COMMISSIONER OF INCOME TAX Vs. HIND LAMPS LTD

JUDGEMENT

(1.) This appeal under Section 260A of the IT Act has been filed against the impugned order of the Income-tax Tribunal dt. 18th Dec., 2000, vide Annexure 3 to the appeal. The main point pressed by the learned counsel for the Department is that the amount of Rs. 9,82,426 was wrongly allowed by the Tribunal under Section 36(i) and (ii) or Section 37(1) of the IT Act. This question has been discussed in para 5 of the impugned order of the Tribunal. It appears that in the year 1978 the workers of the assessee went on strike and the factory was closed for almost a month. When finally the Chief Minister of Uttar Pradesh intervened, an agreement was reached, whereby certain amount was to be paid over and above the statutory bonus, Thereafter every year the workmen demanded twenty per cent bonus, which was the maximum limit under the provisions of Payment of Bonus Act, 1965. Thereafter, also the assessee was paying to the workmen bonus above the amount legally payable under Payment of Bonus Act, 1965.

(2.) It may be mentioned here that under the Payment of Bonus Act, the bonus (which deals with profit bonus) is payable to the employees as a, matter of right and it is not sweet will of the employer to pay it or not. The scheme of the Payment of Bonus Act for calculating bonus payable to the workmen is that we have to start from the profit of the previous year as mentioned in the P&L a/c of the company. We have then to add certain amounts and subtract certain amounts which are mentioned in the Payment of Bonus Act: We then come to the available surplus. Sixty per cent of the available surplus is the allocable surplus payable to the workmen. The idea of giving bonus is that since the workmen have contributed to the prosperity of the concern, they are entitled to share in the profit of the concern. There may be several cases like the present where the concern pays higher bonus than what it is legally bound to pay under the Payment of Bonus Act and this higher amount is often paid to Keep harmony and good industrial relationship so as to facilitate the smooth business. In the present case as mentioned in para 8 of the order of CIT(A), the payment above the legally due amount under the Payment of Bonus Act was made to the workmen because they had threatened to stop the work and they resorted to mass hunger strike, which continued for two days.

(3.) In CIT v. Shaw Wallace & Co. Ltd. (1991) 190 ITR 455 (Cal) similar facts, as in the present case were involved. The Calcutta High Court held that the payment made above the amount due under the Act to keep industrial peace was allowable as a business expenditure. We are in respectful agreement with the aforesaid decision of Calcutta High Court.