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TMI Blog1982 (7) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 36(1)(ii), deduction on the account of bonus shall not exceed the amount of bonus payable under the Payment of Bonus Act, 1965 ('the Bonus Act'). During the year under appeal, the assessee had paid bonus at 8.33 per cent but the workers were not satisfied with the payment and with a view to avert labour trouble which would have brought the production to a complete halt, the company made a further payment of Rs. 74,206. On the above argument of the assessee, the Commissioner (Appeals) has stated that whatever may be the reason for making the additional payment of Rs. 74,206, the fact remains that the payment is in the nature of bonus, although it may be called by the name of 'ex gratia payment'. The payment is not allowable according to the provisions of section 36(1)(ii) and he, therefore, confirmed the disallowance. 3. Dr. D. Pal, the counsel for the assessee, referred to the provisions of section 36(1)(ii) and stated that the payment made by the assessee is not hit by the above provision. He filed a copy of the settlement by which the additional payment of Rs. 74,206 was made to the workers. He stated that the limit provided under the first proviso to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of bonus at 8.33 per cent and demanded bonus at 20 per cent. The management was not in favour of the demand of the labour but, however, in order to have the industrial peace, the management subsequently agreed for the additional payment at 8.17 per cent and accordingly the sum of Rs 74,206 had been paid to the workers. Necessary settlement to this effect was arrived at between the management and the labour on 10-10-1975. The settlement in Form No. M was as hereunder : " MEMORANDUM OF SETTLEMENT Representing Employees --- Sri R.S. Shukla General Secretary, Shaw Leiner Gelatine Factory Employees Union Representing Employers --- Sri Haridass, General Manager, Shaw Leiner Limited, Jabalpur SHORT RECITAL OF THE CASE The Shaw Leiner Gelatine Factory Employees Union Jabalpur demanded that the workmen of the factory be paid 20 per cent bonus for the accounting year 1974. The management informed the Union that the factory has not made profits which entitle the workmen for the payment of 20 per cent bonus. The Union fully appreciated the contentions of the management but represented that for the sake of cordial industrial relations, the Management shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has paid the amount to its workers employed in a factory or establishment to which the provisions of the Bonus Act was applicable. The assessee has paid bonus during the year under appeal at 8.33 per cent. Now, the question is whether the assessee can make payment of the additional amount of Rs. 74,206 which could be allowed as deduction from the profits of the company. It is clear in the first proviso to section 36(1)(ii) that the bonus payable by the assessee to the employees in a factory or establishment to which the provisions of the Bonus Act was applicable, should not exceed the amount or the bonus payable under that Act. The contention of the assessee is that the proviso restricts only that amount of bonus which is paid under the Bonus Act. But if the customary or puja bonus is paid to the workers, the Bonus Act is not applicable and, hence, that amount was allowable to the assessee. The departmental representative, on the other hand, has argued that whatever name may be given, the amount paid by the assessee was bonus and the bonus paid by the assessee should not exceed the bonus payable under the provisions of the Bonus Act. A question arose before the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inconsistent with the Bonus Act shall become inoperative also has no substance vis-a-vis customary bonus. The fallacy is simple. Once we agree and this is incontestable now that the Bonus Act, 1965 does not deal with customary bonus and is confined to profit-based or productivity-based bonus, the provisions of the Act have no say on customary bonus and cannot, therefore, be inconsistent therewith. Conceptually, statutory bonus and customary bonus operate in two fields and do not clash with each other. " It is clear from the quotation that the 'bonus' referred to in the Bonus Act only relates to the bonus which is based upon profit or production, but it excludes puja, customary and other bonus. 8. The bonus is deductible under section 36(1)(ii). The restriction is imposed by first proviso. The deduction shall not exceed the amount payable under the Bonus Act. Therefore, if the proviso is read as it is, it is clear that the bonus paid by an employer, which is a bonus under the Bonus Act, should not exceed the payment, as payable under the Bonus Act. In other words, if an employee is paid bonus which is based upon profit and/or production and the amount so payable by an employer e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he specific clause excludes the general and thereby the assessee is out of the field to claim the additional amount at 8.17 per cent which had been paid to its workers for keeping industrial peace. Section 36(1)(ii), read with first proviso, as it has been read by the Commissioner (Appeals), restricts the payment. Therefore, it is clear that the amount payable under the Bonus Act, can be allowed as deduction under section 36, but section 36 does not say that if the assessee pays any other bonus, the same cannot be allowed even though the same had been expended for the purposes of the business of the assessee. Therefore, the specific clause is in relation to the bonus payable under the Bonus Act. But if the bonus had been paid, which does not come under the purview of the Bonus Act, such bonus would only be governed by section 37 of the Act. Hence, the legal maxim referred to by the departmental representative is not coming as a rock to deter the assessee from claiming deduction under section 37. The assessee has filed the terms of settlement. The assessee is running an industry and the industry cannot run unless the relation between the employer and the employee is good. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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