This appeal by Department relates to asst. yr. 1977-78. In relevant accounting year, assessee made provision in its accounts for Rs. 45,650 representing bonus to be paid to employees on occasion of Fifth Anniversary of assessee s business. This amount of bonus was in addition to amount of regular bonus is of 20 per cent of salaries paid under provisions of Payment of Bonus Act, 1965. ITO disallowed claim on ground that amount in excess of maximum amount payable under said Act was not allowable under first proviso to s. 36 (1) (ii) of IT Act. In appeal filed by assessee, CIT (A) deleted disallowance. He observed that bonus provided for in accounts of assessee was not on basis of year s profits or productivity. According to him, said payment represented celebration of important occasion, where recognition had to be given to services of employees and, as such, provisions of s. 36 (1) (ii) would not apply. On this reasoning, he deleted that addition of Rs. 45,650. Department has now come in appeal before us, contention on behalf of Department is that claim for bonus could be allowed only if conditions mentioned in first and second proviso of s. 36 (1) (ii) of Act were satisfied. Sec. 37 (1) of Act, according to ld. Departmental Representative , would not be applicable in such cases. submission on behalf of assessee, on other hands, was that amount in question represented ex-gratia payment and, as such provisions of s. 36 (1) (ii) were not applicable with result that provisions of s. 37 (1) were attracted. further submission was that bonus in question was not linked with productivity and, as such, provisions of Payment of Bonus Act would not apply and for this reason also, provisions of s. 37 (1) would be attracted. Reliance was placed on decision of Supreme Court in case of Mumbai Kamgar Sabha, Bombay vs. M/s Abdulbhai Faizallabhai & Ors. AIR 1976 SC 1455. We have considered rival submissions and facts of record, Sec. 36 (1) (ii), so far as material is as follows: "36 (1) deductions provided for in following clauses shall be allowed in respect of matters dealt with therein in computing income referred to s. 28; (i) amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores used for purposes of business or profession; (ii) any sum paid to as employee as bonus or commission for serves rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission. Provided that deduction in respect of bonus paid to employee employed in factory or other establishment to which provisions of Payment of Bonus Act, 1965 apply shall not exceed amount of bonus payable under Act. Provided further that amount of bonus (not being bonus referred to in first proviso) or commission is reasonable with reference to (a) pay of employee and conditions of his service; (b) profits of business or profession for previous year in question; and (c) general practice in similar business or profession. main provision in s. 36 (1) (ii) enjoins upon ITO to allow deduction in respect of bonus paid by assessee to his employee. only condition laid down in man provision for disallowance is that such sum which is ostensibly paid as bonus should not have been payable as profits or dividend if it had not been paid as bonus. term "bonus" is not defined in Act. It would include every amount paid in addition to contractual salary or wages for services rendered. Even ex-gratia payments made for past services would come within its ambit. Even when condition for allowability under main provision is fulfilled, whole amount paid does not become automatically deductible. This is because of ceiling fixed under first and second proviso. However, after deciding that particular amount is bonus and is deductible under main provision, inquiry should be directed to ascertain as to under which of two provisos amount falls. first proviso deals with bonus paid to employee in factory or establishment to which provisions of Payment of Bonus Act, 1965 apply. If certain bonus becomes payable under provision of Payment of Bonus Act, 1965, deduction in respect of such bonus is to be allowed without any further inquiry as to its reasonableness or otherwise. This is because by making such payment, assessee was discharging its statutory obligation. However, when bonus is not bonus referred to in first proviso, ITO has to make inquiry to ascertain whether it is reasonable having reading to three factors mentioned therein viz. (a) pay of employee and conditions of his service (b) profits of business for previous year in question and (c) general practice in similar business. bonus to which second proviso applies is bonus not referred to in first proviso. question, therefore, would arise as to what is nature of bonus referred to in first proviso. bonus referred to in first proviso is bonus payable under Payment of Bonus Act, 1965 to employee employed in factory to which provisions of said Act apply,. If particular bonus comes in category of bonus which is not payable under Payment of Bonus Act, 1965, it would be bonus not referred to in first proviso and such bonus would have to be dealt with under second proviso. As far as Payment of Bonus Act, 1965 is concerned, it deals with minimum bonus under s. 10 and maximum bonus under s. 11. minimum bonus is payable irrespective of fact whether employer has any allocable