TMI Blog1964 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had debited its accounts with the sum of ₹ 71,949 in respect of its liability to pay bonus for its employees. This debit did not represent any actual payment. In the account year relevant to the assessment year 1957-58, the claim of the employees to bonus for the account year relevant to the assessment year 1950-51 was settled at ₹ 17,470 and that was paid to the employees. The difference between the original debit and the actual payment i.e., ₹ 54,479, was credited to the profit and loss account of the company. 2. In the assessment for the year 1957-58 the Income Tax Officer brought this amount to tax. He purported to do so under S. 10(2-A) of the Act. He repelled the contention of the assessee that since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits or gains, an assessment for any year in respect of any expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained some benefit in respect of such trading liability by way or remission or cessation thereof, the amount received by him or the value of the benefit accruing to him shall be deemed to be profits or gains of the business during that previous year. The section is perfectly clear. Applying it to the facts of this case, what it means is that if the assessee had incurred a particular liability, such as for bonus, of the sum stated earlier in the account year relating to 1950-51 and thereafter in any subsequent year that particular trading liability had become l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment had become final and was not capable of being reopened. The matter came before the High Court and the learned Judges observed thus: Once an assessment has been made to the best of he Income Tax Officer's judgment f any net income under S. 23(4) of the Act, it follows that all expenses incidental to the business must be presumed to have been taken into consideration in arriving at the net income assessed. It is this passage to the judgment that has been relied upon by the learned counsel for the department. Though this observation lends some support to the argument we may notice that in that particular case, it was a case of depreciation of he working assets which was not available beyond five years, and when the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to debit against the profits made in any year the liability which has accrued, even though that liability may not have been discharged. Mr. Swaminathan's further argument that there was no award or agreement under the Industrial Disputes Act, which would have created a legal liability upon it is no doubt good as far as it stands. But is well known that such bonus is payable year after year in the interest of industrial peace and in fact even in the assessment year 1949-50 there appears to have been a regular assessment on the basis of which the subsequent estimated assessments, were made. The bonus claim in 1949-50, debited probably in an identical manner as in 1950-51, was allowed in that year does not appear to be disputed. That ..... X X X X Extracts X X X X X X X X Extracts X X X X
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