- (1.) 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 Income tax Act, 1922 -
(2.) The assessment year concerned is 1961-62, the relevant accounting year being the year ending on 19-9-1960. The workers had raised a dispute demanding bonus. The dispute was referred on 7/9/1960 to a Committee formed for this purpose by the government. A 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 23/12/1960 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 accounting year 1961-62, the assessee had made a provision in a sum of Rs. 1,01,530. 00 towards bonus and claimed a 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.
(3.) The accounting year concerned herein is one prior to 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 of paying 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 Income tax Act, 1922. This is indeed the decision of this court in commissioner OF INCOME TAX v. Swadeshi cotton and Flour Mills (P) Ltd. ' Same view has been taken in another decision of this court in cit v. Kalyanmal Mills Ltd;