1983 (12) TMI 96 - AT - Income Tax

Summary

Issues Involved:

1. Disallowance of Rs. 1,15,383 out of the assessee's claim for bonus.
2. Interpretation of sub-section (1) of section 10 of the Payment of Bonus Act, 1965.
3. Consideration of the bonus as customary bonus versus statutory bonus under the Payment of Bonus Act.
4. Admission of additional grounds by the assessee at the appellate stage.

Detailed Analysis:

1. Disallowance of Rs. 1,15,383 out of the assessee's claim for bonus:

The primary issue in this appeal is the disallowance of Rs. 1,15,383 from the assessee's claim for bonus. The assessee had claimed a total bonus of Rs. 6,91,896 for the calendar year 1977, corresponding to the assessment year 1978-79. However, the Income Tax Officer (ITO) restricted the claim to the allocable surplus of Rs. 5,76,530, disallowing the remaining Rs. 1,15,383.

2. Interpretation of sub-section (1) of section 10 of the Payment of Bonus Act, 1965:

The assessee argued that according to sub-section (1) of section 10 of the Payment of Bonus Act, 1965, the claim for bonus was in accordance with the specific language of the section, which allows for a maximum of 20% of the salary or wage paid to employees. The assessee contended that this section did not prohibit payment in excess of the allocable surplus, as long as the allocable surplus exceeded the minimum bonus payable.

The Commissioner (Appeals) rejected this contention, stating that the upper ceiling of 20% of the salary/wages as bonus is restricted within the allocable surplus available. Since the bonus paid exceeded the allocable surplus, the argument of the assessee was dismissed.

3. Consideration of the bonus as customary bonus versus statutory bonus under the Payment of Bonus Act:

In an alternative argument, the assessee claimed that the bonus paid was not in accordance with the Payment of Bonus Act but was a customary bonus paid annually to its workers. The assessee presented figures of bonus payments from 1971 to 1977 to support this claim.

The revenue opposed this alternative contention, arguing that the assessee had never previously claimed the bonus as customary and had not provided any evidence to support this new claim. The revenue also noted that determining whether a bonus is customary requires factual evidence, which the assessee had not provided.

The Tribunal agreed with the revenue, stating that the assessee had not previously claimed the bonus as customary and had not provided evidence to support this claim. The Tribunal refused to permit the assessee to raise this new factual argument at this stage.

4. Admission of additional grounds by the assessee at the appellate stage:

The assessee's counsel argued that they were entitled to raise additional grounds at the appellate stage and cited the Supreme Court decision in Hukumchand Mills Ltd. v. CIT as support. However, the Tribunal distinguished this case, noting that the new argument presented by the assessee involved a new factual position that had not been previously raised or evidenced.

The Tribunal emphasized that raising new factual arguments at the appellate stage, which require additional evidence, is within its discretion to refuse. The Tribunal found that the assessee's new argument about customary bonus was not supported by evidence and was contrary to the previous position taken by the assessee.

Conclusion:

The Tribunal concluded that the assessee's interpretation of sub-section (1) of section 10 of the Payment of Bonus Act was incorrect and that the bonus paid in excess of the allocable surplus was not allowable. The alternative argument of customary bonus was also rejected due to lack of evidence and the late stage at which it was raised. Consequently, the appeal was rejected.