TMI Blog1975 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 ?" The assessee is a private limited company and runs a sugar mill at Deoria. The assessment year involved is 1961-62 with the previous year ending on 19th September, 1960. The assessee made a provision of a sum of Rs. 1,01,539 for payment of bonus to its workers in respect of the profits of the relevant previous year and claimed the sum as deduction in the computation of its net profits liable to tax. The Income-tax Officer disallowed the claim of the assessee on the ground that the liability for bonus was determined under the orders of the Government dated 29th December, 1960, and so on 29th September, 1960, when the accounts were closed there was no ascertained liability against the assessee for payment of bonus. He relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a similar practice in the past the claim of the assessee should be allowed in respect of the assessment year in question also. Against that order the department went up in appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the department's appeal and set aside the order of the Appellate Assistant Commissioner of Income-tax holding that at the end of the previous year there did not exist any legal liability against the assessee for the payment of bonus and the liability arose only on 23rd December, 1960, when the Government issued a notification under the Industrial Disputes Act, saddling the assessee with the liability for the payment of bonus. The assessee is aggrieved and at his instance this reference has been made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of which the profits and gains are computed under this section. This has been provided in section 10(5) of the Act. In the instant case the bonus was admittedly paid after the close of the previous year but the liability for payment had also arisen after the close of the previous year when the Government issued the notification in December, 1960. A similar question arose before the Supreme Court in Commissioner of Income-tax v. Swadeshi Cotton and Flour Mills (P.) Ltd. There the assessee-mill made a provision for payment of bonus relating to the profits of the year 1947. The provision was made in the year 1948 but the award under the Industrial Disputes Act was given in 1949. The Supreme Court held that the liability of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in which the approval is granted by the Government and not earlier. In Textile Machinery Corporation Ltd. v. Commissioner of Wealth-tax the Calcutta High Court held that the liability to pay bonus is a debt and not a contingent liability within the meaning of section 2(m) of the Wealth-tax Act, 1957. We have no quarrel with that proposition. We respectfully do not agree with the view that a provision for bonus can become a debt even prior to the date when the payment of bonus is amicably settled or adjudicated upon under the Industrial Disputes Act. Such a view is contrary to the view of the Supreme Court in the case of Swadeshi Cotton Flour Mills (P.) Ltd. It is true that bonus is no longer a matter of concession but workers can cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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