TMI Blog1998 (7) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... s in excess of the provision that had been made in the accounts as an item of expenditure in the year of account is the question that is posed before us by the Revenue. The second question is whether the assessee is entitled to the expenditure incurred by it on food and drinks provided to customers which had no element of entertainment. The assessment years are 1972-73, 1973-74 and 1974-75 and the assessee is an industrial undertaking which is a manufacturer of machinery. The assessee had during these three assessment years claimed sums of Rs. 7,58,754 Rs. 11,24,351 and Rs. 12,34,766 respectively for the assessment years 1972-73,1973-74 and 1974-75 as the amount paid by it as statutory bonus for the relevant previous years. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had been reached between the assessee and its workmen though after the end of the accounting year and that the amount so quantified was payable as bonus for the year of account. The Tribunal in a fairly elaborate order held that the assessee which follows the mercantile system of accounting is entitled to provide for bonus and get the same allowed as deduction and it also held that figures relating to the additional bonus payment consequent on the settlement had been available in all these years well before the assessment and that it was for this reason that the assessee substituted the actual payment of bonus relating to the accounting year for the provision made in the accounts in the adjustment statement for income-tax purposes. Thus t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 1965 every employer employing ten or more workmen and who is not otherwise exempted under the provisions of the Act is required to pay bonus to its workmen if the employment is in a factory or a mine, irrespective of the number of workmen and in cases of other establishments if ten or more persons are employed in any day during an accounting year. Failure to pay the bonus under the Act is an offence punishable with imprisonment for a term which may extend to six months as provided under section 28 of the Payment of Bonus Act. Section 10 of the Act provides for payment of minimum bonus at the rate of 8.33 per cent. although at the time the Act was enacted that percentage was less. Section 11 prescribes a ceiling at the rate of 20 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le computing the income for the purpose of taxation. Learned counsel for the Revenue contended that this was not statutory liability as even according to the assessee the assessee, had entered into a settlement. This argument overlooks the fact that whether there is a settlement or not the employer was bound to pay bonus to the workmen and that payment was a statutory obligation which he could not avoid as he would expose himself to the penalties imposable under the Act. The Revenue's case is not that the assessee had paid in excess of that provided for in the Act as there is no material to show that the figure arrived at as a result of the settlement was a figure which would not have been payable on a proper calculation of the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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