COMMISSIONER OF INCOME TAX Vs. RAJASTHAN STATE INDUSTRIAL DEVELOPMENT AND INVESTMENT CORPORATION LIMITED

JUDGEMENT

(1.) On an application under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion:-

(2.) The Assessee-Company claimed deduction of ex-gratia payment of Rs.19,77,436 to its employees during the assessment year 1985-1986. The Assessing Officer has negatived the claim as assessee suffered loss and no outstanding performance has been shown. In appeal before the CIT (Appeals), the CIT (Appeals) also held that the amount is not for the purpose of business.

(3.) In appeal before the Tribunal, the Tribunal has considered the report of the Directors for the payment in question and considering the reason given for the payment of ex gratia bonus, the Tribunal held that the amount was paid for the purpose of business and it was allowed.