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Issues Involved: The judgment involves the following issues: 1. Allowability of bonus payment exceeding allocable surplus under section 36(1)(ii) of the Income-tax Act, 1961. 2. Allowability of excess bonus payment under the same provision. 3. Allowability of contribution to gratuity fund under section 43B of the Income-tax Act, 1961.
Issue 1 - Bonus Payment Exceeding Allocable Surplus: The case concerned whether bonus payment exceeding 20% of salaries/wages, made in pursuance of an agreement, was an allowable deduction under the first proviso to section 36(1)(ii) of the Income-tax Act, 1961. The Tribunal held that such bonus payment was allowable irrespective of the allocable surplus, following precedents. The Tribunal's decision was based on the interpretation of the relevant provisions and prior judgments. Issue 2 - Excess Bonus Payment Allowability: The second question was whether bonus paid in excess of the amount permissible under the Payment of Bonus Act was an allowable deduction under the first proviso to section 36(1)(ii) of the Income-tax Act, 1961. The Tribunal, in line with previous decisions, allowed the excess bonus payment as a deduction under the mentioned provision, emphasizing the agreement between the assessee-company and its employees. Issue 3 - Contribution to Gratuity Fund: The third question revolved around the allowability of a contribution of Rs. 9,99,560 to the gratuity fund under section 43B of the Income-tax Act, 1961. The assessee claimed the entire payment as a deduction, contending it was an actual payment and not a provision. The Income-tax Officer initially disallowed most of the contribution, but the Commissioner of Income-tax (Appeals) directed the full deduction, citing the importance of section 43B in allowing deductions for actual payments made in the relevant accounting year. Conclusion: The High Court of Calcutta upheld the Tribunal's decisions on all three issues, affirming the allowability of bonus payments exceeding allocable surplus under section 36(1)(ii) and the contribution to the gratuity fund under section 43B. The judgment provided detailed reasoning based on the provisions of the Income-tax Act and relevant precedents, ensuring the deductions were granted in accordance with the law.
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