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TMI Blog2005 (2) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... abad, has referred the following question of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the payment of Rs. 24,674 under the head 'Bonus to senior members of employees who are not entitled to receive the bonus under the provisions of the Payment of Bonus Act, 1965, is an admissible expenditure' under the Income-tax Act?" Briefly stated the facts giving rise to the present case are as follows: The reference relates to the assessment year 1976-77. The assessee respondent is a limited company and derives income from the manufacture and sale of sugar. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the Madras High Court in the case of CIT v. Lakshmi Mills Co. Ltd. [1999] 240 ITR 81. The question whether the amount paid as bonus was a reasonable amount or not had to be determined with reference to the three factors, as pointed by the Supreme Court in the case of Shahzada Nand and Sons v. CIT [1977] 108 ITR 358. The relevant paragraph is quoted below: "Turning to the provisions of section 36, sub-section (1), clause (ii), we find that the proviso to that clause lays down three factors for the purpose of determining the reasonableness of the commission paid to an employee. The question whether the amount of the commission is a reasonable amount or not has to be determined with reference to these three factors. Sometimes these t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of settlement, it was mentioned that in addition to the bonus that is payable under the Bonus Act the assessee also agreed to pay certain additional amount shown in the annexure to the agreement. The Appellate Tribunal found that if the amount was not paid, the workers would have gone on strike and in such circumstances the payment of additional amount was regarded by the Tribunal as commercial expediency. In the case in hand there is no such finding nor material on record to show that the payment of Rs. 24,674 to the senior members of the staff was made, in anyway, due to commercial expediency. Thus the payment of Rs. 24,674 cannot be regarded as admissible expenditure under the Act. In view of the above discussion, we answer the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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