Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1982-83 - Assessee paid certain sum as incentive bonus to its employees and claimed as business expenditure - Assessing authority found that assessee had already paid a sum by way of bonus to its employees, which was calculated at 20 per cent of salary and in addition to that incentive bonus in question was paid to employees - Accordingly, assessing authority disallowed incentive bonus, being in excess of 20 per cent of salary paid to employees - Appellate authorities had allowed said amount on ground that incentive bonus was by way of additional salary linked with productivity and efficiency of worker - Whether since amount in question was paid to employees as production incentive and was wholly and exclusively for purpose of business, same was allowable under section 37(1) - Held, yes ORDER 1. The Income -tax Appellate Tribunal, Allahabad has referred the following question of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as 'Act') for the assessment year 1982-83 for opinion to this Court : "1. Whether on the facts and in the circumstances of the case, Tribunal was correct in law in holding that the amount of Rs. 59,271 paid as incentive bonus was allowable expenditure?" 2. The brief facts of the case are as follows :- The assessee/opposite party (hereinafter referred to as 'assessee'), is a company. In its profit and loss account the assessee claimed incentive bonus amounting to Rs. 59,271 as business expenditure to meet out the business expediency. Assessing Authority noticed that the assessee had already paid a sum of Rs. 74,343 by way of bonus to its employees which was calculated at the rate of 20 per cent of the salary and in addition to that, bonus a sum of Rs. 59,271 was paid to the employees by way of incentive bonus. Assessing Authority was of the view that the bonus and the incentive bonus both should be considered together for watching the limit of 20 per cent allowable under the Payment of Bonus Act. In that view of the matter, he disallowed a sum of Rs. 59,271 being in excess of 20 per cent of the salary paid to…

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