1. The assessee paid bonus of Rs. 47,384. The ITO found that the bonus paid is in excess of 20 per cent of the salary and such excess, which worked out to Rs. 22,076, was disallowed. In appeal, the Commissioner (Appeals) found that bonus was paid on Diwali day and it is a customary bonus. Hence, it is allowable. Following the decision of the Supreme Court in the case of Hukumchand Jute Mills v. Industrial Tribunal AIR 1979 SC 876, he allowed the claim of the assessee. Against the same, the revenue is in appeal.
2. The learned departmental representative submitted that the bonus paid over and above 20 per cent of the salary is disallowable in view of the proviso to Section 36(1)ii) of the Income-tax Act, 1961 and the Commissioner (Appeals) was not justified in allowing bonus paid as customary one. The learned counsel for the assessee submitted that the bonus was paid on Diwali day and it is a customary bonus. Every year such bonus was paid and it was allowed. Since it is a customary bonus, even though it is in excess of 20 per cent of the salary, it is allowable. In this connection, he placed reliance on the decision of the Supreme Court in the case of Hukumchand Jute Mills Ltd. (supra). Me also placed reliance on two orders of the Tribunal, viz., National Lit ha Printers v. ITO 10 TTJ 510 and ITO v. Indira Cotton Mills (P.) Ltd. 9 TTJ 172.
3. We have considered the rival submissions. The Commissioner (Appeals) has given a finding that the bonus has been paid on Diwali day and such bonus was paid every year. From the facts, it is clear that bonus paid is a customary bonus. In the case of Hukumchand Jute Mills Ltd. (supra) the Supreme Court held that Section 17 of the Payment of Bonus Act refers to puja bonus and other customary bonus a? available for deduction from the bonus payable under the Act, thus making a clear distinction between the bonus payable under the Act. and puja bonus or other customary bonus. It was further observed that so long as the section remains without amendment, the inference is clear that the categories covered, by the Act, as amended, did not deal with customary bonus. In the case of National Litho Printers (supra), the Tribunal (Hyderabad Bench) held that Section 36(1)(a) deals with the situation where any sum is payable to an employee as bonus in terms of the Payment of Bonus Act, 1965 but the said provision has got nothing to do with any payment made by an assessee on any other occasion to its employees. In that case bonus paid on the silver jubilee celebrations, which was in excess of 20 per cent of the salary, was allowed as a deduction. The ratio laid down in the above cases squarely applies to the instant case. This is a customary bonus paid by the assessee to its employees and so it is allowable as a deduction. The provisions of Section 36(1)ii) will have no application so far as the customary bonus is concerned. Thus, customary bonus paid is allowable as a business expenditure. Thus, the Commissioner (Appeals) was right in allowing the same, Thus, we uphold his order.