1. The sole controversy raised in this appeal is with regard to the disallowance of Rs. 1,15,383 out of the assessee's claim for bonus. The assessee had claimed bonus in respect of the accounting period, being calendar year 1977, corresponding to the assessment year 1978-79, at Rs. 6,91,896. The allocable surplus of the assessee-company in respect of the aforesaid previous year as worked out by the assessee including the 'set on surplus' was Rs. 5,76,530. The ITO restricted the assessee's claim for bonus in respect of the above year to the amount of allocable surplus, as indicated above, and disallowed the remainder of the claim amounting to Rs. 1,15,383.
2. The assessee challenged the above disallowance before the learned Commissioner (Appeals) and urged before him on the basis of the language of Sub-section (1) of Section 10 of the Payment of Bonus Act, 1965, that the claim of the assessee was in accordance with specific language of Sub-section (1) of Section 10, being 20 per cent of the salary or wage paid to the employees, and that Sub-section (1) of Section 10 did not prohibit making of the payment in excess of allocable surplus and so long as there was allocable surplus in excess of the minimum bonus payable in terms of Sub-section (1) of Section 10 aforementioned, the employer could make the payment of bonus to the employees to any extent subject to the maximum of 20 per cent of the salary or wage.
3. The learned Commissioner (Appeals) rejected the above contention of the assessee and pointed out that "what is implied in the said Section 10(1) of the Payment of Bonus Act is that though the minimum bonus to be paid is 4 per cent of the salary/wages or Rs. 100, whichever is higher, the upper ceiling of 20 per cent of the salary/wages to be paid as bonus within the meaning of Section 10(1) of the Payment of Bonus Act, as referred to in the first proviso to Section 36(1)(ii) of the Income-tax Act, 1961 ('the Act'), is fully and totally restricted within the allocable surplus available in the hands of the appellant-company. Since in this case it is evident that the upper limit of 20 per cent of the salary/wages paid as bonus by the appellant-company in the relevant accounting year is not within the allocable surplus, being in excess of the same, it is my opinion that the contentions of the learned Counsel for the appellant, Shri Gautam Bhowmik, cannot be entertained and are, therefore, liable to be dismissed".
4. The above finding of the learned Commissioner (Appeals) is contested as incorrect by the learned Counsel for the assessee. He takes us through the language of Sub-section (1) of Section 10 of the Payment of Bonus Act and reiterates the plea which was taken by the assessee before the learned Commissioner (Appeals) on the strength of the language of the aforesaid sub-section.
5. In the alternative, the learned Counsel for the assessee pleads that the bonus paid by the assessee was not in accordance with the Payment of Bonus Act but was customary bonus which was being paid by the assessee year after year to its workers and in support of it, he placed before us the figures of payment of bonus by the assessee-company to its workers from the calendar years 1971 to 1977. The said figures may be reproduced here for the sake of ready reference as follows:Financial Assessment Bonus Profits Declared in Date ofYear year declared payment1971 1972-73 20 per cent 32,56,652 August, 1972 24-8-19721972 1973-74 20 per cent 49,31,341 August, 1973 10-8-19731973 1974-75 20 per cent 58,77,411 August, 1974 13-8-19741974 1975-76 20 per cent 68,26,795 August, 1975 30-8-19751975 1976-77 20 per cent 51,81,252 August, 1976 23-8-19761976 1977-78 20 per cent 44,37,741 August, 1977 25-8-19771977 1978-79 20 per cent 19,11,236 July, 1978 14-8-1978 He draws support for his above stand from the ratio of the decision of the Hon'ble Supreme Court in the case of Hukumchand Jute Mills Ltd. v.Second Industrial Tribunal AIR 1979 SC 876 (copy placed on record at pages 6 to 11 of the assessee's paper book). He also draws support for his stand from the decision of the Tribunal, Calcutta Bench 'B', in IT Appeal No. 320 (Cal.) of 1981 in the case of Shaw Wallace Gelatines Ltd., dated 31-7-1982 and the order of the Commissioner in the case of Clarion Advertising Services Ltd. dated 3-8-1982.
