NEW VICTORIA MILLS COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated under section 66(1) of the Income-tax Act of 1922.

(2.) THE material facts are that for the assessment year 1949-50, the previous year being 31st December, 1948, the assessee-company claimed as a deduction a provision made for bonus amounting to Rs. 4,50,000 provided for in the profit and loss in the relevant previous year, but actually paid in the following year. For the accounting year ending October 31, 1942, although a provision was made in its accounts for bonus in the sum of Rs. 1,00,000, only Rs. 63,385, the actual payment made, was allowed to be deducted in that year and the balance was disallowed. For the years ending October 31, 1943, up to the year ending December 31, 1947, the position was more or less the same. Allowance for bonus was invariably made on the basis of actual payments and in disregard of the provision that was made in the accounts for bonus. In some years the actual payment was more than the provision that had been made and in others less. THErefore, the allowance for bonus since the year ending October 31, 1942, was always made on the basis of actual payments and this was being acquiesced in by the assessee. In the relevant year of account the assessee while admitting before the Income-tax Officer that the past practice was to claim deduction for bonus on the basis of actual payment contended that it could change the system of accounting hitherto followed by it by insisting on the bonus being allowed on accrual basis and not on the actual receipt or payment basis. THE Income-tax Officer did not accept this contention and allowed only the bonus of Rs. 5,252 actually paid during the relevant year of account and added back the balance of Rs. 4,44,748 out of the provision of Rs. 4,50,000 that the assessee had made in its books for bonus.

(3.) IN this view of the matter, we would answer the question referred in the negative and against the assessee. The assessee will pay the costs of this reference, which we assess at Rs. 200. Counsels fee is also assessed at Rs. 200.