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Issues:
1. Whether the Tribunal was justified in holding that bonus, as part of normal business expenditure, was covered by the net profit rate applied to the case? Analysis: The case involved two matters referred to the High Court by the Income-tax Appellate Tribunal concerning the same assessee for the assessment years 1985-86 and 1986-87. The respondent-assessee, a MES contractor, had its books of account found defective by the Assessing Officer, leading to a best judgment assessment. The Assessing Officer applied a net profit rate of 10%, which was later reduced to 9.5% on appeal. The claim for deduction of Rs. 1,29,330 as expenditure for bonus payment to workers was initially rejected by the Assessing Officer, stating it was an ordinary incident of business. However, the Commissioner of Income-tax (Appeals) disagreed with this finding and allowed the deduction for bonus payment for the assessment years in question. For the assessment year 1986-87, a bonus of Rs. 1,60,000 was paid by the assessee. It was noted that there was no statutory obligation to pay bonus under the Bonus Act, and the payment was made due to a shortage of local laborers and the need to complete contract work on time. The Commissioner of Income-tax (Appeals) found that the payment of bonus was a relevant factor deserving consideration, as claimed by the appellant. The Tribunal upheld the claim that the bonus payment during the relevant assessment years was of a special nature and should be reduced from the profit by applying the net profit rate. The High Court opined that the Tribunal's finding regarding the special nature of bonus payment as an expenditure incurred during the relevant assessment years was a factual determination and did not raise a legal question. Since there was no continuous liability under statutory provisions, and the bonus payment arose from an agreement with the labor union for the first time, it was considered of a special nature. Therefore, the Tribunal was justified in allowing the deduction for bonus payment made to workers during the relevant assessment year. Consequently, the question in each case was answered in favor of the assessee and against the Revenue.
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