JAWAHAR LAL GUPTA, J. - (1.) THIS is a reference by the Tribunal at the instance of the assessee. The following two questions have been referred to this Court for opinion : "(1) Whether, on the facts and circumstances of the case, the Tribunal was right in law in confirming the disallowance of the assessee's claim of Rs. 25,782 as surtax liability while computing its taxable income for the asst. year 1977 78 ? (2) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that 'set on of bonus' as per S. 15(1) of the Payment of Bonus Act, 1965, at Rs. 2,56,042 is not allowable as business expenditure in computing the assessee's income for the asst. year 1977 78 ?"
(2.) THE assessee is engaged in the manufacture and sale of bicycle freewheels. In its income tax return for the asst. year 1977 78, the assessee claimed deduction of Rs. 25,782 on account of surtax liability under the provisions of the Companies (Profits) Surtax Act, 1964. It also claimed a deduction of Rs. 2,56,042 on account of "allocable surplus set on for bonus liability under the Payment of Bonus Act". This claim was disallowed. Having lost up to the Tribunal, the assessee has sought the reference and has now come to this Court. Mr. Ajay Mittal, learned counsel for the assessee, contends that a tax paid by the assessee is not income but is a deductible part of the expenditure. He further submits that the action of the Revenue in disallowing the amount kept for set on of bonus under S. 15(1) of the Payment of Bonus Act, 1965, could not have been denied as a permissible deduction.
(3.) MR . Sawhney, on the other hand, has pointed out that both the questions are concluded against the assessee by pronouncements of different Courts in so far as surtax is concerned.;