BHAGABATI PRASAD BANERJEE, J. - (1.) THE Tribunal has referred the following question of law under S. 256(1) of the IT Act, 1961 to this Court : "Whether, on the facts and in the circumstances of the case and on the correct interpretation of the Ordinance amending the Payment of Bonus Act, 1965 on 25th Sept.1975 with retrospective effect, the assessee was entitled to the deduction of Rs.12,59,034 in computing its total income for the accounting period relevant to the asst. yr. 1975-76 ?"
(2.) IN this case the assessment year involved is 1975-76 for which the corresponding year of accounting is the year ended on 31st March, 1975. The facts found by the Tribunal as contained in the statement of case are as under: Admittedly the assessee had for the year provided for bonus @ 8.33 per cent in accordance with the provisions of the Payment of Bonus Act, 1965. After the accounts of the assessee for the year under consideration were closed on 31st March, 1975, the Government of India issued an Ordinance amending the said Bonus Act on 25th Sept., 1975 restricting the amount of bonus to 4 per cent. The bonus provided in the accounts for the year ending on 31st March, 1975 exceeded the bonus payable in accordance with the Ordinance, which was given retrospective effect and was applicable for the year 1974-75, by Rs.12,59,034. The ITO, however, allowed the deduction on account of bonus to the extent of Rs.15,84,481 and disallowed the excess sum of Rs.12,59,034 by observing as under : "The bonus statement filed shows that the assessee provided Rs.28,43,523 in the account and got it debited in the P&L A/c, under the heads salary, wages, bonus etc. The assessee was liable for payment of bonus amounting to Rs.15,84,481 and it transpired that an excess sum of Rs.12,59,034 was claimed as expenses and reduced their taxable profit to that extent. A question was raised in the assessment and the assessee had explained by a note that the unspent liability was written back in the next year's a/c. In a letter the assessee had suggested that bonus @ 8-1/3 per cent was provided in the accounts as bonus during the last year was paid @ 8-1/3 per cent. Actual payment of bonus for the accounting year ended 31st March, 1975 was @ 4 per cent. For whatever explanation the assessee likes to offer, it cannot be denied that the actual liability on account of bonus for the year under consideration was not known to them at the time of filing the return and there cannot be any reason to understate the profit shown in the return of income. Amount of Rs.12,59,034, which was neither an ascertained liability nor a liability in fact is disallowed in the assessment. The attempt to write back the amount in the next year, as submitted by the assessee, will not take away the character and treatment of the said sum in this assessment, since it is a disallowable item in this assessment." Being aggrieved by the aforesaid disallowance the assessee brought the matter by way of appeal before the CIT(A), Central-II, Calcutta who upheld the claim of the assessee in the matter of bonus in entirety as provided for in the books. The matter came up before the Tribunal. The Tribunal upheld the order of the CIT(A) by observing as under : "7.... It is seen that the debit in the accounts on 31st March, 1975 was in accordance with the Payment of Bonus Act, as it stood on that date. The assessee was under a statutory liability to pay a bonus of Rs.28,43,523. The Ordinance passed in the subsequent year reduced the liability, no doubt, by Rs.12,59,034. The relevant provisions of the Ordinance are reproduced below : 10......Amount of bonus-(1) Subject to the other provisions of this Act, where an employer has any allocable surplus in any accounting year, he shall be bound to pay to every employee in respect of that accounting year a minimum bonus, which shall not be less than four per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees whichever is higher, or in a case where the allocable surplus exceeds the said amount of minimum bonus payable to the employees, an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage : Provided that where an employee has not completed fifteen years of age at the beginning of that accounting year, the provisions of this sub-section shall have effect in relation to such employee, as if for the words "one hundred rupees". the words "sixty rupees" were substituted. (2) For the purposes of sub-s. (1) the allocable surplus shall be computed taking into account the amount set on or set off in the three immediately preceding accounting years and in the accounting year in respect of which the bonus is payable in the manner illustrated in the Third Schedule. (3) Notwithstanding anything contained in this section, every employer shall be bound to pay to every employee in respect of the accounting year commencing from any day in the year 1974, a minimum bonus which shall be four per cent of the salary or wage earned by the employee during that accounting year or one hundred rupees whichever is higher, whether or not the employer has any allocable surplus in that accounting year : Provided that where an employee has not completed fifteen years of age at the beginning of that accounting year, the provisions of this sub-section shall have effect in relation to such employee as if for the words "one hundred rupees", the words" sixty rupees" were substituted: Provided further that where an employer has, before the commencement of the Payment of Bonus (Amendment) Ordinance, 1975, paid to his employees in respect of the accounting year commencing on any day in the year 1974, a minimum bonus in excess of that specified in this sub- section, notwithstanding that such employer did not have the required allocable surplus for the payment of such bonus, then such employer shall deduct the excess amount of bonus so paid from the amount of bonus payable by him to the employees under this Act in respect of the three immediately succeeding accounting years and the employees shall be entitled to receive the balance."
(3.) IN our view in the facts and circumstances of this case the Tribunal has taken a correct view. In this case the Ordinance came into force only on 25th Sept., 1975. The petitioner made a claim for deduction in the assessment for the year 1975-76 for which the relevant accounting year ended on 31st March, 1975. The accounting of the petitioner for that year of account was completed and closed and the liability was shown on the basis of the law prevailing at the time and bonus was provided for in accordance with law prevailing at that time during the year of assessment. It has been stated on behalf of the assessee that in the next year the assessee had adjusted the amount and had paid the tax on the excess amount, in view of the said Ordinance after adjusting the amount in terms of the said Ordinance. In that view of the matter the question is answered in the affirmative and in favour of the assessee. There will be no order as to costs.;