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TMI Blog1991 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... lus of Rs. 3,35,766 within the meaning of the Payment of Bonus Act, 1965. Even then, the assessee paid profit-sharing bonus to the extent of Rs. 3,37,000. In addition to such profit-sharing bonus, the assessee-company paid monthly incentive bonus of Rs. 5,66,963 and special incentive bonus of Rs. 1,17,314. The Income-tax Officer disallowed Rs. 1,254 out of the profit-sharing bonus of Rs. 3,37,000 as it was in excess of 8.33% of the salary and wages and the entire monthly incentive bonus and special incentive bonus. On appeal, the Commissioner of Income-tax (Appeals) held that the monthly incentive bonus was " nothing but incentive wages " and, therefore, allowed this amount of monthly incentive bonus of Rs. 5,56,963. He, however, declined to accept the assessee's claim in respect of the special incentive bonus of Rs. 1,17,314. This disallowance was contested by the assessee in an appeal to the Tribunal. The Department also preferred an appeal against the finding relating to the monthly incentive bonus. The Tribunal held that the annual special incentive bonus and monthly incentive bonus are production bonuses and as such additional or further emoluments which do not come under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s employed in certain establishments and for matters connected therewith." After the 1975 Amendment, the preamble reads as follows: " An Act to Provide for the payment of bonus to persons employed in certain establishments on the basis of profit or on the basis of production or productivity and for matters connected therewith." However, it is not correct to say that bonus will be paid only if there are profits or the bonus has to be linked to production or productivity. Section 31A of the Payment of Bonus Act, 1965, stipulates that the provisions of the Act will not be applicable to those establishments where the employees enter into an agreement with the employer before the commencement of the 1975 Amendment for payment of bonus and also to those who enter into an agreement after commencement of the 1975 Amendment for payment of bonus linked to production or productivity. Even in these cases, the maximum bonus an employee can receive is limited to twenty per cent. of the salary or wages earned by him in the relevant accounting year. The Supreme Court in Titaghur Paper Mills Co. Ltd. v. Its Workmen [1959-60] 16 FJR 323 ; [1959] Suppl. 2 SCR 1012 ; AIR 1959 SC 1095, has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position restored in 1977 by the later wisdom of the new Parliament. However, we are concerned only with the import and effect of the few provisions incorporated by Act 23 of 1976. The fundamental fact which we must reiterate is that the Bonus Act, before the 1976 amendment, had nothing to say on bonus not oriented on profit what then was the departure made ? Did it travel beyond the broad territory of the original statute and invade other forms of bonus ? Apart from the clauses which we will presently deal with, a key to the understanding of the changes is the long title. The long title of the Bonus Act was also amended in 1976 and the substituted one runs thus : 'An Act to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity and for matters connected therewith.' The clear light that we glean from the new long title is contrary to the intent of Shri Pal's argument. Specifically, the new long title purports to provide for the payment of bonus 'on the basis of profits or on the basis of production or productivity and for matters connected therewith'. The emphatic inference flows therefr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in terms of the required invoiced despatches is known. The above clauses make it clear that the payment of special incentive depended on performance in terms of required invoiced despatches and was not payable in case of failure to achieve the required invoiced despatches. In view of the aforesaid payment by the company, the union assured to put its endeavour to ensure a high level of production and productivity among all the workmen and upkeeping of the effective discipline in the factory in all its aspects to achieve the target set out. The terms regarding the monthly incentive bonus are contained in the agreements dated May 19, 1971, and April 8, 1974. Clauses. 2 and 3 of the agreement dated May 19, 1971, run as follows : " 2. The parties to this agreement realise and appreciate the fairness of a certain amount of output in return for the guaranteed basic wage and dearness allowance. Taking the conditions of Holman-Climax Mfg. Ltd. in particular, the parties hereto agree to fix this limit at 50 per cent. productivity index beyond which the incentive scheme shall operate. 3. The parties hereto have observed that the productivity index of some groups of workmen in the immedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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