This is appeal by Department relating to income tax assessment f o r year 1981-82 of assessee, Sales, Co-operative Sugar Mills Ltd. Salem. There are to objections raised in this appeal against order of CIT (A). first is with regard to allowance directed by CIT (A) of bonus payment by assessee in excess of statutory limit prescribed under payment of Bonus Act under s. 37(1) of IT Act. second objection is to direction of CIT (A) for allowing extra shift allowance in respect of concern entitled to such extra shift allowance as whole without restricting it to number of days each item of plant and machinery actually worked extra shift. It is convenient to dispose of second objection first. Department in support of its contention relies on decision of Madras High Court in case of South India Visose Ltd vs. CIT (1982) 29 CTR (Mad) 356: (1982) 135 ITR 206 (Mad). This question has repeatedly come up before Tribunal in number of cases and it has been uniformly held that though Madras High Court decision would support Department s case and is binding on Tribunal if Tribunal were to interpret relevant rules concerning grant of extra shift allowance assessee s claim has to be upheld because it is supported by circular of CBDT which it has been by number of decisions of Supreme Court and High Court is binding on IT authorities and should be followed even if it deviate from strict provisions of law. (See for instance decision in K. R. Varghese vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC), CWT vs. Gommon India Ltd. (1981) 130 ITR 47 (Bom) and T. C. No. 387 & 388 of 1978 dt. 28th Dec. 1983 in case of CIT vs. Sumdaram Finance (1984) 43 CTR (Mad) 53) it is also understood that earlier circular of CBDT had been reiterated and reaffirmed recently even after taking note of Madras High Court decision in South India Viscose Ltd. (supra). In circumstances, there is no merit in Department s objection on this point, which is accordingly rejected. As regards first ground of objection, assessee claimed deduction for payment of bonus of Rs. 6,27,868 in addition to minimum bonus payable u n d e r payment of Bonus Act. This payment was necessitated by settlement with workers under Industrial Disputes Act. ITO disallowed claim on ground that assessee had no allocable surplus and therefore any payment beyond minimum of 8.1/3 per cent is inadmissible, but in appeal CIT (A) accepted assessee s claim and allowed deduction. contention of Department before us it that s. 36(1) of IT Act puts ceiling on admissible amount of expenditure on payment of bonus. According to this provision, only bonus as provided under Payment of Bonus Act is eligible for deduction and excess has to be disallowed. He draw support for this from recommendation of Choksi Committee which, according to him evidence understanding of Choksi Committee as restricting payment of bonus as per payment of Bonus Act. It is pointed out that in this case payment claim for deduction is in pursuance of settlement made in regard to s. 31A of payment of bonus Act. We referred to this section and contended that very language of section authorising payment of bonus linked with production or productivity shows that it is in lieu of bonus issued on profits payable under said Act and therefore payment under agreement under sec. 31A cannot be said to be payment of bonus as per payment of Bonus Act which is linked with profit. Such payment under agreement being outside statutory limit under payment of Bonus Act it is argued must therefore by regarded as voluntary payment by employer in so far as it exceeds limit of bonus allowable under payment of Bonus Act, which is hit by prohibition contained in proviso to cl. (ii) of s. 36(1) of IT Act. In his submission production bonus payable under s. 31A of payment of Bonus Act would arise only if employer and employee out of their volition enter into agreement or settlement to receive production bonus in lieu of bonus payable under Payment of Bonus Act, that such payment under s. 31A is not mandatory and nobody can compel employer to enter into agreement within meaning of s. 31A of Payment of Bonus Act. It is also further argued that although agreement is entered into in this case under s. 12(3) of Industrial Disputes Act, it cannot be regarded as payment beyond control of assessee, such as it would be where amount is filed by award under Industrial Disputes Act where it is not determined either by employer or employee or by mutual agreement, but determined altogether by independent authority. Therefore, it is argued that it cannot be regarded as payment otherwise than payment of bonus under s. 36(1) of Act so as to entitle it to be claimed as expenditure or outlay necessitated by statutory compulsion. ld. Departmental Representative also sought to distinguish High Court order in case of Sivanada Mill in TCP No. 228 of 84 dt 12 Dec. 1984 on ground that it was incentive bonus paid in addition to regular bonus. Lastly, he contended that settlement was reached in this case on 23rd Sept. 1978 covering two years 1977-78 and 1978-79 and therefore relevant previous year in which assessee could have claimed deduction relating to year 1978-79 is asst. yr. 1980-81 and not present asst. yr. 1981-82. ld. Representative for assessee contended that s. 31A is part of payment of Bonus Act and therefore any payment under that will be payment of bonus in accordance with Act authorised by it and consequently it cannot be said to be in excess of amount payable under Payment of Bonus Act. He also relied on order of Tribunal, Madras Bench -D in case of IAC vs. Jawaha Mills Ltd. (184) 8 ITD 20 (Mad). assessee s ld. Representative further relied on order of Tribunal in assessee s own case for earlier asst. yrs. 1979-80 and 1980-81 in ITR Nos. 732 & 733 Mds/84 dt. 17th Nov. 1984 and pointed out that assessee is entitled to claim payment in this year in accordance with practice followed and noticed by Tribunal in its order and further that total bonus claimed by assessee does not exceed 20 per cent of wages. On careful consideration of facts and rival submission, we do not find any merit in Departments objection on this point. Tribunal in articles order in case (supra) has noticed practice followed in assessments of assessee for deduction of bonus. practice is to allow minimum 8.1 3 per cent in relevant pervious year and balance in subsequent assessment year. We have seen assessment orders in this case for earlier years. e.g. 1975-76. It show that against bonus provided 8.1 5 per cent is allowed and further allowances is made in regard to bonus actually paid. It is clear to us that while amount payable under Payment of Bonus Act. 8.1/ 3 per cent is allowed against provisions made in accounts, any excess payment in pursuance of agreement of settlement beyond limit provided under Payment of Bonus Act on basis of profits is allowed in year of actual payment. We, therefore, do not find any merit in Department s objection that present year is not relevant year in which assessee can claim deduction. As regards contention that payment cannot be said to be in accordance with Payment of Bonus Act, here also we do not agree with learned Departmental Representative. Sec. 36(1), cl. (ii) proviso only limits payment of bonus to amount of bonus payable under Payment of Bonus Act. Now, if s. 31A authorises payment of bonus otherwise than on basis of profit we cannot see how payment under that section cannot be regarded as payment under Act out outside Act. Be that as it may, even assuming that it does not fall under Payment of Bonus Act, we hold that payment in this case of amount under settlement is therefore payment falling to be considered as expenditure wholly, necessarily and exclusively incurred for purpose of business as assessee has no option, but to discharge its liability. contention of ld. Departmental Representative that because amount of bonus of method of determining same is fixed under agreement between workers and employer it is voluntary payment and it is open to employer not to agree to pay any bonus is without merit. It is seen that payment in this case is made under settlement under sec. 12(3) of Industrial disputes Act. preamble to agreement shows that industrial disputes has arisen in this case over payment of bonus and there were negotiations between parties on this issue and as result of conciliatory talks before special Dy. CIT settlement has been arrived at. Sec. 12 of Industrial Disputes Act contemplates conciliation proceedings being held by conciliation Officer where industrial dispute exists or is apprehended and it is his duty to induce parties to come to fair and amicable settlement. If settlement is reached then he has got to forward it with report to appropriate Government. under sec. 18 of Industrial Disputes Act, settlement arrived at in course of conciliation proceedings or award etc. shall be binding on all parties to dispute and sec. 29 of Industrial Disputes Act providese that any person who commits breach of any term of any settlement or award which is binding on him under said Act shall be punishable with imprisonment for term stated therein or fine or both and for other consequences. If any agreements is not reached between parties as result of negotiating, act provides for reference of case to appropriate Government which may ultimately lead to award. It is therefore clear to us that employer in case where industrial dispute arise on question of payment of bonus has either to agree to settlement or allow law to take its own course which may result in award and when he makes settlement it is done in best interest of business and to avoid uncertainties particularly as if agreement is not reached it is not possible to know what will be ultimate award and whether it will be more burden some than amount stipulated under agreement. In any event, whether he agrees to settlement or allows dispute to be decided ultimately resulting in award he cannot choose to ignore either, which will amount to infraction of statutory requirement exposing him to penal consequences. Therefore, he discharges his statutory liability which is binding on him, it can only be regarded as payment eligible for deduction under s. 37 of IT Act and not payment of bonus under s. 36 of IT Act and consequently limit prescribed under s. 36(i)(ii), proviso will not apply. Moreover, we do not agree that order of High Court in Sivananda Mills Ltd. is distinguishable. That case involved claim for deduction of incentive bonus which was made in addition to regular bonus as per Payment of Bonus Act and question was whether it should be allowed as deduction under s. 37 of IT Act. It was held in that case at s. 36(i)(ii) reference to payment made under Bonus Act and incentive bonus or customary bonus in not bonus paid under payment of bonus Act and therefore, s. 36(i)(ii) of IT Act has no application. It was held that incentive bonus paid is expenditure laid out wholly and exclusively for purpose of business and it is eligible for deduction under s. 37. production bonus is not in any way different. In circumstances, we reject this objection of Department also. In result, appeal is dismissed. *** FIRST INCOME TAX OFFICER v. SALEM COOPERATIVE SUGAR MILLS LTD.