COMMISSIONER OF INCOME TAX Vs. ANAMALLAIS BUS TRANSPORTS P LIMITED

JUDGEMENT

(1.) THE following question has been referred in this tax case :

(2.) THE assessee is a private limited company operating a bus transport. It follows the mercantile system. For the assessment years 1962-63 and 1963-64, the assessee made provision for payment of bonus to its employees to the extent of Rs. 1,63,503 and Rs. 1,79,000, respectively. THE amounts were shown under " liabilities for expenses " under the head, "contingency account " and the assessee deducted these amounts from the income returned for the respective years. THE Income-tax Officer held that these amounts were only provisions and not an ascertained liability and that, therefore, it was not an allowable claim. THE assessee preferred an appeal. THE Appellate Assistant Commissioner agreed with the views of the Income-tax Officer. But, on a further appeal, the Tribunal took the view that the bonus was regularly calculated on the basis of the period of service of the employees, that it was an ascertained and definite sum of money and that the bonus to workmen is a contingent liability of the employer and that this contingent liability becomes an accrued liability when the claim is admitted by the employer. In that view, the Tribunal held that it is an allowable claim of deduction.