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Issues:
1. Whether a separate deduction for bonus should be allowed out of the estimated net profit when no books of account are maintained by the assessee? Analysis: The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the correctness of allowing a separate deduction for bonus out of the net profit estimated by the Income-tax Officer in a scenario where no books of account were maintained by the assessee. The assessee, a handling contractor, did not maintain books of account and received Rs. 8,32,346 from a company for contract works. The Income-tax Officer estimated the net profit at Rs. 83,240 for the relevant assessment year. The claim to deduct Rs. 29,228 as bonus from the estimated net profit was initially disallowed by the Officer. However, on appeal, the deduction was allowed based on the pattern followed in earlier years and similar cases in the region. The Tribunal, considering the history of allowing bonus deductions in previous years and for other contractors, affirmed the allowance of a separate deduction for bonus from the net profit. The Revenue appealed to the Tribunal, which refused to refer the case to the High Court, stating that the estimation of income by reducing the claim for bonus was a factual determination and not a legal issue. The Revenue argued that once the net profit is determined, no further deduction should be allowed, including for bonus. However, the assessee contended that the deduction of bonus is permissible under the Income-tax Act and is a statutory liability. The High Court analyzed the Payment of Bonus Act, 1965, and relevant case laws to understand the treatment of bonus payments in such cases. It noted that the Tribunal's decision to estimate income by deducting bonus based on past practices and industry norms was a factual determination. The Court emphasized that the Tribunal's finding on the quantum of income and expenditure allowable to the assessee was a question of fact, not law. The Court held that the Tribunal's decision was based on relevant considerations and not arbitrary, concluding that it could not interfere with a finding of fact. Therefore, the question was answered in favor of the assessee, allowing the deduction for bonus, and costs were awarded to the assessee. In summary, the judgment addressed the issue of allowing a separate deduction for bonus from the estimated net profit of an assessee who did not maintain books of account. The decision highlighted the importance of factual determinations by the Tribunal based on industry practices and past precedents, emphasizing that such determinations are final and not subject to legal challenge. The Court upheld the allowance of the bonus deduction, considering it a statutory liability and a factual aspect of income estimation, not a legal one.
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