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TMI Blog1990 (6) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... director on the basis of agreement with the employees and on the basis of terms and conditions of the services of the managing director ? (2) Whether the Tribunal was right in holding that the aforesaid payment was made on grounds of business expediency and, therefore, was an allowable deduction even under section 37 of the Income-tax Act, 1961 ?" Income-tax Reference No. 147 of 1987: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessee is entitled to claim deduction of the bonus paid in excess of the minimum and in holding that the customary bonus paid will not attract the provisions of section 36(1)(ii) of the Income-tax Act, 1961 ?" The respondents are different publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re contractual bonuses to which the provisions of the Payment of Bonus Act will not apply. Even if the said amount paid was not an allowable deduction as "bonus", it should be allowed under section 37 of the Act on the ground of business expediency. Thereafter, at the instance of the Revenue, the two questions of law formulated hereinabove have been referred for the, decision of this court in the said referred case. Regarding the facts in Income-tax Reference No. 147 of 1987, the assessee claimed a sum of Rs. 4,05,000 as bonus paid during the relevant year in terms of the settlement arrived at with the employees. Admittedly, the said payment exceeded the maximum of 20% allowable under the Payment of Bonus Act. The Income-tax Officer disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be claimed as a deduction under section 36(1)(ii) of the Act provided the following conditions are fulfilled : The amount should be reasonable with reference to (a) the pay of the employee and the conditions of his service ; (b) the profits of the business or profession for the previous year in question ; and (c) the general practice in similar business or profession. In the two cases on hand, the guidelines stated above, which have been exhaustively dealt with in Alikunju's case [1987] 166 ITR 611, have not been followed. The Appellate Tribunal stated that the payment of bonus, over and above the limit prescribed by the Payment of Bonus Act, is a permissible deduction in both the cases. In Income-tax Reference No. 143 of 1987, the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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