TMI Blog1996 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal was justified in upholding the order of the Appellate Assistant Commissioner deleting the disallowance of Rs. 15,003 on account of provision for bonus ? " It was found by the Tribunal that the assessee made a provision for payment of bonus at the rate of 24 per cent. on the basis of agreement with the employees association. The agreement was dated April 2, 1974, and the assessment proceedings ended on March 31, 1974. Therefore, the Income-tax Officer was of the view that the liability for payment of the increased rate of bonus arose during the next year and not for the assessment year 1974-75. Since there was no liability for payment of bonus in excess of the maximum payable under the Bonus Act, the Income-tax Officer rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed for the sale of its products in various parts of the country in April, 1971, and the distributors had deposited with the assessee amounts running between Rs. 25,000 and Rs. 2,00,000 at Rs. 5 per tin. The agreement was entered into which stipulated the quantity of the vegetable ghee, which was to be supplied by the assessee-company to the distributors. The assessee failed to supply the products to some of the distributors with the result that non-lifting commission had to be paid. In respect of bonus, it was found that the copy of the agreement dated April 2, 1974, was submitted before the Income-tax Officer where the employees' association entered into an agreement. The demand of the association was for 30 per cent. bonus for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission was to be paid at the rate of 50 paise per tin. Since the option was to be exercised by the distributors twice in a year to invoke clause IV of the agreement, payment was considered under the agreement for business considerations. It was also explained that the work of the company was divided in different zones and freight was to be borne by the company and, therefore, it was more profitable to supply the commodity to certain zones which are nearby as a result of which distributors of other zones could not be supplied vanaspati. The price of vanaspati was found to be lower than the price fixed by the Government. The Tribunal found that under the agreement if the company fails to supply the products to the distributors, it would be li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement dated April 2, 1974, fixes the liability for the accounting year ending on March 31, 1974, i.e., the assessment year 1974-75, and as such simply because it was executed only two days later from the end of the year, it cannot be considered that the deduction was not permissible. The finding which has been recorded by the Tribunal is that the agreement dated April 2, 1974, fastened the liability for extra bonus for the assessment year 1974-75 and, therefore, it was allowed. The Calcutta High Court in the case of CIT v. Arcuttipore Tea Co. Ltd. [1992] 197 ITR 588 found that the payment of extra bonus as a result of bipartite agreement over and above the minimum bonus payable under the Payment of Bonus Act, 1965, to maintain industrial p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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