Judgment :- K. A. THANIKKACHALAM J. (9-1-1996) : At the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961 "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 15, 216 being the amount advanced to the assessee's employees in the year 1971 and written off in the year under consideration is as admissible deduction either as business loss or under section 37 of the Act ?" * The assessee is a company. In the assessment year 1974-75, the assessee filed a return showing a deduction of a sum of Rs. 15, 216. According to the assessee, it is a loan paid to the employees in view of the agreement with the employees reached on October 6, 1971, in the presence of the Commissioner of Labour. Accordingly, the assessee agreed to pay workmen recoverable bonus equivalent to one month's basic salary and dearness allowance, but the Income-tax Officer disallowed the same on the ground that the assessee failed to satisfy the conditions prescribed under section 36 of the Income-tax Act. According to the Income-tax Officer, this amount was bonus for the calendar year 1970, disbursed in the year 1971 and written off in the accounts of 1973, i.e., pertaining to the assessment year under consideration. Since this expenditure does not pertain to this year and the assessee failed to satisfy the conditions stipulated under section 36(2)(i)(a), the Income-tax Officer held that the assessee is not entitled to this deduction. However, on appeal, the Appellate Assistant Commissioner considering the agreement entered into between the employer and the employees, accepted the claim made by the assessee, but directed the Income-tax Officer to verify whether the conditions prescribed under section 36(1)(ii) of the Act are satisfied, and then allow the amount. Aggrieved, the assessee filed a second appeal before the Tribunal. The Tribunal held that the amount paid by the employer was in the nature of a loan and it is not bonus. Aggrieved, the assessee filed a second appeal before the Tribunal. The Tribunal held that the amount paid by the employer was in the nature of a loan and it is not bonus. Accordingly, the Tribunal held that the assessee is entitled to deduction under section 37, if the assessee satisfied the conditions prescribed under that sectionLearned counsel appearing for the assessee submitted before us that even though in the agreement between the employer and the employees, it is stated as bonus, it should be construed as payment of loan to the employees, which was written off in the assessment year under consideration. Therefore, it cannot be called as bonus. Accordingly, learned counsel appearing for the assessee submitted that deduction should be given under section 37 of the Act as business expenditure. Thus, learned counsel for the assessee supported the order passed by the Tribunal. On the other hand, learned standing counsel for the Department, submitted that a plain reading of the agreement entered into between the employer and the employees would go to show that what was paid by the employer to the employees was originally a loan, but at a later stage it was treated as a bonus, adjustable as part of bonus payable in the subsequent year. It was, therefore, submitted that the finding of the Tribunal that what was paid to the employees by the employer is loan and not bonus, is not based upon the facts available on record We have heard the rival submissions. As per the agreement reached between the employer and the employees, dated October 6, 1971, in the presence of the Commissioner of Labour, the assessee agreed to pay the workmen recoverable bonus equivalent to one month's basic salary and dearness allowance. Accordingly, a sum of Rs. 15, 216 was disbursed in the year 1971. However, the board of directors decided on November 16, 1973, not to recover this amount. The board's resolution runs as under in this regard "A sum of Rs. 15, 290.56 is the amount due from the employees out of the recoverable bonus paid on October 11, 1971, in terms of clause 2(e) of the agreement, dated October 6, 1971, with the employees' unions. Regarding the mode of recovery of the same, the matter was since discussed with the unions and it was agreed not to recover the same, in order to maintain good industrial relations. Regarding the mode of recovery of the same, the matter was since discussed with the unions and it was agreed not to recover the same, in order to maintain good industrial relations. Resolved to adjust the above amount to bonus paid account in the accounts for the current financial year." * The point for consideration is, what is the nature of the amount paid by the assessee to its employees in the year 1971 which was claimed as deduction in the assessment year 1974-75. In the abovesaid resolution, it is resolved to adjust the above amount to bonus paid account in the accounts for the current financial year. According to the Tribunal, the amount paid was adjusted to the bonus paid account only for accounting purposes. But there is no material on record to support this view taken by the Tribunal. According to learned counsel for the assessee in order to settle the dispute between the employer and the employees, the abovesaid amount was paid and bonus paid once cannot be recovered subsequently. In such circumstances, the payment of the abovesaid amount should be considered as a loan advanced to the employees. As against the statement made in the resolution passed by the board of directors, no evidence was produced to show that what was paid to the employees was a loan and it was written off. Under such circumstances, we are unable to subscribe to the view taken by the Tribunal that what was paid by the assessee to its employees is loan, which should be considered as business expenditure under section 37 of the Act. If it is bonus, the assessee must satisfy the conditions prescribed under section 36 of the Act. In view of the factual position appearing in this case, we consider that the Tribunal was not correct in holding that what was paid to the employees is loan and not bonus. Under such circumstances, we answer the question referred to us in the negative and in favour of the Department. No costs (5-2-1996) :--This tax case came up for hearing on being mentioned. Learned counsel appearing for the assessee submitted that the decision of this court in T. C. No. 1054 of 1981, dated January 19, 1994, and the decision in T. C. No. 185 of 1982, dated February 17, 1994, supports the case put forward by the assessee. No costs (5-2-1996) :--This tax case came up for hearing on being mentioned. Learned counsel appearing for the assessee submitted that the decision of this court in T. C. No. 1054 of 1981, dated January 19, 1994, and the decision in T. C. No. 185 of 1982, dated February 17, 1994, supports the case put forward by the assessee. We have carefully gone through the abovesaid two decisions. They are rendered on the facts available on record. But in so far as the present case in concerned, there is no evidence on record to show that the assessee decided not to recover the sum paid as bonus. Accordingly, those decisions would render no assistance to the assessee to put forward his case. Accordingly, the earlier order passed by us dated January 9, 1996, in T. C. No. 1080 of 1980 would stand without any modification.