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TMI Blog1996 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... aid was treated as part of the remuneration and not as a bonus out of profits and, therefore, the Payment of Bonus Act has no application to the assessee's case ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the ceiling prescribed under section 36(1)(ii) was not attracted and, therefore, there was no case for disallowance of a part of the bonus payment ? " The assessee is an individual carrying on business in tanning hides and skins. In the accounts of the previous year ended March 31, 1978, corresponding to the assessment year 1978-79, the assessee had paid a sum of Rs. 20,900, to the workmen with the narration that it was bonus paid to them and debited to the wages account. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomary in the trade and, therefore, the ceiling prescribed under section 36(1)(ii) of the Act was not attracted, since the payment itself was only a remuneration and not bonus at all. Therefore, the Tribunal came to the conclusion that the disallowance as deleted by the Commissioner of Income-tax is in order. In the assessment year 1978-79, the assessee had paid a sum of Rs. 20,900 to the workmen as bonus and debited it to the wages account. According to the Department, since it is bonus payment, it should be allowed as per the provisions contained in section 36(1)(ii) of the Act. Even if this provision is applied, the excess amount of Rs. 16,450 over and above 20 per cent. of the salary has got to be disallowed. The assessee pleaded it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 36(1) of the Act has no application in respect of employees covered under the Bonus Act, and that bonus or commission paid to them in excess of, or otherwise than, what is statutorily required (although reasonable when considered with reference to clauses (a) to (c) of the second proviso) is not deductible under section 36, is to put an artificial construction upon a beneficial provision. In Workmen of Kettlewell Bullen and Co. Ltd. v. Kettlewell Bullen and Co. Ltd. [1994] 84 FJR 265 ; 2 SCC 357, the Supreme Court, while considering payment of customary bonus, held that since there was payment of a uniform rate of 10.5 per cent. of salary or wages for an unbroken period of nine years from 1965 to 1973, which was a sufficiently long p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is clear that the categories covered by the Act, as amended, did not deal with customary bonus ". According to learned standing counsel appearing for the Department, the Tribunal has not considered the second proviso to section 36(1)(ii) of the Income-tax Act, 1961. The second proviso prescribes three conditions in order to allow the bonus payment as customary bonus. In order to allow the bonus as customary bonus, we have to look into the pay of the employee and the conditions of his service, the profits of the business or profession for the previous year in question and the general practice in similar business or profession. In the present case, the Tribunal recorded a finding that the assessee is a Muslim and Muslim traders used to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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