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Section 6 of Payment of Bonus Act, 1965

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Section 6 lists the deductions that are allowed to be deducted from the gross profits. These include:

  • Depreciation
  • Development Rebate or Development Allowance
  • Amounts that are liable to be deducted for direct taxes
  • Amounts that are mentioned in the third schedule

Depreciation

  • Loss incurred due to wear and tear of the machinery or other asset.
  • The object of depreciation is to keep the capital intact.
  • According to the Workmen of National and Grindleys Bank Ltd vs National and Gridlays Bank Ltd AIR 1976, the burden of proving depreciation claimed is the correct amount admissible under Section 32(1) of the Income Tax Act lies on the party claiming such amount

Development Rebate or Development Allowance

  • Section 33 and 33A of the Income Tax Act allows exemptions which are also allowed under the Payment of Bonus Act
  • The object for the exemption is to encourage the industry

Direct Taxes

Section 6(c) and 7 of the Payment of Bonus Act, 1965 allows deduction of direct taxes being paid.

See Also