TMI Blog1973 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... S. ACHARYA. JUDGMENT G. K. MISRA C.J.- The petitioner is a public limited company having its registered office and factory at Chowdwar in the district of Cuttack. The petitioner used to manufacture and sell and is still manufacturing and selling G. I. pipes of different sizes. The assessment year in question is from April 1, 1959, to March 31 1960, and the accounting year is from April 1, 1958, to March 31, 1959. Petitioner's case is that during the accounting year 1958-59 amounts equal to one month's salary were paid to the workmen of the company by way of loan. There were some agitations by the workmen who tried to put pressure upon the petitioner by adopting go-slow tactics in production. A dispute arose between the workmen and the management relating to payment of bonus for the accounting year 1957-58. The managing director of the petitioner thought it to be in the best interests of the petitioner's business to pay one month's wages as bonus for the year 1957-58, and issued an order that the said loan, equal to one month's wages already paid to the workmen, should be adjusted as bonus for the year 1957-58. Bonus was actually provided in the accounts for the year 1957 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 47,879 paid towards the legal charges during the assessment year 1959-60 were expenditure laid out wholly and exclusively for the purpose of business ? (3) Whether the assessees are entitled to claim development rebate on railway sidings used by them for transporting their raw materials and finished goods? " In paragraph 3 of the appellate order the Tribunal extracts the case of the petitioners as presented before him. It runs thus: " According to the assessee's own statement : Apart from the bonus due and payable under the law certain amounts were paid to the workers by way of loan. Bonus was provided in the previous assessment year, i.e., financial year 1957-58, which was written back in the financial year 1958-59 relevant to the assessment year which is now under appeal. The case of the assessee is that on account of agitation and the pressure and the go-slow tactics adopted by the workmen a dispute arose between the workmen and management. The managing director, therefore, thought that it was in the interest of the company to treat this loan as payment by way of bonus and settle the dispute. Accordingly, he issued an office order that this loan should be adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the petitioner on a finding that it was not " bonus " and did not examine further whether the conditions prescribed in the proviso had been fulfilled. The reasoning given by the Tribunal is contrary to law, and is a question of law arising out of the appellate order. Even though the sum had been advanced by the petitioner to its employees by way of a loan, nothing prevented the petitioner from adjusting the same as bonus by not realising the loan. Bonus may be paid in cash or it may be adjusted against the pre-existing loan. The nature and character of bonus is not in any way affected merely because the same was not paid in cash, but was given by way of adjustment. The petitioner made it clear that it decided to pay bonus to the employees as they created some trouble in running the industry. It is for the management to decide for maintaining peace in an industrial concern whether to pay bonus to the workmen to keep them contended for better production, even though bonus had not been statutorily prescribed. It is not for the income-tax department to control the management's conduct in paying bonus. It is, however, open to the department to reject the same if the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as legal expenses. There is no dispute between the parties that this amount was spent in litigation between the petitioner and Sri S. P. Jain in relation to the affairs of the company. S. P. Jain succeeded before a single judge of this court as would be found from Shanti Prasad Jain v. Kalinga Tubes Ltd. The petitioner came up in appeal and in Kalinga Tubes Ltd. v. Shanti Prasad Jain a Division Bench of this court allowed the appeal and set aside the judgment of the learned single judge. The Division Bench decision was confirmed by the Supreme Court in Shanti Prasad Jain v. Kalinga Tubes Ltd. The point that arose in that case for determination has been enumerated in paragraph 7 in A.I.R. 1963 Orissa. 189. Ultimately, the petitioner succeeded. It was a fairly contentious litigation. The defence by the petitioner was well founded and the petitioner could not avoid such a litigation brought at the instance of Sri S. P. Jain. The question for consideration is whether allowance should be given to such a claim under section 10(2)(xv) of the Act which runs thus : "S. 10, (2) Such profits or gains shall be computed after making the following allowances, namely :-...... (xv) any exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to find out whether the term 'plant, machinery or equipment' includes railway sidings. After careful consideration, we are of the opinion that the railway siding is not a part of the plant or equipment or machinery. We, therefore, feel that the department was justified in refusing the claim of development rebate. " It would thus appear that the Tribunal did not critically examine the matter and assigned no valid reasons for rejecting the claim. The rebate is claimed on the basis of section 10(2)(vib) which runs thus : "(2) Such profits or gains shall be computed after making the following allowances, namely :-...... (vib) in respect of machinery or plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twenty-five per cent. of the actual cost of such machinery or plant to the assessee : Provided that no allowance under this clause shall be made unless the particulars prescribed for the purpose of clause (vi) have been furnished by the assessee in respect of such machinery or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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