- (1.) AT the instance of the assessee, the following question has been referred to this court under Section 256(1) of the Income-tax Act, 1961, for its opinion by the Income-tax Appellate Tribunal : " 1. Whether upon the facts and in the circumstances of the case, the Tribunal was justified in reversing the order of the first appellate authority which allowed the deduction of Rs. 1,28,107 which was claimed under the head 'Bonus payable' ?"
(2.) THE question for consideration is whether, on the facts and circumstances of the case, the assessee can be allowed deduction in respect of "payment of bonus at the rate more than 8.33 per cent., i. e., the minimum limit of bonus. Section 36(1)(ii) of the Act states as follows : " (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28-- ..... (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;" The first proviso to Clause (ii) was inserted by the Payment of Bonus (Amendment) Act, 1976, with retrospective effect from September 25, 1975, which is as under : " Provided that the deduction in respect of bonus paid to an employee employed in a factory or other establishment to which the provisions of the Payment of Bonus Act, 1965 (21 of 1965), apply shall not exceed the amount of bonus payable under that Act." (underlined by the court).
(3.) FROM the said proviso, it is clear that the payment of bonus shall not exceed the amount of bonus payable under the Payment of Bonus Act, 1965 (for short, "the Act of 1965"). It is, therefore, nothing but appropriate to refer to the relevant provisions of the Act of 1965. Section 11, Sub-section (1), of the Act of 1965, briefly, states that where in respect of any accounting year referred to in Section 10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent. of such salary or wage. Subsection (2) of Section 11 further states that in computing the allocable surplus in this section, the amount set on or the amount set-off under the provisions of Section 15 shall be taken into account in accordance with the provisions of that section.;