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Judgment
Mohta, J.—Following two questions have been referred to this Court u/s 256(1) of the income tax Act, 1961 (''the Act'') at the behest of the Commissioner, Nagpur:
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that bonus is allowable under the second proviso to section 36(1)(ii) ?
Whether the Bonus Act is applicable to a particular factory/ business, whether payments to some of the employees falling outside the scope of Bonus Act are to be allowed under second proviso to section 36(1)(ii)?"
The relevant assessment year is 1977-78, The assessee claimed deduction of bonus paid to the employees to the tune of Rs. 66,999. An amount of Rs. 24,000 was allowed by the ITO as that part fell within the parameters of the Payment of Bonus Act, The bonus paid to 4 or 5 administrative officers in higher income groups was not allowed by the ITO on the sole ground that it fell outside the scope of Bonus Act, 1965 as amended by the Payment of Bonus (Amendment) Act, 1975.
The Commissioner (Appeals) in an appeal filed by the assessee the balance of Rs. 42,999 as allowable taking into consideration the second proviso to section 36(1)(a) of the Act, which reads thus:
"Provided further that nothing contained in this clause shall apply in the case of an employee whose income in the previous year chargeable under the head ''Salaries'' exceeds twenty thousand rupees;"
The assessee has been in profit not only in the relevant assessment year but also in the previous assessment year. Such payments have been made to the employees even before and was not unique feature of that year only. Such payments of bonus made under identical circumstances have been allowed even in the past. No material was placed to hold that bonus was excessive or unreasonable. The Tribunal sustained this view of the Commissioner (Appeals).
The ITO had overlooked the second proviso. The finding that second proviso was attracted is based on facts. There is no legal error in the approach to the question. Under the circumstances, both the questions are answered in the affirmative and in favour of the assessee. No order as to costs.