Disallowance of Bonus under Sec.43B
This query is : Resolved
21 September 2010
Hi friends,
I am in need of ur help.
I am currently doing a tax audit of a listed company.
The company is creating emoployee assured bonus (other than the normal bonus as per payment of bonus Act, which is separately created) based on some criteria.
My doubt is whether the employee assured bonus so created is to be disallowed under Sec.43B, If not paid before date of filing of return.
I got a case law, the contents are as follows,
Case Law :-"Commissioner Of Income-Tax vs Shaw Wallace And Co. Ltd. on 22/8/1989"
Contents:- We may add that by Section 11 of the Direct Tax Laws (Amendment) Act, 1987, two provisos to Section
36(1)(ii) laying down ceilings on the bonus to be allowed as deduction have been deleted with effect from
April 1, 1989. Simultaneously, bonus payments have been covered by the provisions of Section 43B, so that
these are allowed on actual payment basis. This amendment only indicates that the Legislature did never
intend that the payment of bonus in whatever name it is called in excess of the amount of bonus prescribed
under the Payment of Bonus Act, 1965, would not be allowable even if such payment is reasonable and has
been made having regard to the commercial and business expediency and to maintain the target of production
through sustained industrial peace.
I am in need of ur help.
I am currently doing a tax audit of a listed company.
The company is creating emoployee assured bonus (other than the normal bonus as per payment of bonus Act, which is separately created) based on some criteria.
My doubt is whether the employee assured bonus so created is to be disallowed under Sec.43B, If not paid before date of filing of return.
I got a case law, the contents are as follows,
Case Law :-"Commissioner Of Income-Tax vs Shaw Wallace And Co. Ltd. on 22/8/1989"
Contents:- We may add that by Section 11 of the Direct Tax Laws (Amendment) Act, 1987, two provisos to Section
36(1)(ii) laying down ceilings on the bonus to be allowed as deduction have been deleted with effect from
April 1, 1989. Simultaneously, bonus payments have been covered by the provisions of Section 43B, so that
these are allowed on actual payment basis. This amendment only indicates that the Legislature did never
intend that the payment of bonus in whatever name it is called in excess of the amount of bonus prescribed
under the Payment of Bonus Act, 1965, would not be allowable even if such payment is reasonable and has
been made having regard to the commercial and business expediency and to maintain the target of production
through sustained industrial peace.
Aditya Maheshwari
(Expert)
21 September 2010
read section 43B
62[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 63[or]
36(1)(ii) any sum paid to an employee as bonus or commission29 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;
62[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 63[or]
36(1)(ii) any sum paid to an employee as bonus or commission29 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;
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21 September 2010
Hi Aditya,
What i understood is , it is to be disallowed. It it correct...??
What i understood is , it is to be disallowed. It it correct...??
Aditya Maheshwari
(Expert)
21 September 2010
Yes the same will be allowable on payment basis only as per section 43B.
If paid before due date of filing return then only allowable.
If paid before due date of filing return then only allowable.
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