6. On behalf of the revenue, the pleas of the assessee are strenuously opposed. With regard to the first line of reasoning, it is pointed out that the order of the learned Commissioner (Appeals) was entirely in order and that interpretation of Sub-section (1) of Section 10 of the Payment of Bonus Act, as placed by the assessee, was not correct and was far fetched. With regard to the alternative contention of the assessee, the learned departmental representative opposes its admission at this late stage. According to him, it has never been the assessee's case heretobefore that the bonus was not paid by the assessee to its workers in terms of the Payment of Bonus Act but that it was a customary bonus paid on the occasion of festivities irrespective of the profits earned or loss incurred by the assessee in a given year.
Whether or not a bonus was a customary bonus was a question of fact which needed to be established by the assessee by leading cogent evidence. The assessee had never pleaded heretobefore that the bonus paid was a customary bonus and had not led any evidence in respect of the above plea. Raising of a fresh plea, it was pleaded, raised in this manner at the eleventh hour should not be encouraged by the Tribunal.
7. In any case, it was further urged, if the plea was admitted, the revenue will need time to verify the facts as now averred and it was not possible for it to make any submission in regard to the fresh plea taken in the aforesaid manner.
8. In rejoinder the assessee's learned Counsel submitted that he was entitled to take the additional ground and that the ITO had not considered the provisions of Section 17 of the Payment of Bonus Act while adjudicating the assessee's claim for deduction of bonus, and that the decision of their Lordships of the Supreme Court in the case of Hukumchand Mills Ltd. v. CIT  63 ITR 232 was an authority for the proposition that the assessee could raise additional grounds for the first time before the Tribunal.
9. We have given careful consideration to the facts of the case and the rival submissions. To evaluate properly the line of reasoning of the assessee, it would be necessary to look not only at the language of subsection (1) of Section 10 of the Payment of Bonus Act, but at the entire scheme of the said Act so far as it relates to the quantification of the amount of bonus payable under the said Act.
Sub-section (4) of Section 2 of the aforesaid act defines 'allocable surplus' in the following terms: (a) in relation to an employer, being a company which has not made the arrangements prescribed under the Income-tax Act for the declaration and payment within India of the dividends payable out of its profits in accordance with the provisions of Section 194 of that Act, sixty-seven per cent of the available surplus in an accounting year; The phrase 'available surplus' is defined under Sub-section (6) of Section 2 of the Payment of Bonus Act and means 'the available surplus computed under Section 5'. Section 5 of the Payment of Bonus Act stipulates that 'the available surplus in respect of any accounting year shall be the gross profit for that year after deducting therefrom the sums referred to in Section 6'. A combined reading of Sub-sections (4) and (6) of Section 2 and of Section 5 extracted above, would show that in the case of the present company, which is covered by Clause (b) of Sub-section (4) of Section 2 of the aforesaid Act, the 'allocable surplus' would be 60 per cent of the gross profits for the calendar year 1977 as computed in terms of Section 5 of the aforesaid Act.
Section 10 of the aforesaid Act links the quantification of the amount of bonus to the concept of 'allocable surplus'. Sub-section (1) of the said section, so far as it is relevant for our purpose, reads as follows: Subject to the other provisions of this Act, where an employer has any allocable surplus in any accounting year, then, he shall be bound to pay to every employee in respect of that accounting year a minimum bonus which shall not be less than four per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, or, in a case where the allocable surplus exceeds the said amount of minimum bonus payable to the employees, 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: Sub-section (2) of the aforesaid section is not relevant for our purpose. Sub-section (3) modifies the concept of 'allocable surplus' as defined by Sub-section (4) of Section 2 of the said Act for the purpose of Section 10 in the following terms: For the purposes of this section, the allocable surplus shall be computed taking into account the amount set on or set off in the three immediately preceding accounting years and in the accounting year in respect of which the bonus is payable, in the manner illustrated in the Third Schedule.
The notion of 'set on or set off' referred to in Sub-section (3) of Section 10 has been elaborated in Section 15 of the aforementioned Act.
