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Restriction of inquiries by Assessing Officer on payment of bonus genuineness alone. Analysis: The judgment pertains to a reference made by the Income-tax Appellate Tribunal regarding the restriction of inquiries by the Assessing Officer solely to the genuineness of payment of bonus. The case involved an addition made on account of incentive bonus during the assessment year 1974-75 to a public limited company running textile mills. The Commissioner of Income-tax (Appeals) directed the Income-tax Officer to re-examine the claim after an appeal by the company. The Assessing Officer, upon re-examination, made the same addition again. The Tribunal, in a previous assessment year, had emphasized judging the responsibility of bonus payment based on commercial expediency rather than subjective standards. The Tribunal directed the Income-tax Officer to focus solely on the genuineness of the payment of incentive bonus. The Revenue contended that the excess payment of bonus beyond the limits set by the Payment of Bonus Act, 1965, was not allowable under section 36(1)(ii) of the Income-tax Act, 1961. The court analyzed section 36(1)(ii) of the Act, which provides for deductions in respect of bonus payments to employees. The section specifies conditions that need to be fulfilled before allowing bonus payments beyond the limits set by the Payment of Bonus Act, 1965. The court emphasized that genuineness of payment alone is not the sole criterion for allowing incentive bonus. The conditions mentioned in sub-clauses (a), (b), and (c) of the second proviso to section 36(1)(ii) must also be fulfilled. Therefore, the Tribunal was deemed unjustified in restricting the Income-tax Officer's discretion to verify only the genuineness of payment. In conclusion, the court answered the question referred in the negative, favoring the Revenue and against the assessee. No costs were awarded in the matter.
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