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TMI Blog1993 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37 of the Income-tax Act, 1961, which was paid over and above the limits of the statutory bonus as prescribed under section 36 of the Income-tax Act, 1961 ?" Pursuant to the direction, a statement of case has been drawn up and the aforesaid question has been referred by the Tribunal. The background facts so far as they are relevant for the purpose of answering the question are as follows : Messrs. Orissa Industries Limited, a company incorporated under the Companies Act, 1956 (hereinafter referred to as "the assessee"), claimed a total amount of Rs. 14,92,036 towards bonus, ex gratia, salary and wages during the assessment year 1981-82. The Income-tax Officer was of the view that a sum of Rs. 1,96,299, aggregating the production b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or profession". With reference to section 36(1)(ii), it is submitted that any amount in excess of 20 per cent. of the profits is not allowable as a deduction. Learned counsel for the assessee, on the other hand, contended that the nomenclature has been rightly held to be inconsequential by the Commissioner of Income-tax (Appeals) and the Tribunal, and the latter has recorded a positive finding that the amounts paid did not partake of the character of bonus. The provision at the relevant time read as follows: "36. (1) Other deductions.-. . . . (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troversy centres round the question whether the amount paid was relatable to "bonus" as held by the Income-tax Officer or "incentive wages" as observed by the Commissioner of Income-tax (Appeals) and the Tribunal. Subject to a specified condition, bonus or commission paid to an employee is allowable under this clause. The condition is that the sum paid to the employee as bonus or commission should not have been payable to him as profits or dividend if it had not been paid as bonus or commission. The Revenue's stand was that nothing beyond the ceiling limit prescribed by the Payment of Bonus Act, 1965 (in short, "the Bonus Act"), is to be treated as payment under section 36(1)(ii). The Tribunal, in essence, has affirmed the view of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dearness allowance, etc., payable to workers for a period of three years, but even before the period covered by the settlement expired, the workers started agitating for increased payments due to increased cost of living and various other factors. The management again reached a settlement on April 15, 1980, with the workers' union through conciliation proceedings which was effective from April 1, 1980. The production and maintenance bonus claimed by the assessee for the year under consideration was paid in terms of the said settlement. Though the Income-tax Officer observed that the production and maintenance bonus was in addition to the maximum of 20 per cent. bonus paid under the Bonus Act, no details were on record to establish this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reads as follows "31A. Special provision with respect to payment of bonus linked with production or productivity.-Notwithstanding anything contained in this Act, (i) where an agreement or a settlement has been entered into by the employees with their employer before the commencement of the Payment of Bonus (Amendment) Act, 1976 (23 of 1976), or (ii) where the employees enter into any agreement or settlement with their employer after such commencement, for payment of an annual bonus linked with production or productivity in lieu of bonus based on profits payable under this Act, then, such employees shall be entitled to receive bonus due to them under such agreement or settlement, as the case may be : Provided that any such agreement or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vis, customary bonus. It was observed that the fallacy is simple and it is incontestable that the Bonus Act does not deal with the customary bonus and is confined to profit-based or productivity-based bonus. The provisions of the Act have no say on customary bonus, and cannot, therefore, be inconsistent therewith. Conceptually, statutory bonus and customary bonus operate in two fields and do not clash with each other. A similar view was expressed by the apex court in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai [1976] 49 FIR 15 ; AIR 1976 SC 1455. In Titaghur Paper Mills Co. Ltd. v. Their Workmen [1959-60] 16 FIR 323 ; [1959] Suppl. (2) SCR 1012, it was observed that payment of production bonus was in the nature of an incentive wage. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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