TaxTMI 
TaxTMI 
2024 (3) TMI 666
X X X X Extracts X X X X
X X X X Extracts X X X X
....printing and publishing of News Papers and Periodicals. The matter at hand pertains to Assessment Year 1987-1988. During the assessment year in question, the Assessing Officer made the following disallowances : (a) Provision for additional salary and wages amounting to Rs. 17 lakhs arising out of the Justice Palekar Award for the period 1st January 1986 to 30th June 1986 on the basis of the Memorandum of Settlement between the management and the employees signed on 8th May 1987; (b) Ex-gratia bonus paid amounting to Rs. 16,28,258/- over and above the eligible bonus under the Payment of Bonus Act; and (c) Bad and irrecoverable debts written off Rs. 13,65,300/-. 3. Assessee challenged the order before the Commissioner of Income Tax (Appeals) who deleted the disallowances and allowed the amount as deduction in computing assessee's income. The Revenue impugned the order of the CIT(A) before the Income Tax Appellate Tribunal (ITAT) who set aside the findings of the CIT(A) and restored that of the Assessing Officer. It is that order passed by the ITAT on 8th April 2002 which is impugned in this appeal. Only two disallowances matter to this appeal, i.e., additional salary and wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt portion of the judgment reads as under : The gravamen of Dr. Balasubramanian's case is that the liability had not accrued to the assessee in respect of payment to its workmen until after the close of the relevant previous year. This does not appear to us to be, upon the facts, a sustainable proposition. The awards that had governed the terms and conditions of service of the assessee's workmen were terminated. The assessee's board of directors took note of this and made a provision of a sum of Rs. 1,00,000 in respect of the impending liability that arose, pursuant to the termination, on account of the revision in the service conditions of its workmen. This was done in the manner of a prudent businessman who knew that the service conditions would have to be bettered. The liability was rightly recognised as having accrued and it was provided for. The provision itself would have been allowable as a deduction. It was not allowed. Instead, the quantified liability in the aggregate sum of Rs. 76,680, though it was discharged subsequent to the close of the previous year with which we are concerned, must be allowed as a deduction. The payment in that aggregate sum was made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7. Shri Usgaonkar for the respondent submits that apart from the decision of this court in the case of Raghuvanshi Mills Ltd., there are decisions of other High Courts too taking the same view. The learned counsel placed reliance on the following decisions : CIT v. Shaw Wallace and Co. Ltd. [1991] 190 [TR 455 (Cal), CIT v. Rahimia Lands and Tea Co. P. Ltd. [1992] 197 ITR 310 (Cal) subsequent decision of the Calcutta High Court on the issue. He also relied on the decision of CIT v. Sree Kamakhya Ten Co. P. Ltd. [1993] 199 ITR 714 (Cal), CIT v. National Engineering Industries Ltd. [1994] 208 ITR 1002 (Cal), CIT v. Ganges Rope Co. Ltd. [2001] 252 ITR 524 (Cal) and CIT v. Rajasthan State Mineral Development Corporation [2003] 261 ITR 479 (Raj). 8. Perusal of the aforesaid decisions of the Calcutta and the Rajasthan High Courts shows that the object of the proviso to section 36(1)(i) of Income-tax Act was to encourage the management to pay bonus in excess of what is statutorily bound to be paid to the employees provided the payment is justifiable as "reasonable payment." It was observed that any other construction of the said provision would be artificial and may not be in, keepin....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The provision for deduction in section 17, on the other hand, indicates the independent existence of customary bonus although, to some extent, its quantum is adjustable towards statutory bonus. Again section 34 only emphasizes the importance of the obligation of the employer, in every case, to pay the statutory bonus. The other sub-sections of section 34 also do not destroy the survival of other types of bonus than provided by the Bonus Act. Further it is clear from the long title of the Bonus Act of 1965 that it seeks to provide for bonus to persons employed 'in certain establishments not in all establishments. Moreover, customary bonus does not require calculation of profits, available surplus because it is a payment founded on long usage and justified often by spending on festivals and the Act gives no guidance to fix the quantum of festival bonus; nor does it expressly wish such a usage. The conclusion seems to be fairly clear, unless the court strains judicial sympathy contrarywise, that the Bonus Act dealt with only profit bonus and matters connected therewith and did not govern customary traditional or contractual bonus. The omission to mention the name of a festiva....