“2. While completing the assessment under Section 143(3) of the Income Tax Act, 1961, the Assessing Officer found that the assessee had claimed deduction on the ex-gratia payment made to employees who were not covered by the provisions of the Payment of Bonus Act. The assessee contended that it was a type of incentive given to those employees, who did not fall under the provisions of the Payment of Bonus Act. The claim of the assessee was rejected holding that the same could not be treated as one falling under business expediency referred to under Section 37(1) of the Income Tax Act, 1961 specifically excluding the expenditure covered under Sections 32 to 36 of the Act and more so, in particular, when Section 36(1)(ii) specifically deals with payment of bonus as a head of deduction. The Assessing Officer held that the assessee was not entitled to have the deduction considered under Section 37(1) of the Act. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who confirmed the order of the Assessing Officer. Hence, the assessee went on further appeal before the Income Tax Appellate Tribunal. The Tribunal pointed out that the payment in the instant case was made to those employees who did not fall within the purview of the Payment of Bonus Act. The provisions under Section 36(1)(ii) of the Income Tax Act, 1961 covered specific instances stated therein and that ex-gratia payment made to employees in
