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TMI Blog1991 (3) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental Representative and the learned counsel for the assessee and have perused the material placed before me. 2. During the year under consideration the assessee paid Rs. 40,876 as bonus to its employees. This was @ 20% of their wages. The ITO observed that the assessee had no allocable surplus and, therefore, it was liable under the Bonus Act to pay only the minimum bonus i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat extent would override section 37(1) and, therefore, deletion of the disallowance was improper. He placed reliance, inter alia, on Addl. CIT v. Moolchand Jaikishandas Co. [1977] 108 ITR 500 (Guj.) in which while dealing with the payment of commission the Hon'ble High Court held that the same has to be restricted in terms of Section 36(1)(ii) and cannot be allowed under section 37(1). The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceed the amount of bonus payable under the Act. The second proviso applies to payment of bonus to which the first proviso does not apply and permits the deduction to be allowed if the payment of bonus is reasonable with reference to-- " (a) the pay of the employee and the conditions of his service ; (b) the profits of the business or profession for the previous year in question ; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thought that since there was no allocable surplus, the assessee was debarred by the Bonus Act from paying bonus above 8.33%. This interpretation, in my view, is not correct. Section 11 permits payment of bonus up to 20% and the maximum limit of 20% seems to have been placed so that the basic grades of pay of the employees are not kept low. Similarly, when the first proviso to section 36(1)(ii) use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proviso would be deemed to have been complied with because the payment has been made after arriving at an agreement between the employers and employees' union and that too through the intervention of the conciliation machinery in the Labour Department of the Government of West Bengal. For the above reasons I am of the view that the CIT (A) rightly deleted the addition made by the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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