disallowed sum of ₹ 9,40,000/- under section 43B of the Act. 6. The CIT(A) referred to the Explanation (2) to section 43B of the Act to observe that the assessee could claim the said deducti .....

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on 43B of the Act. 7. The assessee is in appeal against the order of CIT(A) and has filed written submissions. As per said submissions, the assessee pointed out that the bonus of ₹ 9,40,000/- was paid by debiting Profit & Loss Account and by crediting respective Current account maintained for the employees. The assessee stressed that the amount of bonus was credited to the accounts of employees within the year itself and once the said amount is credited to their accounts, the assessee .....

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er stressed that under section 36(1)(ii) of the Act, there is no stipulation that the bonus payment should be in cash or by cheque. Where the assessee had credited the accounts of employees in respect of said bonus and complied with the provisions of the Act in respect thereof, the said expenditure to have been incurred wholly and exclusively for the purpose of business merits to be allowed. Another contention which was raised by way of written submissions was that the provisions of Bonus Act we .....

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to be treated as actually paid. 8. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 9. On perusal of record and written submissions filed by the assessee along with Annexures and after hearing the learned Departmental Representative for the Revenue, the issue which arises for adjudication in the present appeal is the allowability of bonus of ₹ 9,40,000/-. The assessee was carrying on his business in sole propriet .....

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oyees and the assessee claims that once the same is so credited, then it is out of control of assessee and the employees are at liberty to withdraw at their convenience. The assessee stressed that no provision was made on account of bonus payable but the said bonus was credited to their accounts. Another aspect which has been raised by the assessee in this regard is that since it was not employing persons more than 20, the provisions of Bonus Act were not attracted. The payment at best could be .....

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any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or ( .....

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the assessee as an employer in lieu of any leave at the credit of his employee, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the .....

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red to in section 36(1)(ii) of the Act i.e. sum paid to an employee as bonus or commission for services rendered, then the same shall be allowed as deduction, of the previous year in which such sum was actually paid by the assessee, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee. The proviso thereunder further provides that in case the said amount is actually paid by the assessee on or before the due date of filing the return of income under .....

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count is bonus but the nature of payment was not bonus as in the first instance, the assessee claims that the provisions of Bonus Act are not applicable where total number of employees employed by him were less than 20. There is merit in the plea of assessee in this regard. Merely because the term used by the assessee is bonus , then the same does not partake the nature of bonus. In this regard, it is necessary to look into the remuneration paid by the assessee on a salary of ₹ 1,50,000/- .....

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