RAJES KUMAR, J. - (1.) THE Income Tax Appellate Tribunal, New Delhi has referred to following four questions of law under Section 256(1) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') for opinion of this Court. '1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in ignoring the fact that the assessee had not established the genuineness and nature of the payment and as such, had failed to discharge the onus for deduction of the payment in computing the business income.
(2.) WHETHER on the facts (sic.) and in the circumstances of the case, the tribunal was correct in law in admitting the claim for payment of incentive bonus over and above the admissible bonus under the Payment of Bonus Act. Whether, on the facts and in the circumstances of the case, the I.T.A.T. was correct in stating that if a particular payment does not fall within the first provision it can still be considered under the second proviso to Section 36(1)(ii) of the Act, or even under Section 37(1) of the Act.
(3.) WHETHER on the facts and in the circumstances of the case, the I.T.A.T. Was correct in law in holding that the assessee is entitled to the deduction of the entire incentive bonus of Rs. 22,23,518.' 2. The present reference relates to the assessment year 1981 -82. 3. Brief facts of the case are as follows: The assessee -respondent (hereinafter referred to as 'Assessee') claimed before the Inspecting Assistant Commissioner that it had paid incentive bonus of Rs. 22,23,518/ - to its workers and members of the staff. This was in addition to another payment of Rs. 11,31,000/ - paid under the Payment of Bonus Act. When enquired about the nature of the payment, it was stated before the Assistant Commissioner that it was incentive bonus representing overtime payment for extra work done by the employees in double shifts. It was also stated that the workers had gone on strike in the assesses mill on 22.01.1980, which was called off only in May, 1981. During the month of December, 1980, some of the loyal workers/employees had agreed to stay in the factory premises. They were provided food as also extra payment as 'reward for loyality' compensation for good work and risk involved in their stay in the factory premises.' It was because of these extra payment the amount of incentive bonus had gone upto Rs. 6,69,440/ - in the month of December, 1980. The I.A.C. Disallowed the claimed with the following observations: - '20. I have gone through his arguments and also the decision cited by him. Firstly, the payments made to the employees as loan can not be allowed as deduction. Secondly, if the Incentive Bonus is taken to be Bonus, it is not allowable in view of first proviso to Section 36(1)(ii). Lastly, presuming (without accepting) that the payment is covered by second proviso to Section 36(1)(ii) I hold that with reference to the circumstances mentioned therein the payment does not qualify for deduction.' On appeal, it was contended before the Commissioner of Income -tax (Appeals) that the workers were paid since the very inception of the mills a customary amount as production -cum -attendance and efficiency bonus. It was shown to the Commissioner of Income -tax (Appeals) that the following payments had been made in different years: - Year Incentive Bonus____ _______________1976 7,81,5851977 10,75,4091978 11,53,4991979 12,68,683 4. It was next submitted before him that it was the policy of the management to pay the workmen the advances against the incentive bonus and when pay sheets were finally prepared, the advances under head 'Workers Loan Account' were recovered and credited to the Incentive Bonus Account. It was further clarified that the above payments were exempt from Provident Fund and E.S.I., as the payment related only for attendance, efficiency and production. It was also explained that the payment was equal to single wages for extra time put in by the workers. It was further clarified that there was considerable increase in the payment in the month of December, 1980, because of the extra payments made to loyal workers, who had stayed within the mill premises during the period of strike. It was also stated that as a consequence the wages had gone down in the above month. Certain vouchers for payments were also produced before the Commissioner of Income -tax (Appeals). It was found that the thumb impressions of the recipients were similar against several payments. This matter was, therefore, enquired into through the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner reported that the Finger -print expert had confirmed that thumb impressions on the documents had been forged. As a clarification, it was point out to him that sometimes the workers used to authorise their colleagues to receive the payments and that explained the similarity in the thumb impressions. In this connection, the Commissioner of Income -tax (Appeals) also required the Inspecting Assistant Commissioner to examine some of the workers. According to him, a perusal of their statements went to show that they had only selective memory or, in other words, they had come forward only to support the assessee's version. At the instance of the Commissioner of Income -tax (Appeals) it was finally certified by the Joint Managing Director of the assessee that 'incentive bonus' was an additional payment made to regular workers for additional work done by such workers mainly during time other than their normal duty hours i.e. in additional time. It was again stated that non -payment/payment of Provident Fund and E.S.I., in no way, rendered the amount as disallowable.;