9911796707
TMI Blog1995 (1) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... reated a provision for bonus and ex gratia to employees amounting to Rs. 3,82,735 as under : Bonus/ex gratia Rs. 2,82,735 Provision for contingency Rs. 1,00,000 ------------------- Rs. 3,82,735 ------------------- The Assessing Officer computed the bonus payable at 8.33 per cent which amounted to Rs. 2,06,262. Therefore, he disallowed the balance of Rs. 1,76,473 (Rs. 3,82,735 minus Rs. 2,06,262) as representing excess provision of bonus. Over and above this, he disallowed a further sum of. Rs. 2,89,028 representing ex gratia paid to employees. On appeal, the learned CIT (Appeals) held that the agreement to pay bonus at the rate of 20 per cent was entered into by the assessee only in the subsequent previous year and, therefore, the Assessing Officer was justified in disallowing the excess over 8.33 per cent. The assessee is in second appeal. 5. Having heard rival submissions, we delete the disallowance. The assessee has entered into a long-term agreement with the labour on 22-12-1981 for the accounting years 1980-84 1981-82 and 1982-83. Under the terms of the agreement, the assessee has paid bonus and ex gratia at 21 per cent for the assessment year 1982-83, 18 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision and has been made on the basis of a reasonable apprehension of its liability to pay bonus in such percentage and, therefore, we hold that no part of it can be disallowed. In this view of the matter the disallowance of Rs. 1,76,473 as sustained by the learned CIT (Appeals) is deleted. 6. Turning to I.T. A. No. 41 (Coch)/1990, the revenue is a grieved that the learned CIT(Appeals) has deleted the disallowance of ex gratia payment of Rs. 2,89,028. The Assessing Officer was of the view that-the company has paid ex gratia amounting to Rs. 2,89,028 over and above the bonus paid. The assessee had contended before the first appellate authority that there was no debit of Rs. 2,89,028 in the profit and loss account and the impugned amount was paid only in the succeeding previous year and not in the relevant previous year relating to the assessment year 1985-86. In this view of the matter, the learned CIT(Appeals) accepted the contention of the assessee and deleted the disallowance of Rs. 2,89,028. The revenue's grievance is that in the facts of the case, the CIT(Appeals) should have restored the matter to the Assessing Officer in order to verify whether the amount of Rs. 2,89,028 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of Rs. 52,766 in respect of bonus and ex gratia being the difference between the claim of Rs. 2,83,068 and the deduction allowed by the CIT(Appeals) in a sum of Rs. 2,30,302. As the issues are related to each other they are taken up together for consideration. For the year ending on 30-9-1985, relevant to the assessment year 1986-87, the assessee had paid Rs. 1,58,416 relating to the assessment year 1985-86. In addition to the above, a sum of Rs. 71,886 was paid to the officers as customary bonus on the eve of Onam festival. The Assessing Officer ' disallowed the entire amount of Rs. 2,30,302 on the ground that the payment of Rs 1,58,416 did not relate to this year and the ex gratia payment was in excess of the minimum bonus of 8.1/3 per cent payable under the Payment of Bonus Act. The payment of Rs. 1,58,416 was as a result of the agreement signed In April, 1985 and the ex gratia payment of Rs. 71,886 was not governed by the Payment of Bonus Act. On a consideration of these submissions, the learned CIT(Appeals) allowed deduction of Rs. 1,58,416 as a liability accrued during the year. He further allowed the payment of Rs.71,886 under section 37(1) of the I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment is the same as that of the workers and if it satisfies any one of the conditions prescribed in section 36(1)(ii) we hold that the assessee will be entitled to the deduction of the claim, otherwise not. For this limited purpose, the issue is restored to the file of the Assessing Officer. 12. In the assessee's appeal, the assessee is aggrieved that the learned CIT(Appeals) has only allowed bonus and ex gratia'in a sum of Rs. 2,30,302 (Rs. 1,58,416 + Rs. 71,886) as against the claim of Rs. 2,83,068. This figure is worked out as follows : Total amount of bonus and ex gratia paid to employees relating to the accounting year 1983-84, relevant to the assessment year 1985-86. The amount was actually paid in April 1985 in the assessment year 1986-87 Rs. 4,95,290 Less : Amount of minimum bonus allowed by the Assessing Officer at 8.33 per cent in the assessment year 1985-86 Rs. 2,02,222 ------------------------- Balance to be allowed in the assessment year 1986-87 on the basis of payment Rs. 2,93,068 ------------------------- It is on the above basis, the assessee contends that the CIT(Appeals) has allowed only Rs. 2,30,302 and disallowed the balance which was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 57,747 was allowed by the Assessing Officer on payment basis. Therefore, only the balance of the disallowance made in the preceding assessment year would fall for consideration, if paid during the year and such an amount as per assessee's computation is, Rs. 2,08,808. In the circumstances, the CIT(Appeals) erred in allowing Rs. 2,66,555. The revenue's contention is that the assessee is not entitled to the deduction of even this amount of Rs. 2,08,808. We do not agree with the contention of the revenue, since the amount had been paid on 22-10-1984, for which proof of payment has been produced before us. Since the payment has been made on 22-10-1984, that is, in the previous year relevant to the assessment year 1986-87, under the provisions of section 43B, such payment has to be allowed on payment basis. Thus, the revenue's appeal is partly allowed. 15. The next ground in the revenue's appeal is against the grant of investment allowance on electrical installations and moulds. The assessee is a manufacturer of glass bottles. The CIT(Appeals) was of the view that electrical installations and moulds formed the integral part of the plant and machinery required for the manufacture. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year : Provided ............................................" It is the contention of the assessee that it had installed the assets before 1-4-1985 and had brought to use the assets as on 1-4-1985. Therefore, it was entitled to additional depreciation. The contention of the revenue is that the assets had not started functioning before 1-4-1985 and, therefore, the assessee was not entitled to the additional depreciation on such assets. In our considered opinion, though for purpose of claiming depreciation it would be enough if the asset is put to use even for a single day in the previous year, yet, for purpose of claiming additional depreciation, what is relevant is the installation of the asset before 1st day of April, 1985. It is seen that a Fax message was sent by the Technical Director of the company dated 15-12-1994 as follows : "As part of our capacity expansion we installed a third I.S. Machine during March 1985. The machine was received here during March 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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