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C. D. Lonappan Vs. Commissioner of Income-tax, KeralA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Referred Case No. 22 of 1961
Reported in[1963]49ITR708(Ker)
AppellantC. D. Lonappan
RespondentCommissioner of Income-tax, KeralA.
Excerpt:
- .....to this court reads :'whether the tribunal misdirected itself in law in disallowing a part of the bonus paid to the employees ?'in the year of account ending on march 31, 1956, the assessee made a profit of rs. 91,812 on his grocery business. he paid rs. 10,125 towards bonus that year to his 34 employees in this business. they had been paid during that year rs. 16,000 and odd as salary and the whole of this amount has been allowed as a deduction for computing the income. but the taxing authorities felt that rs. 10,125 paid as bonus was not reasonable. rs. 10,125 works out to about 7 1/2 months salary. they reduced the bonus to be months salary.the questions to be considered are stated in the proviso to section 10(2) (x) of the indian income-tax act and they are :(a) the pay of the.....
Judgment:

GOVINDAN NAIR J. - The question that has been referred to this court reads :

'Whether the Tribunal misdirected itself in law in disallowing a part of the bonus paid to the employees ?'

In the year of account ending on March 31, 1956, the assessee made a profit of Rs. 91,812 on his grocery business. He paid Rs. 10,125 towards bonus that year to his 34 employees in this business. They had been paid during that year Rs. 16,000 and odd as salary and the whole of this amount has been allowed as a deduction for computing the income. But the taxing authorities felt that Rs. 10,125 paid as bonus was not reasonable. Rs. 10,125 works out to about 7 1/2 months salary. They reduced the bonus to be months salary.

The questions to be considered are stated in the proviso to section 10(2) (x) of the Indian Income-tax Act and they are :

(a) the pay of the employee and the conditions of his service,

(b) the profits of the business of the year, and

(c) the general practice in similar businesses.

The average salary of the employees is quite meagre. There is no evidence regarding the other conditions of service. It is not even suggested that the employees are afforded other amenities and facilities. The profits during the relevant accounting year is substantial. There is no evidence about the practice in similar businesses. But considering the profits earned and the low salary of the employees, it is impossible to say that the bonus paid is not reasonable.

We, therefore, answer the question referred to us in the affirmative and in favour of the assessee. The parties will bear their costs in these proceedings.

Question answered in the affirmative.


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