surplus in accounting year or not. maximum bonus under s. 11 is payable where allocable surplus exceeds amount of minimum bonus payable under s. 10. maximum ceiling under s. 11 is 20 per cent of salary or wage. This bonus is what may be termed as profit bonus. said Act does not deal with customary or festival bonus. Customary and festival bonus are outside scope of provisions in said Act. (see Mumbai Kamage Sabha, Bombay vs. Abdulbhai Faizullabhai and Ors. (supra) and Hukum Chand Jute Mills vs. Second Industrial Tribunal AIR 1979 SC 876). It is true that s. 17 of Act entitles employer to adjust, if he so likes, amounts paid as customary or festival bonus out of amount of profit bonus payable under that Act. But, if employer does not so adjust amounts paid as customary or festival bonus, Department cannot invoke first proviso to s. 36 (1) (ii) of IT Act and refuse to allow employer s claim for deduction of amounts paid as customary or festival bonus. customary or festival bonus which fall outside scope of payment of Bonus Act would be become deductible under second proviso provided said bonus is reasonable having regard to factors mentioned therein. We do not agree with contention of ld. counsel for assessee to effect that bonus which is not payable under first proviso would become allowable under s. 37 (1) of Act. Sec. 37 (1) contains general principles, while sec. 36 (1) (ii) deals with special case where sum is paid to employee, over and above its salary, as bonus for services rendered. According to well established canons of construction, when statute deals with special case, it is not permissible to contend that special case would also fall under general provision in statute. To hold otherwise would result in virtual nullification of provisions in s. 36 (1) (ii) of Act. Sec. 37 expressly mentions that expenditure should not be covered by s. 30 to 36 next question to be determined is as to under that category payment involved in this case would fall. ld, counsel for assessee contended that payment was ex-gratia payment and, as such, was outside scope of s. 36 (1) (ii) of Act, with result s. 37 (1) would apply. This contention cannot be accepted. payment was to employees for services rendered and that payment was in addition to salary payable . Consequently amount would be regarded as bonus paid to employees. It follows that provisions of s. 36 (1) (ii) would apply. We do not accept further contention of ld. counsel for assessee to effect Festival Bonus that said bonus was festival bonus would be bonus payable on occasions of rejoicing and spend for purpose of making payments of such bonus to employees is to help they meet extra expenses. in present case, payment has not been made to employees to meet extra expenses. It was not made on occasion of any festival. It is true that there was rejoicing because of occasion of 5th anniversary of business. However, that occasion cannot be considered as festival. It is usual for businessmen to celebrate certain anniversaries of their business which fall on expiry of certain numbering years like five years, ten years, or twenty five years. Such occasion is occasion for rejoicing. Since success of business depends on contribution made by employees, it is customary to pay bonus on such occasions. In circumstances, bonus of this type should be regarded as customary bonus. As already stated, this bonus is outside purview of provisions of Payment of Bonus Act, 1965. Consequently, first proviso would not apply, It is bonus which comes under category of bonus not being referred to in first proviso. Consequently, second proviso would be applicable. amount would be allowable as deduction provided it is reasonable with reference to three factors mentioned therein. Sometimes, said three factors are loosely described as conditions, but they are not really conditions on fulfilment of which alone amount of bonus paid to employee can be regarded as reasonable. They are merely factors to be taken by assessing authorities in determining reasonableness of amount of bonus. It may be that one of these factors yields negative response. For example, there may not be general practice in similar business to pay bonus but, yet, having regard to other circumstances, amount of bonus paid to employee may be regarded as reasonable. reasonableness of payment of bonus in such circumstances, is to be determined not by applying any subjective standards of assessing authorities, but with reference to principle of commercial expediency and by taking into consideration provisions of said clause. commercial expediency must be viewed in light of requirements of business and actual services rendered by persons concerned. perusal of orders of ITO and CIT (A) indicates that no attempt has been made to determine reasonableness of payment as customary bonus having regard to provisions referred to above. Consequently, it is necessary to restore matter to CIT (A) We hereby restore appeal to CIT (A) with directions to determine afresh question of admissibility of deduction of amount in question of light of relevant provisions of law after giving reasonable opportunity to bring necessary material on record to assessee and to ITO. In result, appeal is accordingly allowed. *** INCOME TAX OFFICER v. CHAITRA ADVERTISING PVT. LTD.