Law:

Section:

Section 37(1) of Income-tax Act, 1961 - Business Expenditure - Allowability of - Assessment year 1985-86- Assessee-company claimed deduction of production bonus paid to its workers - Assessing Officer disallowed assessee's claim holding that same was not in nature of normal bonus covered by Payment of Bonus Act - However, it was found that said payment was in pursuance of an agreement with employees for achieving production over and above normally expected production and was treated as part and parcel of regular wages for purpose of Employees State Insurance Corporation and provident fund contribution - Whether once payment of bonus was treated as part and parcel of wages, which were undisputedly allowed as deduction by revenue, same treatment was required to be given to production bonus and, hence, assessee's claim was to be allowed - Held, yes Section 37(1), read with section 37(3A) of Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1985-86 - Assessee-company claimed deduction on account of discount on sales - Said discount was in nature of reduction in sale price - Whether payment of said discount could not be treated as sales promotion expenses within meaning of section 37(3A) and, therefore, assessee was entitled to deduction claimed - Held, yes FACTS During the accounting year relevant to the assessment year 1985-86, the assessee-company made payment of certain amount as production bonus to its workers and claimed the same to be a deductible expenditure. The assessee also made a claim on account of discount on sales. The Assessing Officer disallowed assessee's 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 discount paid was also disallowed by invoking the provisions of section 37(3A). On appeal, the Commissioner (Appeals) confirmed the disallowances on both the counts. On second appeal, the Tribunal allowed both the claims of the assessee. On reference: HELD In relation to the payment of production bonus, in the impugned order, the Tribunal had recorded that (i) the payment was in pursuance of the agreement with the…

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