2002 (12) TMI 21 - HC - Income Tax

For the assessment year 1992-93, the assessee claimed a sum of Rs. 23,46,558 towards payment of bonus which includes a sum of Rs. 12,81,108 a liability as per the agreement for payment of bonus entered into on December 22, 1992. In the assessment the Assessing Officer allowed deduction for a sum of Rs. 10,65,450 only which was the provision created in the accounts during the previous year and disallowed the balance of Rs. 12,81,108. - Commissioner (Appeals) allowed the claim of the assessee for deduction of the total sum of Rs. 23,46,558 as the assessee has made the payment before the due date for filing the return under section 139(1) read with the first proviso to section 43B. Tribunal upheld the order of Commissioner no infirmity in Tribunal s order

Summary

Issues: Interpretation of section 36(1)(ii) read with section 43B of the Income-tax Act regarding deduction of bonus payment for the assessment year 1992-93.

The judgment pertains to an income-tax appeal filed by the Revenue against the Income-tax Appellate Tribunal's order regarding the deduction of bonus payment by a public limited company engaged in yarn manufacturing for the assessment year 1992-93. The company claimed a sum of Rs. 23,46,558 for bonus payment, including a liability of Rs. 12,81,108 as per an agreement made in December 1992. The Assessing Officer allowed a deduction of Rs. 10,65,450 only, created as a provision in the accounts during the previous year, disallowing the balance amount. The Commissioner of Income-tax (Appeals) allowed the full deduction, stating that the payment was made before the due date for filing the return under relevant sections. The Tribunal upheld the Commissioner's decision, leading to the Revenue's appeal before the High Court.

During the hearing, the Revenue argued that the bonus agreement was made after the previous year, and thus the entire bonus amount paid could not be included for the relevant assessment year. Conversely, the assessee contended that the payment was made before filing the return, and the agreement specified the bonus for the period 1991-92. The Tribunal's order was based on the absence of evidence showing liability for the previous year's minimum bonus, allowing the deduction under the proviso to section 43B on a payment basis. Citing various decisions, including one by the Rajasthan High Court, the High Court found the Tribunal's decision appropriate in allowing the deduction based on the agreement, similar to a case involving bonus provision under the Payment of Bonus Act.

In conclusion, the High Court upheld the Tribunal's decision, affirming the deduction of bonus payment based on the agreement entered into by the company. The appeal by the Revenue was dismissed, emphasizing the correctness of allowing the deduction in line with the terms of the agreement and relevant legal provisions.