ASSOCIATED PRINTERS MADRAS PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Associated Publishers Ltd., to which we shall refer hereafter as the predecessor company, carried on the business till January 31, 1950. It was transferred to the assessee company which continued the business from February 1, 1950, without any break. Both were private companies, and a third company, Amalgamations Ltd., was the principal shareholder of both. THE year of account of that business ended on January 31 each year. When the business changed hands on February 1, 1950, the claim of the workmen for Deepavali bonus for 1949 was the subject of an industrial dispute pending adjudication before the Industrial Tribunal constituted under the Industrial Disputes Act. THE award of the Tribunal, directing the grant of bonus of one and a half months basic wages to each of the workmen, was published on February 9, 1951. THE assessee company was a party to that award. Section 18 of the Industrial Disputes Act provided for the enforcement of the award against the successor, where there had been a succession to business. THE claim for bonus for Deepavali in 1950 was settled by direct negotiation between the assessee company and its workmen on the same lines, namely, one and a half months wages. That agreement was arrived at on June 30, 1961. THE total amount thus payable as bonus for the two years amounted to Rs. 54,140, and that amount was debited in the accounts of the assessee company in its year of account which ended on January 31, 1952. Out of this amount Rs. 51,936 appears to have been disbursed to the workmen in the course of that year. THE balance of Rs. 3,204 remained undisbursed even in the next year, and it was shown as a liability of the assessee company in the next years account. THE assessee company deducted the amount of Rs. 54,140 as an allowable item of expenditure in computing its losses in the assessment year 1952-53. That claim was disallowed by the Income-tax Officer, who added back the sum of Rs. 54,140 to compute the loss that the assessee could be allowed to carry forward. In the assessment year 1953-54 the undisbursed bonus of Rs. 3,204 was added back by the Income-tax Officer to compute the assessable profits of the year of account 1952-53. THE learned counsel for the assessee represented that the assessee company did not claim Rs. 3,204 over again as an allowable item of expenditure in the year of assessment of 1953-54.

(2.) THE Assistant Commissioner, to whom the assessee company appealed allowed the claim of the assessee for : both the years. On appeal preferred by the department, the Tribunal set aside the orders of the Assistant Commissioner and restored the orders of the Income-tax Officer.

(3.) IN the case of the assessee company, when the liability to pay the bonus for 1949 and 1950 became an accrued liability, the law imposed that liability on the assessee. Thus it was its own legal liability that the assessee company discharged when it provided for the bonus payments in the year of account 1951-52.