Madhya Pradesh High Court
Commissioner Of Income-Tax vs Gunwantrai Harivallabh Jani on 3 October, 1997
Equivalent citations: [1999]235ITR33(MP)
Author: A.K. Mathur
Bench: A.K. Mathur, Dipak Misra
JUDGMENT A.K. Mathur, C.J.
1. This is a reference under Section 256(2) of the Income-tax Act, 1961, at the instance of the Revenue and the following questions have been referred by the Tribunal for answer by this court :
"1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in holding that the provision towards bonus payment at Rs. 1,09,932 was allowable for deduction ?
2. Whether there was any material on record and if so, whether they were significant for the Tribunal to hold that the legal liability was in fact incurred during the accounting period ?"
2. The assessee is a registered firm. During the year under consideration, it had carried on business of bidi manufacture and its sale. It had made a provision for Rs. 1,09,932 towards bonus which undisputably was not paid to its employees up to the last date of the accounting year. The assessee had claimed that this amount of provision was deductible from its profit. The claim of the assessee rested on two grounds, namely, (i) that it was maintaining its accounts on mercantile system, and (ii) it was within the purview of Section 43B. Its second reasoning was given in the foot note on the computation sheet filed along with the return of income. The return was filed on August 8, 1984.
3. During the assessment proceedings, the issue was decided on the assessee's reasoning that bonus was part of the salary or wages and, therefore, it did not come within the ambit of "fund for the welfare of employees". The Assessing Officer, on the contrary, held that it was a fund for the welfare of the employees. According to the Assessing Officer, since it was part of the fund for the welfare of the employees, the provisions of Section 43B were not applicable. He, therefore, disallowed the claim. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) which was dismissed .
4. The assessee then preferred an appeal before the Tribunal. The Tribunal allowed the appeal by holding that the provisions of Section 43B(b) were not applicable and the provision was actually made and they were told that the Labour Court had ordered them to pay the bonus. Therefore, the Tribunal allowed the claim of the assessee and set aside the orders passed by the Assessing Officer and the Commissioner of Income-tax (Appeals).
5. In fact Clause (c) of Section 43B of the Income-tax Act came to be inserted for the first time with effect from April 1, 1989. Therefore, it was not in existence at that time and Clause (b) was not applicable, because the bonus did not fall in the extended expression of the fund for the welfare of the employees and, accordingly, the Tribunal permitted the deduction.
6. We have considered the submissions of learned counsel for the parties and are of the opinion that the view taken by the Tribunal is justified.
7. Accordingly the reference is answered against the Revenue and in favour of the assessee.