COMMISSIONER OF TAXES Vs. UJALA MATCH FACTORY
SUPREME COURT OF BANGLADESH
COMMISSIONER OF TAXES
Ujala Match Factory
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MAINUR REZA CHOWDHURY,J. -
(1.) These appeals under Article 103(2) of the Constitution arise from certificate granted by the High Court Division under section 66A (2) of the Income Tax Act 1922 to appeal against its common judgment dated 2-6-1991 delivered on reference made by the Deputy Commissioner of Taxes under section 66 of the Income Tax Act 1922 in application Nos. 1, 2 and 3 of 1984. The High Court Division was required to answer the following question in the affirmative:
Whether in the facts and in the circumstances of the case the Tribunal was justified in directing the Deputy Commissioner of Taxes to allow bonus as expenditure under section 10(2)(XVI) of the Income Tax Act, when the appellant-company had disclosed loss for the assessment years 1976-77, 1977-78 and 1978-79 and the same was disallowed by the Deputy Commissioner of Taxes under section 10(2)(X).
(2.) The relevant facts of the cases are that the respondent Ujala Match Factory Dhaka filed income tax return for the assessment years 1976-77, 1977-78 and 1978-79 claiming deduction of bonus of Taka 6,39,904, Taka 5,25,588 and Taka 5,42,742 for the above assessment years respectively. The Deputy Commissioner of Taxes disallowed these claims under section 10(2)(X) of the Income Tax Act and the same was upheld by the Appellate Joint Commissioner of Taxes on appeal preferred by the respondent assessee. The respondent assessee then filed Income Tax Appeal Nos. 1762 and 1763 of 1981-82 and Income Tax Appeal No. 3729 of 1982-83 before the Income Tax Appellate Tribunal who by one judgment dated 13-10-83 allowed the appeals in part, inter alia, by making the following observations.
Records show that although the appellant- company disclosed no book losses in all the years under reference the DCT nonetheless, computed net income in each of these years. This, in our view, turns the table completely against the department. Since the department itself has computed profit in all these years there is no reason why the condition of profit as laid down in section 10(2)(X) should not be deemed to have been amply satisfied. We will thus conclude that bonuses as in the cases of the appellant-company are allowable business expenditure within the meaning of section 10(2) of the Act and they shall be allowed as such. The orders of the DCT disallowing such expenditure and those of the learned AJCT confirming them shall therefore stand vacated for the assessment years 1976-77, 1977-78 and 1978-79.
(3.) The Deputy Commissioner of Taxes then filed an application under section 66(1) of the Income Tax Act, posing the query as has been quoted above. It was submitted on behalf of the learned Counsel for the applicant before the High Court Division that there was no provision for allowing bonus under section 10(2) (XVI) as given by the Income Tax Appellate Tribunal when the bonus claimed by the assessee under section l0 (2) (X) of the aforesaid Act is not allowable to him as the assessee allegedly did not earn any profit, during the years in question. The High Court Division noticed from Annexure-A series, that the Deputy Commissioner of Taxes disallowed the bonus as no profit was made by the assessee company by observing that since there was no profit, the claim of bonus under section 10(2)(X) of the Income Tax Act cannot be allowed. The High Court Division examined the provision under Section l0 (2) (X) of the Income Tax Act which runs as follows:
10. (1) Subject to the provisions of this Act, the tax shall be payable by an assessee under the head business profits and gains of business, profession or vocation in respect of the profits or gains of any business, profession or vocation carried on by him.
(2) Subject to the provisions of this Act such profits or gains shall be computed after making the following allowances, namely (X) any sum paid to an employee as bonus or commission for services rendered, whether such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission: Provided that the amount of the bonus or commission is of a reasonable amount with reference to
(a) the pay of the employee and the conditions of his service;
(b) the profits of the business, profession or vocation for the year in question;
(c) the general practice in similar businesses, professions or vocation.
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