9911796707
TMI Blog1984 (7) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... l cancelled the said disallowances. Hence, the Department is in appeal for all these three years. 2. It is not in dispute that the assessee is an establishment to which the provision of the payment of Bonus Act (for brevity the Bonus Act) applies. It is also beyond pale of controversy that the assessee had paid bonus for all the three years in accordance with an agreement arrived at with the employees, and that the total amount of bonus paid does not exceed 20 per cent of the salary or wages of the employees. 3. Following table gives the details facts as to the amount of bonus claimed and disallowed. Asst. yr. Bonus paid and claimed ITO allowed to the extent of availability of allocable surplus ITO disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be allowed under s. 37 of the Act. In support, he placed reliance upon decision dt. 30th Dec., 1983 of the 'A' Bench of the Tribunal at Calcutta in ITA No. 1155/Cal/1982 relating to The Tinplate Co. of India Ltd. vs. ITO. According to him, the bonus paid cannot be taken as anything else and in case it is not allowable deduction under s. 36 of the Act, s. 37 of the Act cannot be taken into service. He has further relied upon the Circular No. 287 dt. 4th Dec., 1980 of the CBDT which mentions that in view of specific limitation placed by s. 36, resort cannot be had to the provision of s. 37(1) of the Act to claim deduction in respect of any larger amount paid by way of bonus. 6. On minute perusal of ss. 30 to 37 of the Act, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Such customary bonus is an implied agreement of service. The difference between the customary bonus and contractual bonus is that the source of the former is custom and the source of the latter is contract. These days practically in all cases customary bonus takes shape of contractual bonus and the employer and the employee enter into specific agreement as to payment of bonus at certain rate. In the words of Hon'ble Mr. Justice Krishna Aiyar in Hukamchand Jute Mills vs. 2nd Industrial Tribunal AIR 1979 SC 876 "the claim is rooted in custom but quantified by contract". 8. It appears misconception of law that contractual bonus is out side the ambit of the Bonus Act. The Bonus Act not only makes the payment of bonus compulsory by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is recoverable under the Bonus Act. 9. The first proviso to s. 36(1) (ii) of the Act was inserted in the Act by s. 29 of the Payment of Bonus (Amendment) Act, 1976. The said proviso makes restrictions as to allowable deduction on account of bonus that is to say only so much bonus is permitted to be deducted as is payable under the Bonus Act. While making this restriction, the legislature simultaneously made special provision with respect to payment of bonus linked with production or productivity and thereby inserted s. 31A. The purpose of insertion of s. 31A was obviously to include the payment of bonus under agreement as payment under the Bonus Act. The said Payment of Bonus (Amendment) Act, 1976 amended long title of the Bonus Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent amendment prescribing limit of 20 per cent on payment of bonus based on agreement further makes it clear that payment of bonus based on agreement is bonus within the purview of the Bonus Act. 10. For the purpose of ascertaining as to what bonus is within the purview of the Bonus Act, it is necessary to bear in mind that from the aspect of compulsory payment of bonus only that bonus as is required to be paid under ss. 10 and 11 of the Bonus Act comes within the purview of the Bonus Act. But for purpose of proviso to s. 36(1)(ii) of the Act not only the compulsory bonus but also the contractual bonus comes within the purview of the Bonus Act. If for purpose of income-tax contractual bonus is kept out of consideration, insertion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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