TMI Blog1988 (8) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year for the payment of any reward, and that the amount of reward was in some cases more than the salary paid to the concerned employees. The learned ITO, therefore, held that there was no actual expenditure and he, therefore, disallowed the same. His action has been confirmed by the CIT(A), who agreed with the findings recorded by the learned ITO. 3. The learned counsel for the assessee contended that the assessee has been paying rewards to his employees even in the past and that a legal liability had been incurred during the accounting year in question as the employees knew that suitable reward would be given to them. The learned counsel pointed out that the amount of the reward was decided by the assessee after the results of the business were available at the close of the accounting year and that the reward were paid to keep the employees contented. According to the learned counsel, the assessee was paying low salaries to his employees and after the close of the accounting year they were compensated by the grant of reward that depended on the profits earned by the assessee. On the other hand, the learned Departmental representative contended that thought awards mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year. Out of a provision of Rs. 32,500 made for this year, only Rs. 11,000 were paid in the accounting year ending 31st March, 1981 and Rs. 21,500 were paid in; the accounting year ending 31st March, 1982. This chart also shows that in respect of the head office, no provision was made for such payment in the accounting year ending31st March, 1979. In respect of a branch at Ambala described as ASB, Ambala out of the alleged provision of Rs. 17,500 only Rs. 2500 were paid in the accounting year ending31st March, 1982. In respect of the Ludhiana Branch, out of the alleged provision of Rs. 32,500 only Rs.5000 were paid in the following accounting year and the balance is shown to have been paid in the accounting year ending 31st March, 1982. This chart would show that for the immediately preceding year ending on 31st March, 1979, only Rs. 5000 are claimed to have been granted as award in one of the branches, i.e. at Kotkapura. For other places, no amount is shown to have been awarded to the employees. It is thus clear that there was no definite understanding between assessee and his employees about the grant of the award nor was there any assurance by the assessee which could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that was the subject-matter of dispute in that case had actually been paid to the persons concerned and there was nothing to show that it was after the close of the accounting year that that assessee decided to make certain payments. What can be allowed as an expenditure for determining the income of an assessee is the expenditure actually incurred either by actual payment or by incurring a liability therefore during the accounting year itself. If a liability incurred later on is allowed as an expenditure that would amount to permitting an assessee to determine on how much of his income he should pay tax and permitting him to avoid tax on the rest of the income on the plea that the rest of his profit would go to his employees, when would it go and to whom, being not certain at all. In the case before us the facts clearly indicate that neither there is any established practice from the past nor any definite terms evolved in the relevant accounting year nor the payments have been made soon after the alleged decision to give the awards. The amounts of awards said to have been granted to the various employees remain outstanding and in such circumstances we are unable to agree with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure on this account was Rs. 21,320 out of which the disallowance is only Rs. 2000 for the estimated personal user of the telephone. In the immediately preceding year, the total expenditure was Rs. 12,950 and in the following year, it was Rs. 10,033. No explanation has been given as to why in this particular year there was an abnormal increase., A telephone at the residence of the proprietor of the business has to be used for personal purpose as well and, therefore, the disallowance to the extent of Rs. 2000 was quite reasonable. 9. The next ground raised in this appeal is about the disallowance of Rs. 726, Rs. 653 and Rs. 2100 in respect of expenditure claimed by the assessee under the head donation. Donation is not allowable expenditure and, therefore, the sums of Rs. 653 and Rs. 726 were properly disallowed. As regards Rs. 2100 we find no such disallowance in the assessment order. There was only a disallowance of Rs. 1000 in the Kotkapura branch out of Diwali expenses. The learned counsel for the assessee did not point out how these disallowances could be said to be allowable. This contention is, therefore, rejected. 10. The last contention raised in this appeal is abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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