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TMI Blog1962 (2) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. The salary and bonus payments claimed as deduction by the assessee for the two assessment years were as follows: Assessment years Salary Bonus 1953-54 ₹ 12000 per year ₹ 3000 per year 1954-55 do do ₹ 3500 per year The Additional Income Tax Officer, Tinnevelly allowed as deduction salary, for both the years, of ₹ 4500 a year and allowed ₹ 900 as bonus for the year 1953-54 and ₹ 1400 as bonus for 1954-55 as proper deduction. The rest of the assessee's claim for deduction was disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low the assessee and the department an opportunity to place further material and to submit the case with its findings. This has now been done by the Tribunal, it is not now necessary for us to express any opinion on the question whether the direction to take further evidence in the matter was properly given in a proceeding under Section 66 of the Act. 4. The business of the assessee was during the relevant period carried on at Kallidaikurichi and at Pollachi. Formerly the business was owned by a firm of two partners, the assessee and his brother, Mani Iyer. Between the years 1929 and 1949 the assessee's brother Mani Iyer was managing the business at Pollachi. Mani Iyer died sometime in December 1949. Thereafter the assessee seems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of the business . Bonus payments paid to the employee in a business concern can be claimed as proper deduction by the employer-assessee if they satisfied the conditions prescribed under Section 10(2)(x) of the Act. That provision reads; Any sum paid to an employee as bonus or commission for services rendered where such sum would not have been payable to him as profits or dividends if it had not been paid as bonus or commission; provided that the amount of the bonus or commission is of a reasonable amount with reference to (a) the pay of the employee and the conditions of this service; (b) the profits of the business, profession or vocation for the year in question and (c) the general practice in similar business, profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing carried on efficiently would be excessive remuneration from the point of view of the departmental authorities who owe a duty to estimate and apportion that amount of payment as would fall within the language of Section 10(2)(XV) of the Act. 7. Payment of salary in excess of the needs of the business cannot be justified as a proper revenue charge on the Income. The taxing authorities have a difficult task to perform when they have to determine whether a salary payment, in whole or in part, is expended wholly and exclusively for the business. Does the payment represent a fair measure of remuneration for services rendered; is it within the limits of commercial prudence of a reasonable business man conducting a business of that magni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an estimate or making an allowance. It has only to decide whether the expenditure is proper or not. For that purpose, it has got to see whether such expenditure was voluntarily Incurred for the purpose of the business. Once that test is satisfied, namely, correlation of the business purpose with the expenditure, the department is not concerned with the question what in its opinion would have been the proper expenditure. 9. What are the facts in this case? A boy just out of the College is said to be in independent charge of a business in the place of a deceased partner. He is paid a salary of ₹ 1000 a month and bonus of about 3 to 4 months salary. The annual income of the business when it was run by the deceased partner Was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that it is not a payment of remuneration. We are unable to say that the department was not justified in allowing portions of the salary, as being not incurred for the purpose of earning the profits of the business. It may be that the department made a slight underestimate of the adequate rate of remuneration payable to the employee, but it is not within the province of this Court to set right matters, and direct the department to make a further allowance. On the basis of the allowed salary the bonus allowed is reasonable and in conformity with Section 10(2)(x). 10. The digression of the Tribunal into the scales of pay of an I.A.S. officer and of a I Class Honours graduate employed in the Accountant General's office cannot rema ..... X X X X Extracts X X X X X X X X Extracts X X X X
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