The Bombay High Court has held that exgratia bonuses paid to employees over and above the eligible bonus under the Payment of Bonus Act are allowable as business expenditures. The AO has disallowed the exgratia bonus paid amounting to Rs. 16,28,258 over and above the eligible bonus under the Payment of Bonus Act. The ITAT held that the exgratia payment in excess of the limit prescribed under the Payment of Bonus Act, 1965, either under Section 36(1)(ii) or Section 37(1) of the Act, was not allowable as a business expenditure. The court held that the ITAT was not right in law in holding that exgratia bonuses paid to employees over and above the eligible bonus under the Payment of Bonus Act are not allowable as expenditures under Section 37(1) of the Act.

Source: Indian Express March 13, 2024 23:15 UTC