9911796707
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Issues:
1. Disallowance of bonus paid to employees for asst. yr. 1976-77. 2. Disallowance of bonus paid to employees for asst. yr. 1977-78. 3. Disallowance of managerial remuneration and related expenses for asst. yr. 1977-78. Analysis: *For asst. yr. 1976-77:* The issue revolves around the disallowance of bonus paid to employees. The CIT(A) confirmed the disallowance made by the ITO, stating the assessee was not entitled to a deduction under s. 36(2) of the IT Act, 1961. However, the ITAT found the CIT(A)'s order confusing as the accounting year actually ended on 31st Dec., 1975, making the assessee eligible for the deduction of minimum bonus payable under the Payment of Bonus Act, 1965. The ITAT directed the ITO to allow the deduction accordingly. *For asst. yr. 1977-78:* The issue here is the excess disallowance of bonus paid to employees. The ITO restricted the bonus paid by the assessee, leading to an excess amount of Rs. 3,841. The CIT(A) upheld this addition. The ITAT noted discrepancies in the computation of allocable surplus and directed the ITO to verify the assessee's computation. If found correct, the entire bonus amount should be allowed as a deduction. *For asst. yr. 1977-78 (Managerial Remuneration):* Regarding the disallowance of managerial remuneration and related expenses, the ITO disallowed Rs. 6,938 under s. 40(c) r/w s. 40A(5) of the IT Act. The CIT(A) upheld this disallowance without discussing the points raised by the assessee. The ITAT found the ITO's computation incorrect and directed a reevaluation. The correct disallowance amount was determined to be Rs. 1,839, considering only specific components of the remuneration as perquisites. In conclusion, the ITAT partially allowed the appeals, directing the ITO to make necessary adjustments based on the correct interpretation of relevant provisions for all the issues raised in the appeals.
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