Commissioner of Income-tax Vs. National Seeds Corporation Ltd. - Court Judgment

Excerpt:
the case dealt with the legality of the decision of the tribunal in holding that the bonus and additional bonus was paid by the assessed after the sanction of the board and the same was paid as a gesture of goodwill under the payment of bonus act, 1965 - the petitioner had claimed the amount to be business expenditure within the provisions of section 36(1)(ii) and 256(1) of the income tax act, 1961 - the claim of the assessed was denied on the ground that the amount of bonus was beyond the permissible limits - it was held that the decision of the tribunal was finding of fact and the same was not involving the question of law - arijit pasayat, c.j.1. the following questions have been referred for the opinion of this court under section 256(1) of the income-tax act, 1961 (in short the 'act'), by the income-tax appellate tribunal, delhi bench 'e', delhi (in short 'the tribunal') :'(i) 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 ?(ii) 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 ?'2. the assessment year involved is 1975-76.3. the factual position is as follows :the assessed had made payment of rs. 2,60,141 to its employees at 8 per cent. of the salary drawn by the concerned employees during 1972-73, in addition to the amount at 8.33 per cent. sanctioned to them separately. the income-tax officer was of the view that the proviso to section 36(1)(ii) limited the allowance of bonus paid to an employee as is payable under the payment of bonus act, 1965. he accordingly made disallowance. the matter was carried in appeal before the commissioner of income-tax (appeals) (in short 'the cit(a)'). the said authority accepted the assessed's stand holding that the amount paid cannot be considered as unreasonable when the assessed 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 the 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 december 19, 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 20 per cent., the board felt it to be not acceptable. but it considered the 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 february 14, 1974. considering the factual aspects highlighted by the commissioner of income-tax (appeals), the tribunal dismissed the revenue's appeal. on being moved for reference, the questions as set out above, have been referred for the opinion of this court.4. we have heard learned counsel for the revenue. there is no appearance on behalf of the assessed. 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.5. as noted above both the commissioner of income-tax (appeals) and the tribunal had recorded findings of fact as to how the payment was made by way of additional bonus on the basis of the decisions taken at the board of directors' meeting. it was also noticed that the payment was made after due sanction and on the basis of the norms prescribed by the bureau of public enterprises. the findings are essentially factual giving rise to no question of law.6. reference is accordingly disposed of.