- (1.) JUDGMENT A.K.Sengupta,Shyamal Kumar Sen In this reference made at the instances of the Revenue, the Tribunal has referred the following questions under s. 256 (1) of the IT Act, 1961 ('the Act') , for the opinion of this Court:-- "1. Whether, on the facts and in the circumstances of the case and having regard to the fact that the assessee had claimed and was allowed deduction of actual bonus payment of Rs. 2,17,394 for the 1982 calendar year (on cash basis) during the calendar year 1983 relevant to the asst. yr. 1984-85, the Tribunal was justified in law in holding that the assessee changed the method of accounting for bonus payment from the 'Cash system' to the 'Mercantile system' and in that view allowing both the cash payment of Rs. 2,17,394 and Rs. 4,45,710 claimed on due basis during the asst. yr. 1984-85? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the disallowance of Rs. 4,45,710 being the provision made by the assessee for the bonus liabilities for the calendar year 1983? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the payment made during the financial year after the due date for payment of advance tax but within the financial year should not be excluded while computing interest chargeable under s. 139 (8) /215 of the IT Act, 1961? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that no interest under s. 139 (8) /215 of the IT Act, 1961 could be levied because of non- paying the last installment of advance tax on the prescribed date but paid during the financial year?"
(2.) THIS reference relates to the Income-tax assessment of the respondent-assessee in respect of the previous year being the calendar year 1983 corresponding to the asst. yr. 1984-85. The brief facts as found by the Tribunal are as under:-- The respondent-assessee is engaged in the business of manufacture and sale of tea. The respondent-assessee maintains accounts on Mercantile system and is being assessed on that basis; but, in respect of bonus payable to the workmen, the deduction was being allowed to the assessee- company in the earlier years on cash basis. During the previous year relevant to asst. yr. 1984-85 under reference, the assessee-company claimed before the AO that it had decided to change its method of accounting even in respect of bonus payment and that it wanted to record the liability in respect of bonus on Mercantile basis and claim deduction in respect of the expenditure by way of bonus on that basis only. Since, the charge in the system of accounting took place for the first time in the previous year relevant to the asst. yr. 1984-85, the assessee-company charged to its Profit and loss account for the previous year ending 31st Dec., 1983, the bonus payment of Rs. 2,17,394 for the calendar year 1982 on actual payment basis and had also debited its P&L A/c for the year ending 31st Dec., 1983 in respect of bonus payable for the said year. In other words, in the P&L A/c of the assessee-company drawn for the previous year ending 31st Dec., 1983 corresponding to the asst. yr. 1984-85, there were two debits on account of bonus, one in the sum of Rs. 2,17,394 being the bonus actually paid during the said year for the calendar year 1982 on Cash basis and another sum of Rs. 4,45,710 being the provision for bonus payable for the calendar year 1983 on Mercantile basis. In this view of the matter, the AO disallowed the sum of Rs. 4,45,710 being the bonus provided for the calendar year 1983 corresponding to the asst. yr. 1984-85. On appeal by the assessee, the CIT (A) confirmed the said disallowance of Rs. 4,45,710. On second appeal, the Tribunal allowed the assessee's appeal on this point following the decision of this Court in CIT vs. Electric Lamp Mfrs. (India) (P) Ltd. (1986) 55 CTR (Cal) 195 : (1987) 165 ITR 115 (Cal). It is an admitted fact that the assessee has changed the method of accounting in respect of bonus from Cash system to Mercantile. The assessee is even otherwise being assessed to Income-tax on Mercantile basis. The payment of bonus is undoubtedly a statutory liability and a provision in respect of bonus payable in accordance with law is clearly admissible in a case where Mercantile system of accounting is being consistently followed. The AO has admittedly computed the income of the respondent-assessee for the year under reference in accordance with the Mercantile system of accounting as indicated at the top of the assessment order against Column No.5 thereof. It is also an admitted fact that the bonus for the calendar year 1982, which was actually paid during the calendar year 1983 corresponding to the asst. yr. 1984-85, was never claimed and/or allowed as a business deduction in the earlier year in view of the fact that all along the bonus payments were being claimed and allowed as business deduction only on cash basis. The calendar year 1983 is the first year of change. Therefore, both actual payments on account of bonus for the calendar year 1982 as well as the provision made by the assessee-company on account of bonus for the calendar year 1983 had to be debited in the P&L A/c of the assessee-company drawn for the calendar year 1983 corresponding to the asst. yr. 1984-85. It is nobody's case that change of accounting in respect of bonus is not bona fide. In this view of the matter, we have no hesitation in holding that the Tribunal correctly allowed the claim of the respondent-assessee in respect of bonus provision for the calendar year 1983 in the sum of Rs. 4,45,710 which was duly provided by it in accordance with the Mercantile system of accounting followed by it in its P&L A/c drawn for the calendar year 1983 corresponding to the asst. yr. 1984-85. We are also forfeited