Sub-sections (1) and (2) of the aforesaid section are relevant for our purpose and may be extracted here below for the sake of ready reference as follows: (1) Where for any accounting year the allocable surplus exceeds the amount of bonus payable to the employees in the establishment under Section 10, then, the excess shall,, subject to a limit of twenty per cent of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on, to be utilised for the purpose of payment of bonus, in the manner illustrated in the Third Schedule.
(2) Where for any accounting year, there is no allocable surplus or the allocable surplus in respect of that year falls short of the amount of bonus payable to the employees in the establishment under Section 10, and there is no sufficient amount carried forward and set on under Sub-section (1) which could be utilised for the purpose of payment of bonus, then, so much amount as is necessary for the payment of bonus under this Act shall be carried forward for being set off in the succeeding accounting year and so on in the manner illustrated in the Third Schedule.
Inasmuch as Sub-section (5) of Section 10 and Sub-sections (1) and (2) of Section 15, extracted above, referred to Third Schedule of the Payment of Bonus Act, it would be appropriate to extract the said Schedule as follows to understand the scheme: The illustration in this Schedule has been worked out with reference to an establishment which has an annual salary or wages bill of rupees one lakh, twenty per cent of which amounts to Rs. 20,000 and four per cent of which amounts to Rs. 4,000.Year Amount equal to sixty 'Set on' or 'set Amount paid Balance of per cent or sixty-seven off' of the pre- or payable 'set on' or per cent, as the case ceding year as bonus 'set off' may be, of available(1) (2) (3) (4) (5) Rs. Rs. Rs. Rs. A combined reading of the aforesaid provisions of the Payment of Bonus Act along with the illustrations given fin the Third Schedule of the said Act would clearly go to show that the payment of bonus under the Payment of Bonus Act is directly related to the amount of 'allocable surplus'. If the assessee has even one rupee by way of 'allocable surplus' in a given year, he is obliged to distribute minimum bonus to its workers in terms of Sub-section (1) of Section 10. If, however, there is no allocable surplus, there is no obligation on the part of the assessee to distribute any bonus in that year [see illustrations (5), (6) and (8) of the above schedule]. So far as the allocable surplus is equal to or less than the minimum bonus distributable to the employees in terms of Sub-section (1) of Section 10, referred to above, the assessee is under obligation to distribute only the minimum bonus, but, as and when the amount of allocable surplus exceeds the minimum bonus payable in a given year (taking into account the set on and set off of earlier four years), the assessee is bound to distribute to the employees higher bonus than the minimum bonus in proportion to their salaries up to the amount of available 'allocable surplus'. There is, however, a ceiling to the amount of bonus that can be distributed and which has been stipulated in subsection (1) of Section 10 itself, namely, 20 per cent of the salaries or wage. If the allocable surplus in a given year permits the distribution of the aforesaid maximum bonus, the maximum would be given to the employees. If, however, the allocable surplus is in excess of it, the bonus distributed in the given year will be 20 per cent of the salary or wage, and the excess over the aforesaid distribution will be carried over to the next year and to the following four years, if necessary, in terms of Sub-section (1) of Section 15. Such carry forward or set on would, however, be only to the extent of 20 per cent of the salary or wage. If the remaining 'allocable surplus' after distribution of bonus to the extent of 20 per cent of salary or wage is in excess of this 20 per cent, the excess will not be carried forward and would not be available for distribution of bonus to the employees under the Payment of Bonus Act in the subsequent years. The above principles have been illustrated in Third Schedule of the Payment of Bonus Act. Item 3 of the Schedule would show that the allocable surplus available for distribution including the 'set on' was Rs. 13,000 and the whole of it was distributed amongst the employees by way of bonus. The maximum bonus that could have been distributed was Rs. 20,000 but the bonus distributed was restricted to Rs. 13,000, i.e., the amount of allocable surplus available for the purpose. The underlying meaning of the italicized portion of Section 10(1) at page 34, is brought out by the illustrations of the Third Schedule.
