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Commissioner Of Income-Tax vs India Radiators Ltd. on 7 January, 1976 cites

The Silk And Art Silk Mills' ... vs Mill Mazdoor Sabha on 19 April, 1972

4. The question for consideration is whether the bonus paid is included in the . word "salary". Prior to the enactment of the Payment of Bonus Act, 1965, the payment of bonus was considered to be not a deferred wage and it is payable only out of profits. But the enactment changed the character of the payment itself. While considering the validity of the Act, the Supreme Court in Jalan Trading Co. (P.) Ltd. v. Mill Mazdoor Sabha, [1966] 36 Comp Cas 901 (SC) considered the bonus paid as additional wages.
Supreme Court of India Cites 11 - Cited by 9 - K K Mathew - Full Document

Gopalan vs Angamali Chit Fund (P) Ltd. on 19 April, 1975

These two decisions were followed by the High Court of Kerala in Gopalan v. Angamali Chit Funds (P.) Ltd., [1975] 2 LLJ 296 (Ker). The learned counsel for the revenue pointed out that the definition of salary and wages in the Payment of Bonus Act excluded bonus from the salary and wages. But as pointed out by the Keraia High Court that was because for the purpose of that Act bonus has to be distinguished from salary or Wages and has to be determined in relation to the wages paid to the employees. In fact, the specific exclusion from the definition of salary or wages would signify that but for such exclusion bonus would fall under the words "salaries and wages". Thus, after the Payment of Bonus Act, the bonus paid is part of the salary or wages. It is true that the Payment of Bonus Act is applicable only to employees drawing salary or wage not exceeding Rs. 1,600 per mensem. For employees, who are drawing more than Rs. 1,600 per mensem, the Act would not be applicable. But that does not mean that if an amount is paid as bonus it will have to be understood in any way different from the payment made to an employee, who is drawing less than Rs. 1,600. The recent development relating to the labour laws showed a change in the understanding of the nature of payment of bonus. It is no longer considered as a share of profits or gift or bounty made by an employer under his sweet will and pleasure. The employee by reason of his contribution or participation in the business of the employer is considered to be entitled for payment of the same, though the exact amount payable may depend on various circumstances Having regard to this development, we are of opinion that even in regard to payment of bonus to employees drawing more than Rs. 1,600 the word "bonus" would have to receive the same interpretation as it means to an employee who is drawing less than Rs. 1,600 per mensem. The learned counsellor the revenue contended that the word "salary" in Section 40(c)(m) read with Rule 2(h) of Part A of the Fourth Schedule would have to be understood as only covering a periodical payment excluding all types of allowances and perquisites. He also contended that bonus is in the nature of an allowance and that, therefore, for the purpose of Section 40(c)(iii) salary would not include bonus. We are unable to agree with this contention of the learned counsel. The word "salary" would have to be understood, with reference to the development of the law relating to bonus, especially when there was no definition of bonus in the Income-tax Act. We may also point out that Section 40(c)(iii), as it stood at the relevant period, was substituted for the original provision with effect from April 1, 1964, on the day when the Payment of Bonus Act itself came into force. We consider, therefore, that a reference to the bonus Act in understanding the words 'salary and bonus' is permissible. The learned counsel for the revenue referred to the original provision 40(c)(iii) which was inserted on April 1, 1963, and contended that at the time when the original provision was inserted, the Payment of Bonus Act was not in force, and it will have to be understood with reference to the law relating to bonus at the time when the provision was originally inserted. We are unable to agree with this contention of the learned counsel also, as the original provision was different and was completely omitted and a new provision was substituted with effect from April 1, 1964. We are of the view, therefore, that having regard to the general understanding of the word 'bonus', payment of bonus should be treated as forming part of the salary itself. The question referred to us is, therefore, answered in the affirmative and against the revenue. The assessee will be entitled to its costs. Counsel's fee Rs. 250.
Kerala High Court Cites 9 - Cited by 1 - Full Document
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