Good Work Reward to employee held not constituting bonus u/s 36(1)(ii) and allowable as normal business expenditure u/s 37 of the Act.
ABCAUS Case Law Citation:
ABCAUS 3078 (2019) (07) ITAT
Important Case Laws Cited/relied upon by the parties:
Shriram Pistons & Rings Ltd. Vs. Commissioner of Income Tax, (2008) 307 ITR 363 (Delhi).
The instant appeal was filed by assessee against order of CIT(A) in confirming the disallowance of good work reward treating them bonus within meaning of section 36(1)(ii) of the Act.
The assessee company had paid management incentive bonus called “good work reward” on the basis of performance of the eligible senior level employees of the assessee under Management Incentive Bonus Plan (MIBP).
The Assessing Officer (AO) had invoked the provisions of Section 43B r.w.s.36(1)(ii) of the Income Tax Act, 1961 (“the Act”) and concluded that the said amount was bonus in the hands of the said employees of the assessee and hence, disallowed accordingly.
The CIT(A) also deleted the disallowance.
Before the Tribunal, the assessee claimed that this payment was not covered under the payment of Bonus Act, 1965 but is based on the performance measured on the key parameters assigned to employees to achieve certain goals.
The assessee produced Management Incentive Policy Documents which mentioned that the objective of the MIBP was to reward the employees for achieving key result areas of the company. There was a separate provision for bonus as well. The MIBP was only to reward the employees for achieving better result for the company.
The Tribunal observed that in the statement showing Management Incentive Policy documents, there was separate column for bonus and separate column for MIBP. The objective for giving MIBP to employees was in a way to acknowledge the efforts made by the employees in achieving higher goals for the company. This was absolutely separate from the bonus given to employees.
The Tribunal observed that the Revenue had strictly gone into interpreting the nomenclature of the terms of “good work reward” and had held that the decision relied upon by the assessee was distinguishable in facts with regard to the case of the assessee where it was a question of giving incentive bonus.
The Tribunal opined that this finding of the Revenue Authorities was incorrect since the facts on records clearly demonstrated that the issue of bonus as well as issue of MIBP were in altogether different terms and conditions.
The Tribunal opined that the judgment of the High Court relied upon by the assessee had referred to the “Good Work Reward” and it had been clearly held that it does not constitute bonus within meaning of section 36(1)(ii) of the Act and was allowable as normal business expenditure u/s. 37 of the Act.
Accordingly, the Tribunal set aside the order of the CIT(Appeals) on this issue and held that the MIBP paid to the employees were not bonus in the hands of the employees and the said amount was allowable for deduction u/s.37(1) of the Act.
Download Full Judgment Click Here >>
- CBDT Guidelines under clause (10D) section 10 of the Income-tax Act 1961
- e-advance rulings Scheme, 2022 notified by CBDT
- SEBI launches SEBI’s “Saa₹thi” Mobile App on Investor Education
- Computation of capital gains for the purposes of sub-section (1B) of section 45
- SEBI is empowering Investors through Investor Charters for Securities Market
addition u/s 68 ca misconduct cash deposit in bank CBDT cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty covid-19 CSR custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstr-1 GSTR-3B GST rates gst refund IBBI ibc itat mca circular MCA notification order u/s 119 penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 sebi circular sebi regulations transfer and postings unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes----------- Similar Posts: -----------