10. The above scheme of the Payment of Bonus Act, in our opinion, leaves no scope for the assessee's argument that Sub-section (1) of Section 10 does not lay down any restriction to the distribution of maximum bonus and that it is left to the assessee to decide the quantum of bonus to be distributed by it in a given year and that so long as the allocable surplus available in a given year was in excess of the minimum bonus payable, the assessee could distribute maximum bonus to the extent of 20 per cent of the salary or wage, even if the allocable surplus was less than the bonus so distributed. The language of Sub-section (1) of Section 10, as italicized by us, read with the illustrations given in the Third Schedule, decisively negative this interpretation. Accordingly, we reject the assessee's first line of reasoning as untenable in law.
11. So far as the alternative plea raised by the assessee is concerned, we are of the opinion that we should not permit the assessee to raise this plea at this stage. It has never been the assessee's case that it has been paying customary bonus to its workers. The case all along proceeded on the footing that the bonus was paid by the assessee to its employees in terms of the Payment of Bonus Act. Whether or not payment of bonus is customary in a given case has to be established by leading cogent evidence and in the present case the assessee has placed no evidence whatsoever on record before the authorities below. We have the authority of the Supreme Court in the case of Moti Ram v. CIT  34 ITR 646 to hold that the Tribunal has full jurisdiction and it is in its discretion to refuse permission to an appellant to raise, for the first time before it, new questions of fact which cannot be decided without taking further evidence. In the present case, it is not possible to hold whether or not the assessee has been paying customary bonus without leading additional evidence pertaining to a number of years preceding the previous year in question. The mere fact that the assessee had paid 20 per cent bonus from 1971 onwards would not per se prove that the said bonus was paid as customary bonus and was not paid in terms of the Payment of Bonus Act. Accordingly, the permission sought by the assessee to raise the additional pleas of fact before us is hereby rejected.
12. The assessee's reliance on the decision of the Hon'ble Supreme Court in the case of Hukumchand Mills' Ltd. (supra) is, in our opinion, misplaced. In that case, the ITO had omitted to take into account the provisions of paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950. The department, which was the respondent in that case before the Tribunal, pointed out that the provisions of the aforesaid Order had not been taken into account for the purpose of finding out the written down value of the assets. The Tribunal accepted this contention of the revenue and remanded the matter for considering the applicability of the aforesaid Order to the facts of the given case.
In the present case, it is not that some provision of law, which was applicable to the given facts, has been omitted from consideration.
Whatever was the relevant law applicable to the facts pleaded by the assessee before the ITO was considered by him and by the learned Commissioner (Appeals) and on that basis they gave their decision. What the assessee is now attempting to do is to plead an altogether new factual position, contrary to its plea before the authorities below, and is seeking our permission to lead evidence in support of the same.
This situation is radically different from what it was before the Tribunal in the case of Hukumchand Jute Mills Ltd. (supra).
13. Section 17 of the Payment of Bonus Act, on which the assessee's learned Counsel has placed reliance also does not, in our opinion, advance the assessee's case. The said section reads as follows: (a) an employer has paid any Puja bonus or other customary bonus to an employee; or (b) an employer has paid a part of the bonus payable under his Act to an employee before the date on which such bonus becomes payable--, then, the employer shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of the accounting year and the employee shall be entitled to receive only the balance.
As will be clear from the wordings of the aforesaid section, before Clause (a) of Section 17 can be brought into play, there has to be a finding of fact that Puja bonus or customary bonus had been paid. The section does not spell out as to what customary bonus is. It starts with the presumption that customary bonus has been paid and then authorises its adjustment against bonus payable under the Act.
Therefore, even for the purpose of Section 17, it has to be established by independent evidence that customary bonus was paid in a given case.
In the present case, as we have noted above, evidence has never been led by the assessee to prove the payment of customary bonus before the authorities below.
In fact, it was never the assessee's contention earlier. The assessee's plea earlier was that the bonus was paid in terms of the Payment of Bonus Act. The assessee now seeks to set up an altogether new plea, which is contrary to the stand earlier taken and to lead evidence in its support. It would, in our opinion, be wrong to grant to the assessee such permission. Accordingly, we refuse permission to the assessee to raise the alternative contention.