Law:

Section:

Section 36(1)(ii) of the Income-tax Act, 1961 [Corresponding to section 10(2)(x) of Indian Income-tax Act, 1922] - Bonus or commission-Assessment year 1956-57 - ITO found that assessee had paid bonus far in excess of permissible limit - He disallowed deduction of certain sum - Tribunal upheld disallowance on grounds (i) that bonus claimed had no relation to salary or length of service, (ii) bonus disbursement was only at end of year; (iii) genuineness of payment was doubtful; and (iv) There were over-writing and erasures in a ledger account - High Court held that Tribunal, inasmuch as it did not take into consideration relevant factors in terms of proviso to section 10(2)(x) misdirected itself in disallowing a part of bonus paid by assessee to its employees - Whether High Court had jurisdiction to direct Tribunal to refer question and to express its opinion on it - Held, yes - Whether question ex-facie involved or question of law and High Court expressed its aforesaid opinion - Held, yes - Whether this was not a fit case for interference in exercise of extraordinary jurisdiction under article 136 for amount involved was a few thousand rupees and no important question of law arose for decision - Held, yes FACTS For the assessment year 1956-57, the ITO disallowed a part of the bonus paid to its employees by assessee, on the ground that in most of the cases the payment of bonus was far in excess of three months' salary. On second appeal, the Tribunal up held the disallowance for the reasons that (i) the bonus claimed had no relation to the salary or length of service; (ii) the bonus disbursement was only at the end of the year; (iii) the genuineness of the payment was doubtful; and (iv) there were over-writing and erasures in the ledger account. As the Tribunal refused to make a reference to the High Court, at the instance of the assessee, the High Court directed the Tribunal to state a case and refer to it the question of law. On reference, the High Court took the view that the Tribunal's finding was not based on any evidence falling under the three heads mentioned in the proviso to section 10(2)(x); (a) the pay of the employee and the conditions of his service;…

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