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TMI Blog1984 (1) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the fact that no appeal lies against provisions of section 214 of the Act. The assessee is following mercantile system of accounting and closes the books of account on 30th June. During the accounting period ending 30-6-1978, the assessee made a provision of Rs. 1,42,139 for payment of bonus to the workers at 20 per cent of their salary and wages. The ITO observed that during the previous year, the company had suffered loss and there was no allocable surplus available from which the bonus at the rate of 20 per cent on salaries and wages could be paid. Under the Bonus Act, since there was no allocable surplus, the liability of the company was only in respect of minimum bonus to the extent of 8.33 per cent of salaries and wages. Any excess bonus over the minimum payable was not admissible as deduction under section 36(1)(ii) of the Act and, therefore, he disallowed this excess sum of Rs. 81,914. The submission of the assessee that 20 per cent bonus was provided on the basis of an agreement entered into with the workers was rejected. 2. On appeal, on behalf of the assessee, reliance was placed on the decision of the Tribunal in IT Appeal No. 3274 (Bom.) of 1980 decided on 30-4- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(5), it was submitted that the department wanted to keep the issue alive as the decision of the Special Bench was not accepted by the department. 7.3 In respect of the interest under section 214, it was submitted that the payments of advance tax were made as under : Date Amount Rs. (i) 10-1-1979 1,50,000 (ii) 16-1-1979 1,00,000 (iii) 17-3-1979 50,000 (iv) Refund for earlier adjusted during March 1978 1,28,416 ---------- Total 4,28,416 ---------- It was submitted that payment in response to the notice under section 210 of the Act would only be considered as advance tax payment. Reliance was also placed on the decisions in the case of Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339 (AP) and in the case of A. Sethumadhavan v. CIT [1980] 122 ITR 587 (Ker.). For the sake of clarification, it was also mentioned that no interest under section 217 of the Act was charged. Support was also drawn from the Special Bench of the Tribunal in the case of ITO v. India Tyre & Rubber Co. (I.) (P.) Ltd. [1983] 3 SOT 52 (Bom.). Basically, no appeal lies for interest under section 214 as was decided in that case. Therefore, the Commissioner (Appeals) was in error in directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of 20 per cent was held to be allowable. However, the facts of the case under appeal are different. It is an admitted fact that agreement with the employees was arrived at only on 26-9-1978, i.e., after the accounting year ended. Though the terms of settlement do include the payment of bonus even for the year under consideration, this aspect has no bearing on the point of allowability of the expenditure. The Commissioner (Appeals) was in error in not distinguishing these features of the case under appeal. There was no question of applicability of decision of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) because in this case, the liability was a statutory liability which accrued on the specified statutory dates. In the case of the assessee, what is under consideration is a contractual liability which did not crystallise until the date of agreement, i.e., 26-9-1978. Therefore, the revenue was fully justified in claiming that liability for making the payment to the extent of 20 per cent did not exist at all before the end of the previous year. If at all liability existed, it was only to the extent of 8.33 per cent as provided under the Payment of Bonus Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments on the advance tax challans, if the ITO did not wish to accept the payments as advance tax payments, it was his duty to return the payments or at least write to the assessee that payments are accepted though not as advance tax payments. Because sections 59 to 61 of the Indian Contract Act, 1872, lays down that when the payment is made with certain conditions and directions, the payments would be appropriated as directed, if the payment is accepted by the payee. Certainly, it cannot be the case of the revenue that the Indian Contract Act does not apply to it. The learned departmental representative, while giving the details in respect of the payments as brought to our notice that Rs. 1,28,416 pertained to refund of tax for earlier year. Looking to the assessment order, the ITO has stated as under: "Give credit for advance tax paid Rs. 3 lakhs and advance tax Rs. 1,28,416 adjusted during March 1978." Therefore, it is clear that refund of Rs. 1,28,416 was adjusted as advance tax in the records of the revenue by an order of the ITO. Therefore, the refund of the earlier year acquired the same characteristic of the advance tax. We also do not find anything wrong in this becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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