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Issues:
1. Disallowance of excess bonus by the ITO. 2. Interpretation of the settlement agreement between the assessee and its workers. 3. Applicability of the decision in Garware Synthetics Pvt. Ltd. case. 4. Validity of the CIT(A) decision. Analysis: 1. The primary issue in this appeal was the objection raised by the revenue regarding the disallowance of Rs. 19,926 by the ITO, representing excess bonus paid by the assessee to its workers. The ITO disallowed this amount under the first proviso to s. 36(1)(ii) of the IT Act, stating that the bonus was not payable under the Bonus Act, 1965. 2. The appeal related to the income tax assessment of M/s Shuraguwa Industries Pvt. Ltd. for the assessment year 1980-81. The assessee had debited a sum of Rs. 39,026 as bonus, with Rs. 19,926 being the additional bonus paid based on a settlement agreement with the workers. The CIT(A) found that the bonus fell under a category not covered by the Payment of Bonus Act, as per the decision in Garware Synthetics Pvt. Ltd. case. The CIT(A) allowed the assessee's appeal, leading to the revenue's objection. 3. The settlement agreement between the assessee and its workers, dated 30th September 1979, mandated the payment of additional bonus equivalent to 11.67% of the salary/wages earned by the workers during the accounting year 1978. This contractual bonus was not affected by the provisions of s. 36(1)(ii) of the IT Act, as per the decision in the Garware Synthetics Pvt. Ltd. case. The Tribunal confirmed the CIT(A)'s decision based on this interpretation. 4. The Tribunal, after examining the terms of the settlement agreement and the relevant legal provisions, upheld the decision of the CIT(A) and dismissed the revenue's appeal. The Tribunal found that the additional bonus paid by the assessee was contractual and not subject to disallowance under the IT Act. The decision in the Garware Synthetics Pvt. Ltd. case was deemed directly applicable to the present case, leading to the affirmation of the CIT(A)'s order.
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