Commissioner of Income Tax, Andhra Pradesh, Hyderabad vs Singareni Collieries Co. Ltd.

Anjaneyulu, J.—The following two questions of law are referred to this court under s. 256(1) of the Income Tax Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, the assessee was entitled to deduct the sum of Rs. 44,582 and Rs. 7,682 as revenue expenditure for the assessment years 1966-67 and 1970-71 respectively ?

(2) Whether, on the facts and in the circumstances of the case, a part of the bonus payment made by the assessee-company to its employees could be disallowed u/s 40(c)(iii) of the Income tax Act, 1961 for the assessment years 1966-67 and 1967-78 ?"

Learned standing counsel for the Income Tax Department fairly stated that, so far as the first question is concerned, it is covered by a decision of this court in favour of the assessee, in R.C. No. 70 of 1975 dated March 9, 1977. Commissioner of Income Tax Vs. Singareni Collieries Co. Ltd., . An identical issue arose for consideration in that case and it was answered in favour of the assessee holding that the expenditure in question is revenue expenditure. The first question is, accordingly, answered in favour of the assessee.

As regards question No. 2, it is stated that the bonus paid to the employees drawing salary in excess of the statutory limit of Rs. 1,600 per month was disallowed under s. 40(c)(iii) of the I.T. Act, 1961, The bonus was paid in cash to the employees concerned. The preponderance of judicial opinion on this question is that the provisions of s. 40(c)(iii) and s. 40(a)(v), after amendment with effect from April 1, 1969, do not apply to allowances paid in cash to employees, as there is no question of convertibility into money where cash was paid.. This court has taken the same view in Commissioner of Income Tax Vs. Warner Hindustan Ltd., . Following the above view, we hold that no part of the bonus paid to the employees in cash could be disallowed under s. 40(c)(iii) of the I.T. ACT, 1961.

In the result, both the questions are answered in favour of the assessee and against the Revenue. In the circumstances of the case, there shall be no order as to costs.