9911796707
TMI Blog1973 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... he Southern India Mill Owners' Association of which it was a member. The Income-tax Officer disallowed the entire claim for deduction of bonus on the ground that no part of it was an ascertained liability at the close of the accounting year 1956 and normally bonus is allowed on the basis of actual payment. The Appellate Assistant Commissioner, while disallowing the assessee's claim for deduction to the extent of Rs. 48,993 not provided for in the accounts, allowed the claim to the extent of Rs. 1,50,000 on the ground that the provision made in the accounts was on the basis regularly adopted in the past. Both the assessee and the department filed appeals before the Tribunal. The Tribunal confirmed the order of the Appellate Assistant Commissioner in the view that to the extent of Rs. 1,50,000 in respect of which a provision has been made in the accounts of the assessee, it was an admitted liability and, therefore, an ascertained or accrued liability as on December 31, 1956. With regard to the assessee's claim for deduction of additional bonus of Rs. 48,993 the Tribunal held that it was neither admitted by the assessee in the accounting year 1956, nor settled by agreement with the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s enabling it to treat the provision as one for a current liability. We are unable to accept this contention of the learned counsel for the assessee. There is no evidence as to the basis on which the provision was made in the earlier years. For the assessment year 1957-68, Rs. 1,50,000 is said to have been arrived at on the basis of 31 months' salary. To find out whether the same basis was adopted in the earlier year or any different basis was adopted, there is no evidence. There is also no evidence that these provisions were made in the earlier years in pursuance of any agreement between the parties. Even the Tribunal did not accept the contention of the assessee that any particular system of accounting which contemplated a provision being made on any definite basis was systematically followed. The Tribunal considered that to the extent of Rs. 1,50,000 the liability is an admitted liability and, therefore, allowable as a deduction. There is no evidence of any claim having been made by the workers during the accounting year 1956. No question of admitting any liability could, therefore, arise. The entries in the account books were also not communicated to the workers and the workers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued liability on the date of the agreement." On the question whether the bonus payment was properly debitable only for the years of account 1949 and 1950, this court observed that it was only in the year of account ending January 31, 1952, that the liability accrued because the award was made on February 9, 1951, in respect of 1949 and the agreement in respect of 1950 was arrived at only on June 30, 1951. In the earlier years, it was at best a claim for bonus which is a contingent liability. A provision for meeting a contingent liability was not an allowable item of deduction. For this opinion, the learned judges also relied on the decision of the Supreme Court in Indian Molasses Co. (Private) Ltd. v. Commissioner of Income-tax. This decision was followed by another Division Bench of this court in Pankaja Mills Ltd. v. Commissioner of Income-tax. That was a case where the assessee who kept its accounts on mercantile system debited a sum of Rs. 70,000 in the accounting year ending December 31, 1951, by way of bonus for the workers for the years 1948 and 1950. The debit entry for the bonus for the year 1948 was based on an award of the industrial tribunal dated October 24, 1951, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany's accounts for the year were finalised, the amount of bonus used to be in fact debited to the profit and loss account of the respective year. The question for consideration was whether and in what year the liability of the sum of Rs. 1,08,325 arose according to the mercantile system. It was held that it was only in 1949 when an award was passed by the industrial tribunal, that the liability was incurred and that, therefore, the assessee was entitled to claim the deduction of bonus for the assessment year 1950-51. It will be seen from these judgments that a liability to pay bonus arises only when an award under the Industrial Disputes Act is made or an agreement is reached between the employer and the employee, which assumes a claim by the workers for payment and a settlement of the same by agreement. Thus, it a legal liability had accrued or was incurred, an assessee keeping the mercantile system of accounting could debit such liability in the accounting year in which such liability was incurred or had accrued. In this case, the provision of the sum of Rs. 1,50,000 made in the accounts was not towards liability incurred under an award or a settlement by agreement arrived at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a resolution of the board of directors to pay bonus at a particularate even during the accounting year in question and the provision was made only on the basis of the resolution. It was not disputed in that case that the assessee had incurred a liability when it passed the resolution. Clearly, therefore, the ratio of this decision is not applicable to the present case. For the foregoing reasons, we hold that the sum of Rs. 1,50,000 was not an admissible deduction. We, accordingly, answer the reference in the negative and in favour of the revenue. The learned counsel for the assessee submitted that if the amount is not an admissible deduction in the assessment year 1957-58, it should be directed to be deducted in the assessment year 1958-59 at least when the amount was actually paid. It is true that in view of our finding that he is not entitled to get the amount deducted for the assessment year 1957-58, he would be entitled to a deduction in 1958-59 assessment. But the question referred to us does not cover that issue. As such, we are unable to give any direction in this regard. But it will be open to the assessee to raise this point before the Tribunal in section 66(5) proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
