Sec 36(1)(ii)

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Ayush Agarwal

Articled Assistant

23 Points Posted on 21 September 2013

If a Proprietorship or a Partnership Firm gives Remuneration to its Employees in form of Bonus (provided that Bonus Act, 1965 is not applicable on the concern) and booked its amount under Bonus A/c in profit and loss account, whether the amount booked in Bonus A/c will be allowed as deduction u/s 36(1)(ii).

Replies (3)

Ritzz

CA Final - Article

214 Points Posted on 21 September 2013

The conditions for deduction are :

Bonus or commission paid to an employee is allowable as deduction subject to

certain conditions:

Admissible only if not payable as profit or dividend - One of the conditions is

that the amount payable to employees as bonus or commission should not

otherwise have been payable to them as profit or dividend..

Deductible on payment basis - Bonus or commission is allowed as deduction

only where payment is made during the previous year or on or before the due date

of furnishing return of income under section 139.

But since bonus act is not applicable to your co./concern, it would not be allowed as deduction.

I am not sure on this though. Do watch for expert opinions on this.

Regards

CA LOVELY ARORA

C.A. B.Com (H) Graduate

1985 Points Posted on 22 September 2013

agree with Mr. rohan.. but don't why he diverted in the last line... it is allowed as deduction.. as

sec. 36(1) says allowed as deduction if such bonus "would not have been payable to him as profits or dividend if it had not been paid as bonus or commission" and i don't think such employee would get profit/dividend if he didn't paid bonus/commission... and thus, it would be allowed...

Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com

naseef

CA Final ICWAI Final

39 Points Posted on 22 September 2013

Payment of Bonus in excess of the amount required to be paid under the Payment of Bonus Act is deductible u/s 36(1)(ii) provided same is a genuine business expenditure and paid before failing of return (CIT vs Kumaran Mills)

Hence Bonus shall be allowed as deduction under section 36(1)(ii) only if it is covered under Payment of Bonus Act

i think if bonus act is not applicable, asesee can claim under section 37