This appeal is preferred by the assessee against the
judgment of the Allahabad High Court in Income-tax Reference No. 711 of 1973.
The question which was referred to the High Court under section 256(2) of the
Income-tax Act was :
" Whether, on the facts and in the circumstances of
the case, the sum of Rs. 1,01,530 provided as bonus relating to the profits of
the assessment year 1961-62 was an allowable deduction under section 10(2)(x) of
the Indian Income-tax Act, 1922 ? "
The assessment year concerned is 1961-62, the relevant
accounting year being the year ending on September 19, 1960. The workers had
raised a dispute demanding bonus. The dispute was referred on September 7, 1960,
to a committee formed for this purpose by the Government tripartite conference
was proposed to be held in which the said issue was to be decided. On the basis
of the recommendations of the said bodies, the Government issued a notification
on December 23, 1960, declaring that the workers are entitled to bonus. This
notification, it is evident, was issued after the closing of the said accounting
year of the assessee and it is by this notification that the liability to pay
bonus was created. During the accounting year relevant to the assessment year
1961-62, the assessee had made a provision in a sum of Rs. 1,01,530 towards
bonus and claimed deduction of the said amount in its assessment proceedings.
Its claim was disallowed and it is this issue which was ultimately referred to
the High Court.
The accounting year concerned herein is one prior to the
coming into force of the Bonus Act. Therefore, there was no existing liability
upon the assessee to pay bonus during the said accounting year. In other words,
during the relevant accounting year, the liability to pay bonus had not fastened
on to the assessee. The liability itself was created subsequent to the closing
of the accounting year. In such a situation, merely because the assessee has
made a provision for meeting such a contingent liability, it is not entitled to
deduction of the said amount under section 10(2)(x) read with section 10(5) of
the Indian Income-tax Act, 1922. This is indeed the decision of this court in
CIT v. Swadeshi Cotton and Flour Mills P. Ltd. [1964] 53 ITR 134. The same view
has been taken in another decision of this court in CIT v. Kalyanmal Mills Ltd.
[1964] 53 ITR 573.
For the above reasons, the appeal fails and is dismissed.
Appeal dismissed
