1988 (1) TMI 101 - AT - Income Tax

Summary

Issues Involved:
1. Interest on deferred payment
2. Interest paid and Guarantee Commission
3. Incentive Bonus
4. Medical Reimbursement for the purpose of disallowance under sec. 40A(5)
5. Extra Shift Allowance
6. Malaysian Project Expenditure
7. Forest Lease Demand
8. Deduction under sec. 80J in respect of Pulp Unit

Detailed Analysis:

1. Interest on Deferred Payment
[Details not provided in the text]

2. Interest Paid and Guarantee Commission
[Details not provided in the text]

3. Incentive Bonus
The revenue's objection pertains to the Commissioner (Appeals) allowing the deduction of Rs. 26,82,365 and Rs. 27,30,734 as incentive bonus and bonus, respectively. The Income-tax Officer had allowed only Rs. 16,07,300 based on a bonus formula, rejecting the remaining amounts. The Commissioner (Appeals) found the incentive payment of Rs. 26,82,365 allowable under section 37 of the Income-tax Act and the bonus of Rs. 27,30,734 allowable under the Payment of Bonus Act, subject to a maximum of 20%. The revenue argued that the assessee could not claim both amounts as deductions, citing the Kerala High Court decision in CIT v. P. Alikunju. However, the Tribunal upheld the Commissioner (Appeals)'s decision, noting that the incentive bonus was not covered by the Bonus Act and was allowable under section 37. The Tribunal also referenced the Madras High Court decision in CIT v. Sivanandha Mills Ltd., supporting the deduction of incentive bonus under section 37(1) of the Income-tax Act.

4. Medical Reimbursement for the Purpose of Disallowance under Sec. 40A(5)
[Details not provided in the text]

5. Extra Shift Allowance
[Details not provided in the text]

6. Malaysian Project Expenditure
[Details not provided in the text]

7. Forest Lease Demand
The issue involves the deduction of Rs. 70,23,923 as "Forest Lease Demand." The Income-tax Officer disallowed the claim, arguing that the price determination was challenged in court and the final order was made after the accounting year. The Commissioner (Appeals) allowed the deduction, referencing the Supreme Court decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT, which states that the absence of entries in the books does not affect the allowance of a claim. The Tribunal upheld this view, noting that the liability to pay the additional price arose during the year under appeal, even though the final quantification occurred later. The Tribunal found that the liability was enforceable and not contingent, supporting the deduction in the year of account.

8. Deduction under Sec. 80J in Respect of Pulp Unit
[Details not provided in the text]

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decisions on the key issues of incentive bonus and forest lease demand, affirming the deductions under sections 37 and 36(1)(ii) of the Income-tax Act. The appeal was treated as allowed in part for statistical purposes.