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TMI Blog1985 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess of the maximum amount payable under the said Act was not allowable under the first proviso to s. 36 (1) (ii) of the IT Act. In the appeal filed by the assessee, the CIT (A) deleted the disallowance. He observed that the bonus provided for in the accounts of the assessee was not on the basis of year's profits or productivity. According to him, the said payment represented celebration of an important occasion, where recognition had to be given to the services of the employees and, as such, provisions of s. 36 (1) (ii) would not apply. On this reasoning, he deleted that addition of Rs. 45,650. The Department has now come in appeal before us. 2. The contention on behalf of the Department is that the claim for bonus could be allowed only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. Provided that the deduction in respect of bonus paid to an employee employed in a factory or other establishment to which the provisions of the Payment of Bonus Act, 1965 apply shall not exceed the amount of bonus payable under the Act. Provided further that the amount of the bonus (not being bonus referred to in the first proviso) or commission is 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. 4. The main provision in s. 36 (1) (ii) enjoins upon the ITO to allow deduction in respect of bonus paid by the assessee to his employee. The onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the pay of the employee and conditions of his service (b) the profits of the business for the previous year in question and (c) the general practice in similar business. 7. The bonus to which second proviso applies is bonus not referred to in the first proviso. The question, therefore, would arise as to what is the nature of bonus referred to in the first proviso. The bonus referred to in the first proviso is bonus payable under the Payment of Bonus Act, 1965 to an employee employed in a factory to which the provisions of said Act apply,. If particular bonus comes in the category of bonus which is not payable under the Payment of Bonus Act, 1965, it would be the bonus not referred to in the first proviso and such bonus would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first proviso would become allowable under s. 37 (1) of the Act. Sec. 37 (1) contains general principles, while sec. 36 (1) (ii) deals with a special case where a sum is paid to an employee, over and above its salary, as bonus for the services rendered. According to well established canons of construction, when a statute deals with a special case, it is not permissible to contend that a special case would also fall under the general provision in the statute. To hold otherwise would result in virtual nullification of the provisions in s. 36 (1) (ii) of the Act. Sec. 37 expressly mentions that expenditure should not be covered by s. 30 to 36 9. The next question to be determined is as to under that category the payment involved in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype should be regarded as customary bonus. As already stated, this bonus is outside the purview of the provisions of the Payment of Bonus Act, 1965. Consequently, the first proviso would not apply, It is bonus which comes under the category of bonus not being referred to in the first proviso. Consequently, the second proviso would be applicable. The amount would be allowable as deduction provided it is reasonable with reference to the three factors mentioned therein. Sometimes, the said three factors are loosely described as conditions, but they are not really conditions on the fulfilment of which alone the amount of bonus paid to an employee can be regarded as reasonable. They are merely factors to be taken by the assessing authorities in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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