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Issues:
1. Validity of the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. 2. Justification of the Tribunal in holding that the additional sum of Rs.1,45,595 was not in the nature of bonus. 3. Determination of whether the ex gratia payment of bonus is deductible for the purpose of business. Analysis: Issue 1: Validity of the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. The Commissioner of Income tax set aside the assessment order of the Assessing Officer directing the disallowance of Rs.1,45,595 paid as bonus to the assessee's employees/workers under section 36(1)(ii) of the Act. The Tribunal, following a previous decision, held that the Commissioner had no jurisdiction to exercise his revisionary power under section 263 of the Act. The Tribunal emphasized that statutory bonus and customary bonus operate in different fields and do not clash with each other. The Tribunal found no infirmity in the order and ruled in favor of the assessee against the Revenue. Issue 2: Justification of the Tribunal in holding that the additional sum of Rs.1,45,595 was not in the nature of bonus. The Tribunal referred to the Payment of Bonus Act, 1965, and established that ex gratia payment of bonus is distinct from statutory bonus, and both operate in different spheres. Citing relevant case law, the Tribunal clarified that customary bonus, in this case, was not impaired or eliminated by any amendment act. The Tribunal concluded that the ex gratia payment did not fall under the definition of bonus as per section 36(1)(ii) of the Act, thereby justifying its decision to set aside the order passed by the Commissioner of Income-tax under section 263. Issue 3: Determination of whether the ex gratia payment of bonus is deductible for the purpose of business. The court examined whether the ex gratia payment of bonus was deductible for business purposes. Referring to the second proviso to section 36(1)(ii) of the Act, the court found that the payment satisfied the conditions for deduction, even if it exceeded the limit prescribed under the Act. Relying on precedent, the court affirmed that the payment was for the purpose of business and therefore deductible. As the payment met the requirements of the second proviso, the court upheld the decision of the Tribunal in allowing the claim of the assessee. In conclusion, the High Court of CALCUTTA upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue, based on the distinct nature of statutory and customary bonuses, the deductibility of the ex gratia payment for business purposes, and the compliance with relevant provisions of the Income-tax Act, 1961.
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