The Assessee Company M/s D. S. M. Agro Products Ltd has filed its return of income for the relevant assessment year and claimed the deduction on account of production incentive bonus paid to its workers as a reward of their good performance and efficiency.
While completing the assessment proceedings the Assessing Officer (AO) made an addition of Rs. 5,54,037 and Rs.5,32,238 on account of production incentive bonus and the same brought into tax and accordingly disallowed the claim of the Assessee.
On appeal both the lower authorities such as CIT (A) and Income Tax Appellate Tribunal (ITAT) granted relief to the Assessee by deleting the addition made by the AO after legally justified the facts and circumstances. Consequently, the Tribunal passed an order in favour of the Assessee by allowing the deduction claimed by the Assessee Company.
Thereafter the Revenue approached the Court on further appeal against the order passed by the lower authorities and compiled that the Tribunal has erred in allowing the deduction towards the production incentive bonus which was claimed by the Assessee.
After considering the facts and circumstances of the present issue, the High Court division bench Justice Bharati Sapru and Justice Neeraj Tiwari rejected the findings of the Revenue and held that “where incentive bonus has been paid as a reward of good attendance and efficiency to the workers, it would be deductible under section 37 of the Income Tax Act 1961 and the Tribunal has not erred in allowing deduction in respect of the incentive bonus in the present case”.
Subsequently, the Court also upheld the order passed by the Tribunal and accordingly dismissed the appeal filed by the Revenue while concluding the issue.