High Court Of Gujarat
CIT vs. P.M. Diesel (P) Ltd.
Sections 37(1), 37(3A), 37(3B)
Asst. Year 1985-86
D.A. Mehta & Ms. H.N. Devani, JJ.
IT Ref. No. 300 of 1994
24th November, 2005
Counsel Appeared
Manish R. Bhatt, for the Applicant : S.N. Soparkar, for the Respondent
JUDGMENT
D.A. Mehta, J. :
The Tribunal, Ahmedabad Bench ‘A’, has referred the following two questions under s. 256(1) of the IT Act,1961 (the Act), at the instance of the CIT, Rajkot :
“(1) Whether, the Tribunal is right in law and on facts in allowing the claims of the assessee in respect of production bonus amounting to Rs. 7,32,449 apart from the staff bonus which was allowed ?
(2) Whether, the Tribunal is right in law and on facts in directing the AO to allow the discount on sales amounting to Rs. 2,02,754 holding the same not to be caught by the mischief of s. 37(3A) ?”
The asst. yr. 1985-86 and the relevant accounting period is the year ended on 30th June, 1984. The assessee, a private limited company, made payment of Rs. 7,32,449 as production bonus to its workers and claimed the same to be deductible expenditure. The assessee-company had also made a claim amounting to Rs. 2,02,754 being the discount on sales. The AO disallowed the claim for production bonus holding that the same was not in the nature of normal bonus covered by the Payment of Bonus Act. Similarly, the claim of the assessee regarding discount paid was also disallowed by invoking provisions of s. 37(3A) of the Act. The CIT(A) confirmed both the disallowances. However, the assessee succeeded before the Tribunal. In relation to the payment of production bonus, in the impugned order dt. 27th Oct., 1993, the Tribunal has recorded that (i) the payment was in pursuance of the agreement with the employees, (ii) the payment was for achieving production over and above the normally expected production, (iii) the production bonus had been quantified with reference to the extra production achieved, (iv) the production bonus was treated as part and parcel of regular wages for the purpose of Employees State Insurance Corporation and provident fund contribution. Mr. M.R. Bhatt, learned standing counsel appearing on behalf of the applicant-Revenue has not been able to point out any facts or evidence to dislodge the aforesaid findings of facts. It is apparent that the Tribunal has recorded findings of facts which remain undisturbed. Once the payment has been treated as part and parcel of the wages, which are undisputedly allowed as deduction by the Revenue, same treatment is required to be given to the payment in question, viz., production bonus of Rs.7,32,449.
Therefore, in absence of any infirmity in the impugned order of Tribunal, question No. 1 is required to be answered in the affirmative, i.e., in favour of the assessee and against the Revenue. In relation to second question it was fairly accepted by Mr. Bhatt that the discount was in nature of reduction in the sale price. It was also pointed out that the legal position as regards the nature of items mentioned in s. 37(3A) r/w s. 37(3B)(i) of the Act has already been enunciated by this Court in the judgment rendered in the case of CIT vs. Zippers India IT Ref. No. 141 of 1994, decided on 5th Oct., 2005. Therefore, applying ratio of the aforesaid decision in case of CIT vs. Zippers India (supra), it cannot be stated that the discount allowed on sales of diesel engines worth Rs. 2,02,754 could be termed to be sales promotion within the meaning of s. 37(3A) r/w s. 37(3B) of the Act. The Tribunal was, therefore, right in holding that the said payment of discount could not be termed to be expenditure for sales promotion. Question No. 2 is, therefore, answered in the affirmative i.e. in favour of the assessee and against
Revenue.Reference stands disposed of accordingly. There shall be no order as to costs.
[Citation : 284 ITR 146]
