High Court Of Delhi
CIT vs. National Seeds Corporation Ltd.
Sections 36(1)(ii), 256
Asst. year 1975-76
Arijit Pasayat, C.J. & D.K. Jain, J.
IT Ref. No. 192 of 1983
9th October, 2001
R.C. Pandey with Ms. Premlata Bansal, for the Petitioners : None, for the Respondent
Arijit Pasayat, C.J. :
Following questions have been referred for opinion of this Court under s. 256(1) of the IT Act, 1961 (in short âthe Actâ) by the Income-tax Appellate Tribunal, Delhi Bench âEâ, Delhi (in short âTribunalâ) :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that amounts of Rs. 2,60,142 and Rs. 5,403 paid to the employees and officers of the company were admissible revenue expenditure of this year?
2. Whether, on the facts and in the circumstances of the case, the amounts of Rs. 2,60,142 and Rs. 5,404 did not constitute an ex gratia payment by the company?” Assessment year involved is 1975-76.
2. Factual position is as follows : The assessee had made payment of Rs. 2,60,141 to its employees at the rate of 8 per cent salary drawn by the concerned employee during 1972-73, in addition to the amount at the rate of 8.33 per cent sanctioned to them separately. The ITO was of the view that the proviso to s. 36(1)(ii) of the Act limited the allowance of bonus paid to an employee as is payable under the Payment of Bonus Act, 1965. He accordingly made disallowance. Matter was carried in appeal before the Commissioner of Income-tax (Appeals) [in short âCIT(A)â]. The said authority accepted the assesseeâs stand holding that the amount paid cannot be considered as unreasonable when the assessee had earned a large income of Rs. 80 lakhs during the accounting year 1972-73 to which the payment relates. The payment was made after due sanction and on the basis of norms prescribed by the Bureau of Public Enterprises. The Revenue carried the matter in appeal. The Tribunal noted that in its Board meeting held on 19th Dec., 1977, the true nature and character of the payment were recorded and it was described to be payment by way of additional bonus only. Though the employees had claimed payment of bonus at the rate of 20 per cent, the Board felt it to be not acceptable. But it considered payment of some additional bonus as a gesture of goodwill, without it being treated as a precedent to be followed invariably in future. Similar decision was taken in the meeting of the board of directors on 14th Feb., 1974. Considering the factual aspects highlighted by the CIT(A), the Tribunal dismissed the Revenueâs appeal. On being moved for reference, questions as set out above, have been referred for opinion of this Court.
3. We have heard the learned counsel for the Revenue. There is no appearance on behalf of the assessee. It was submitted that the business needs of the company did not warrant this payment and in any event it was much above the limit prescribed under the Payment of Bonus Act.
4. As noted above both CIT(A) and the Tribunal had recorded findings of fact as to how the payment was made by way of additional bonus on the basis of decisions taken at the board of directorsâ meeting. It was also noticed that the payment was made after due sanction and on the basis of norms prescribed by the Bureau of Public Enterprises. The findings are essentially factual giving rise to no question of law
5. Reference is accordingly disposed of.
[Citation : 257 ITR 430]