in our view by the decision of the Bombay High Court in CIT vs. West Coast Paper Mills Ltd. (1992) 102 CTR (Bom) 127 : (1992) 193 ITR 349. In this view of the matter, we answer both the question Nos. 1 &2 in this reference in the affirmative and in favour of the assessee . The question Nos.3&4 relate to the issue whether payments by way of advance tax made by the respondent-assessee before 31st March, 1984, i.e., during the financial year 1983-84 corresponding to the asst. yr. 1984-85, but after the prescribed date, should be considered as advance tax or not for the purpose of computing assessee 's liability to interest under ss. 139 (8) and 215 of the Act. Reference has been made on behalf of the Revenue to the decision of a Division Bench of this Court in Kalidas Mullick No.1, Charitable Trust vs. CIT (IT Ref. No. 117 of 1982, dt. 29th Jan., 1990) . It is submitted that in the said case the same question whether advance tax paid within the financial year but after due dates of installments could be treated as advance-tax for the purpose of granting interest under s. 214 of the Act arose and it has been decided in favour of the Revenue's contention that advance-tax even though paid within the financial year but not in accordance with the provisions of s. 211 does not entitle the assessee to interest under s. 214. We have gone through the text of said decision. In the said decision, there were in all four questions of which question No.2 specifically raised the issue:-- "Whether advance-tax paid within the financial year but not strictly in accordance with the provisions of s. 211 of the Act is entitled to interest under s. 214?" But, there were other two questions raising the issue whether giving effect to any order of the Board extending concessional benefit to the assessee resulting in the refund of advance-tax becoming in excess there could be said to be excess of advance tax arising in 'regular assessment ' for the purpose of granting interest under s. 214 on such excess. The Division Bench exclusively dealt with the latter issue whether the order of the Board creating refund of advance-tax could occasion for allowance of interest on such excess advance-tax. The finding was that when the Board extends any benefit, the order giving effect to such benefit would not be an order of assessment on rectification so as to come within the scope and ambit of the words 'regular assessment ' for the purpose of s. 214. The question arising from payment of advance-tax within the financial year but not in accordance with the provision of s. 214 was not at all considered by the said Division Bench as there was no occasion for answering that question which became academic, once the refund of advance-tax itself is treated as refund arising otherwise than from regular assessment . This will be clear from the following paragraphs:-- "Admittedly, no notice was served upon assessee to pay advance-tax. The assessee voluntarily paid said amount of advance-tax after close of the accounting year which ended on 31st Dec., 1973 but on 24th March, 1974 before the end of the financial year. The regular assessment order in this case was passed on 29th Aug., 1978 under s. 143 (3) r/w s. 144B. As a result of this order of assessment a tax demand of Rs. 2,27,225 inclusive of interest was raised against the assessee -Trust. It is not the case of the assessee that the tax determined on the assessment under s. 143 (3) exceeded the amount of advance tax paid by it. After the order under s. 143 (3) was passed, the Trust approached the Board under s. 119 of the IT Act, 1961. Under s. 119, the Board can issue instructions and directions to the Income-tax authorities under the Board. If the Board considers it desirable or expedient, the Board can also direct any Income- tax authority, other than the Appellate Authority to grant relief to the assessee even though the period of limitation had set in for making any claim for exemption, deduction, refund or any other relief under the IT Act. In the instant case, assessee -Trust had approached the Board for grant of certain reliefs. The Board issued necessary directions to the ITO and those directions were carried out by the ITO by an order of rectification. Actually, there were no errors apparent in the order of the ITO. It is only to give effect to the direction of the Board, the ITO rectified the order of assessment. This order of assessment cannot be treated as 'regular assessment' under any circumstances. Therefore, the assessee cannot claims interest under s. 214 on the ground that the tax determined on regular assessment was less than the advance tax paid. The question No.2 is, therefore, answered in the affirmative and in favour of the Revenue. The question Nos. 3&4 must also be answered in favour of the Revenue." Through an oversight question No.2 which raised the question of advance-tax paid not in accordance with s. 211 was observed to have been answered in the affirmative and in favour of the Revenue in that judgment of the Division Bench, while in fact question No.2 was not at all dealt with by the said Bench. Therefore, the said decision does not advance the case of the Revenue.
(3.) THIS issue is now covered in favour of the assessee by the two decisions of this Court in CIT vs. Ajoy Paper Mills Ltd. (1989) 84 CTR (Cal) 60 : (1990) 181 ITR 454 (Cal) as well as in CIT vs. Surajbhan Mahawar (1990) 186 ITR 400 (Cal). Respectfully following the said two decisions of this Court, we answer both question Nos. 3 & 4 in the affirmative and in favour of the assessee. Question Nos. 1 & 2, as already stated earlier, are also answered in the affirmative and in favour of the assessee.;