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TMI Blog1984 (10) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... 80. The assessee is a co-operative society which carries on the business of running a spinning mill. The Income-tax Officer stated for the assessment year 1978-79 that bonus had been paid at 11.33 per cent. This came to Rs. 3,90,819. He allowed as a deduction bonus at 8.33 per cent at Rs. 2,87,366 and disallowed the balance of Rs. 1,03,453. This disallowance was made taking the view that this amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad worked at a loss, only the minimum bonus of 8.33 per cent was an admissible deduction. He, therefore, upheld the disallowance. 3. The assessee is in appeal before us and it was contended that the bonus payment in each of the years was only 8.33 per cent in terms of settlement under sec. 18(1) of the Industrial Disputes Act dated 15-10-1978 for the first year and 30-10-1979 for the second year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond year, the terms are in Tamil and are to similar effect. The additional payment was made for cordial and smooth working of the Mills due to the co-operation of labour. It was, therefore, not a payment linked with the profit but a payment out of commercial expediency which would have the effect of securing co-operation in the succeeding year also in the hope of getting such a payment. The extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee can claim deduction under s. 10(2)(xv) of the Act even though there was no compelling necessity to incur such expenditure. IT is relevant to refer at this stage to the legislative history of s. 37 of the I. T. Act, 1961, which corresponds to s. 10(2)(xv) of the Act. An attempt was made in the I. T. Bill of 1961 to lay down the "necessity" of the expenditure as a condition for claiming deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as the payment was for commercial expediency, the same would be an allowable deduction. In the light of our conclusion that the payment does not partake of the nature of bonus, much less as bonus under the Payment of Bonus Act, but is of the nature of ex gratia payment, the ceiling under the first proviso to sec. 36(1)(ii) is not attracted and the payment would be an admissible deduction under t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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