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TMI Blog1993 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... pany incorporated under the Companies Act, 1956 (hereinafter referred to as "the assessee"), claimed a total amount of Rs. 14,92,036 towards bonus, ex gratia, salary and wages during the assessment year 1981-82. The Income-tax Officer was of the view that a sum of Rs. 1,96,299, aggregating the production bonus of Rs. 1,69,699 and maintenance bonus of Rs. 26,600, was not allowable as expenditure, since it was in excess of 20 per cent. of the salary, which is the maximum bonus allowable in terms of section 36(1)(ii) of the Act. According to him, the amount was paid in addition to the maximum of 20 per cent. bonus paid as per the Bonus Act. In appeal, the Commissioner of Income-tax (Appeals), Orissa, held that though nomenclatured as "production bonus" and "maintenance bonus", in essence, the payments were in the nature of incentive wages and, therefore, the disallowance was not in order. On appeal by the Revenue, the Tribunal affirmed this conclusion. An application under section 256(1) of the Act was rejected and subsequently, on being moved under section 256(2), this court had directed the afore-indicated question to be referred for opinion. The primary stand of the Revenue as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g laid down therein as to the allowability of the bonus is no more operative for and from the assessment year 1989-90. It cannot be gainsaid that, if an allowance is granted specifically by any of sections 30 to 36, subject to certain express or implied conditions, the assessee would not be entitled to claim a deduction under the residuary section 37 ; otherwise, the result would be nullification of the express conditions laid down in section 36(1)(ii). The controversy centres round the question whether the amount paid was relatable to "bonus" as held by the Income-tax Officer or "incentive wages" as observed by the Commissioner of Income-tax (Appeals) and the Tribunal. Subject to a specified condition, bonus or commission paid to an employee is allowable under this clause. The condition is that the sum paid to the employee as bonus or commission should not have been payable to him as profits or dividend if it had not been paid as bonus or commission. The Revenue's stand was that nothing beyond the ceiling limit prescribed by the Payment of Bonus Act, 1965 (in short, "the Bonus Act"), is to be treated as payment under section 36(1)(ii). The Tribunal, in essence, has affirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his being not a substitute for bonus based on profits, but a payment in addition to the profit-based bonus, it is not a bonus as prescribed under section 31A of the Bonus Act. In other words, the amount paid being not an annual bonus linked with production or productivity in lieu of bonus based on profits payable under the Bonus Act as envisaged in section 31A, the restriction of 20 per cent. laid down by the provisions of the Bonus Act will not be applicable at all. The Commissioner of Income-tax (Appeals) observed that the production and maintenance bonus for the year under consideration was paid by way of incentive wages from month to month which were mere customary payments even though these were quantified by agreements entered into from time to time. These monthly payments were not an alternative or substitute for the bonus payable under the Bonus Act, and, therefore, did not come under the purview of the provisions of the Bonus Act. It was concluded that though it was not deductible in computing the total income of the assessee under section 36(1)(ii), it was allowable as deduction under section 37. The Tribunal accepted the contention of the assessee that the payments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any substance, vis-a-vis, customary bonus. It was observed that the fallacy is simple and it is incontestable that the Bonus Act does not deal with the customary bonus and is confined to profit-based or productivity-based bonus. The provisions of the Act have no say on customary bonus, and cannot, therefore, be inconsistent therewith. Conceptually, statutory bonus and customary bonus operate in two fields and do not clash with each other. A similar view was expressed by the apex court in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai [1976] 49 FIR 15 ; AIR 1976 SC 1455. In Titaghur Paper Mills Co. Ltd. v. Their Workmen [1959-60] 16 FIR 323 ; [1959] Suppl. (2) SCR 1012, it was observed that payment of production bonus was in the nature of an incentive wage. The extra payment depends not on extra profits but on extra production. In contrast to profit bonus, production bonus is linked to the quantity of production, it is payment of further emoluments in addition to regular wages or salaries depending upon production, as an incentive to the employees to put in more than the standard performance. In Workmen of Bata Shoe Co. (P.) Ltd. v. Bata Shoe Co. (P.) Ltd. [1972] 42 FIR 516 ; AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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