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TMI Blog1983 (11) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... of production. So that the tempo of production may not suffer, he gave an understanding to some of the employees who were to work with the assistance of power to see that the production did not suffer for their own additional investment in time and energy. They were given the understanding that they will be suitably rewarded. It was in pursuit of this understanding that these 131 employees were given various sums totalling at Rs. 2,62,928. The ITO has reproduced the details of the persons as well as the detail of the work done by them along with the details of payment made to them in his order. The ITO not being satisfied with this explanation made further enquiry in the matter. He pointed out to the assessee that assessee had already made a payment of bonus for which he had claimed a deduction of Rs. 34,231. This amount was debited to the profit and loss account of the year and the ITO had no difficulty in accepting the claim for deduction. In the preceding year, the assessee had made a claim of Rs. 36,462 for deduction account of bonus paid to all the employees. The ITO had no difficulty in accepting the claim for deduction. The payment of this sum of Rs. 2,62,928 as additional b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the Payment of Bonus Act, 1965. Workers bonus paid as per profit and loss account is Rs. 34,231 as against Rs 36,462 paid in the preceding year. The assessee has been relied upon the decision of the Supreme Court in the case of Hukum Chand Jute Mills Ltd.... The assessee has tried to distinguish between the payment under section 31A of the Payment of Bonus Act and the payment made by the assessee which is claimed to be customary or not contractual. In the case relied upon by the assessee the customary payments of bonus were being made at least since 1962-63 up to 1976.... The source records from which the productivity bonus has been calculated have not been produced for verification. The provisions of section 31A of the Payment of Bonus Act, 1965 are clearly applicable to this case and as the assessee has made payments of normal bonus under the Payment of Bonus Act the claim for productivity bonus is not admissible as it can only be in lieu of bonus paid under the Payment of Bonus Act based on profits." As the disallowance exceeded a sum of Rs. 1 lakh he sent the draft assessment with the objections of the assessee to his IAC under section 144B of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the products can account for the increase in value of sales. For example, the following Chart will show the direct relevancy of this arguments : Sl. No. in Name of the Item Sale price as on the list ----------------------------------- 1-1-1976 1-4-1977 1-9-1977 22 WP Housing Tata 45 51 51 30 Front Hub Drum W/Bolt 170 190 190 31 Rear Hub Drum 32214 200 220 220 32 Rear Hub Drum 32215 200 220 220 33 Front Brake Drum Tata 115 130 130 34 Rear Brake 110 120 120 58 Gear Box House Tata 115 125 125 59 Clutch Housing Tata 120 130 130 62 R/S Front 17.25 20 20 63 R/S Front ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frequent power cuts his claim for deduction of the additional wages could not be denied on a consideration that the assessee had not been able to produce the original records on which he had come to a finding about the extra efforts put in by those workmen. Therefore, the ITO was not justified in claiming that the payment should be confused with a payment made under the Payment of Bonus Act putting a ceiling on the payment of bonus. He was also not justified in holding that the assessee did not have a norm in making the payment. It was explained that none of the employees was related to any one of the partners of the firm and, therefore, the partners could not be affected by any consideration extraneous to business. He also controverted the finding of the ITO that any formal agreement was needed to provide the basis. The ITO had himself verified from the statement of the employee he had examined that payment was made according to understanding given by the assessee-firm to the employees in this respect. The ITO had found out by a visit to the factory that every workman had a job card which, however, after the year was over, was destroyed. It was from this job card that the specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has been made for the purpose of the business and in the interest of the production achieved by the appellant-firm. Under these circumstances the amount of Rs. 2,62,928 is hereby allowed to the appellant-firm." 3. The revenue has felt aggrieved and has brought this issue before us. The departmental representative speaking for the revenue has relied on the finding of the ITO. According to him, from the facts brought on record, the norm or the basis which the assessee had adopted in making the payment to the employees is not brought out. Payment was not made under any agreement nor under customary law prevalent in the industry. What was the basis on which the assessee had proceeded to make the payment has not been brought out. According to him, it was the compelling force of maintaining the production but the assessee in this respect also failed to produce the original records of production as well as of those of preceding years. Nothing could be found out from the money value of the turnover because even without there having been any increase in the production turnover would rise by the simple device of revising the selling prices upward. Therefore, it was not clear as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind support for his disallowance, this finding should be ignored to determine the allowability of the claim for deduction of the aforesaid sum as a business outgoing. 4. Having heard the rival submissions, we are not able to appreciate that the revenue has been able to prop up a case against the finding of the Commissioner (Appeals) on the issue. The only grievance of ITO was that the assessee had not been able to bring out the basis or define the norm which had led him to make the payment and that the original records of production were not made available so that he could verify the claim of the assessee recording his intention underlying the payment of the aforesaid extra remuneration that tempo of production or the volume of business to be achieved during the year did not suffer on account of the erratic supply of power during the accounting year in appeal. But, in our view, there was enough material before the ITO in this respect to hold that payment was not made for any consideration other than that arising from business payment was made to 131 employees of lower echelon who were not related to the firm or to any of the partners. Payment had been made in the course of runnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which advances the general interest of the community above the personal interest of the individual and which calls upon the assessing authorities to view the payment made by the employers to their employees in the background of this thinking. Since the full observation is contained in paragraph 13 of the order of the Commissioner (Appeals) we refrain from reproducing it. Bearing these principles in mind, we are not moved by the finding of the ITO that the claim for deduction of the aforesaid payment could be denied because the payment could not be related to any cut and dried formula in the shape of a norm or to any agreement, oral or written, entered into between the assessee and its employees. 5. As far as the points made out by the IAC in his directions are concerned, we find force in the contention of the learned counsel for the assessee that if the ITO had chosen to incorporate the directions of the IAC containing his fresh findings and thereby derive support for his findings which had originally led him to disallow the payment, it was but reasonable and proper that those findings of the IAC should have been confronted first to the assessee before having been relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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