| Case ID |
00fdda1a-ec29-4419-8713-3ecf2f81263b |
| Body |
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| Case Number |
D-2741 of 1976 |
| Decision Date |
Aug 01, 1991 |
| Hearing Date |
Jul 15, 1991 |
| Decision |
The Calcutta High Court upheld the decision made by the Tribunal regarding the additional payment of Rs. 74,206 made by Shaw Wallace & Co. Ltd. to its employees as ex gratia payment. The court affirmed that such payments are allowable as business deductions under the Income-tax Act, particularly under sections 36(1)(ii) and 37. The court emphasized that the payments were made to maintain good relations with employees, ensuring industrial peace and preventing disruptions like strikes. The ruling clarifies the interpretation of customary bonuses and the conditions under which additional payments can be considered deductible business expenses. The court ruled that payments made in accordance with a memorandum of settlement are valid as business expenses, reinforcing the need for good employer-employee relations in the industry. |
| Summary |
In the landmark case of Commissioner of Income Tax v. Shaw Wallace & Co. Ltd., the Calcutta High Court addressed the issue of business expenditure related to additional payments made to employees beyond the statutory bonus. The case revolved around the interpretation of sections 36(1)(ii) and 37 of the Income-tax Act, 1961, focusing on the allowance of ex gratia payments as deductible expenses. The court found that the additional payment of Rs. 74,206 was made to foster good relations with employees and avoid industrial disputes, thus qualifying as a reasonable business expense. This decision is crucial for understanding the nuances of business deductions in relation to employee compensation and the impact of customary bonuses in the context of the Income-tax Act. The ruling serves as a precedent for future cases involving similar circumstances, highlighting the importance of maintaining harmonious labor relations in the industrial sector. |
| Court |
Calcutta High Court
|
| Entities Involved |
Commissioner of Income Tax,
Shaw Wallace & Co. Ltd.
|
| Judges |
AJIT K. SENGUPTA,
BHAGABATI PRASAD BANERJEE
|
| Lawyers |
A.N. Bhattacharjee,
D. Pal
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Shaw Wallace & Co. Ltd.
|
| Citations |
1991 SLD 1773 = (1991) 190 ITR 455
|
| Other Citations |
N.M. Rayaloo Iyer & Sons v. CIT [1954] 26 ITR 265 (Mad.),
J.K. Woollen Mfrs. (P.) Ltd v. CIT [1963] 48 ITR 346 (All.),
Laxmandas Sejram v. CIT [1964] 54 ITR 763 (Guj.),
CIT v. Tingri Tea Co. Ltd. [1971] 79 ITR 294 (Cal.),
CIT v. P. Ali Kunju, M.A. Nazir Cashew Industries [1987] 166 ITR 611 (Ker.),
Mumbai Kamgar Sabba v. Abdulbhai Faizullabhai AIR 1976 SC 1455,
Baidyanath Ayurveda Bhawan Mazdoor Union v. Management of Shri Baidyanath Ayurveda Bhawan (P.) Ltd. AIR 1984 SC 457,
Upendra Chandra Chakraborty v. United Bank of India AIR 1985 SC 1010,
Vegetable Products Ltd v. Their Workmen AIR 1965 SC 1499,
Indian Leaf Tobacco Development Co. Ltd. v. CIT [1982] 137 ITR 827 (Cal.),
CIT v. Sivanandha Mills Ltd [1985] 156 ITR 629 (Mad.),
CIT v. Kalyanji Mavji & Co. [1980] 122 ITR 49(SC)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1),
36(1)(ii)
|