TMI Blog1998 (3) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... n 36(1)(ii) of the Income-tax Act, 1961, even though the allocable surplus under the Payment of Bonus Act was only Rs. 99,278. The assessment year involved is 1978-79. A sum of Rs. 18,98,199 was found debited in the trading and profit and loss account under the head "Wages" and this represented two items, viz., (a) Rs. 9,14,446 being the one month's salary to each worker paid in October 1977, on the occasion of Deepavali, and (b) a provision of Rs. 9,83,759 made at the end of the accounting year under reference at the rate of one month's wages for each worker and paid to the workers in May, 1978. The workmen disputed those payments and claimed a much higher amount by way of bonus by a demand dated October 3, 1978, on the ground that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .67 per cent., held that the bonus paid by the assessee cannot be regarded as customary bonus. The Tribunal held that the payment made on the basis of an order of authorisation made under the provisions of section 34 of the Act was also a payment made under the Payment of Bonus Act and since the payment did not exceed 20 per cent. of the wages, the maximum bonus allowable under the Payment of Bonus Act, the claim of the assessee was sustainable under section. 36(1)(ii) of the Income-tax Act and the payment so made could not be disallowed on the ground that it was not made in accordance with the Payment of Bonus Act. The Tribunal, in this view of the matter, allowed the assessee's claim and deleted the disallowance of Rs. 9,49,102. The Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the payment made was under the Payment of Bonus Act, the entire claim of the assessee has to be considered as a payment under the Payment of Bonus Act. We are of the opinion that it is not open to the Income-tax Officer to go into the further question or delve deep into the matter to find out whether the amount was in excess of the amount payable on the allocable surplus of the assessee as the dispute regarding bonus was settled and ultimately got approved by the Government under section 34 of the Payment of Bonus Act. In our view, the Tribunal has come to the correct conclusion in holding that what was paid was a bonus and the amount paid was within the limits of the Payment of Bonus Act and since the amount paid was within the perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Labour for adjudication and the adjudication took place on October 22, 1977, and therein it was agreed that the advance already-given would not be recovered and instead, the assessee also agreed to make further advance of half-month's salary as ex-gratia. The agreement also provided that the bonus payment for the years 1974-75 to 1976-77 would stand settled without affecting the future bonus. The Income-tax Officer was of the opinion that the payment was covered under the Payment of Bonus Act and, therefore, the amount was not allowable as it exceeded the amount prescribed under the Payment of Bonus Act and cannot be allowed under section 36(1)(ii) of the Income-tax Act. The Commissioner of Income-tax (Appeals) also confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts were paid by the assessee as part of the remuneration and part of the conditions of service and on the basis of settlement arrived at between the assessee and its workmen. It is to be remembered that the settlement entered into was under section 18 of the Industrial Disputes Act and the settlement is binding on the assessee and if the amount is not paid under a statutory settlement arrived at under the Industrial Disputes Act, there would be industrial unrest affecting the business carried on by the assessee. In other words, the amounts were paid for smooth running of the business without getting embroiled in labour unrest and to avoid friction with the labourers for the efficient running of the business. Therefore, the amount pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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