2009 (3) TMI 521 - HC - Income Tax

Business Expenditure- On account of the strike of the worker, the assesse was not able to pay the full bonus on or before the due date for filing the return of income. The assesese handed over a sum, by cheque to the trustee of the worker s bonus payment trust with the object of disbursing bonus to the workers. The Assessing officer allowed the sum actually paid before the due date for filing the return and the balance. The Commissioner (Appeals) deleted the disallowance and this was upheld by tribunal. Held that- assessee was entitled to the deduction made towards bonus. The assesese had made the payment prior to the date of omission of the proviso and payment made to the trust being irrevocable would tantamount to payment of bonus to workers.

Summary

The High Court of Madras delivered a judgment in an income-tax appeal against the order of the Income-tax Appellate Tribunal, Madras. The assessee, a company involved in the manufacture and sale of yarn and fabrics, had claimed a sum as bonus and ex gratia payable to employees in its accounts. The Assessing Officer disallowed a portion of this amount under section 43B(c) of the Income-tax Act, 1961, as the full bonus was not paid before the due date for filing the return of income. However, the Commissioner of Income-tax (Appeals) ruled in favor of the assessee, stating that the payment to an irrevocable trust for bonus disbursement constituted payment to the workers within the stipulated time. The Income-tax Appellate Tribunal upheld this decision, leading to an appeal by the Revenue. The High Court found in favor of the assessee, emphasizing that the payment to the trust was made prior to the prescribed date and was irrevocable, thus meeting the requirements of the law. The court dismissed the appeal, concluding that the assessee was entitled to the deduction for the bonus payment. The questions of law were resolved in favor of the assessee and against the Revenue. The judgment highlights the importance of meeting payment deadlines and the validity of payments made through trusts.