9911796707
TMI Blog1980 (3) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year is the calendar year. The method of accounting is mercantile. We are concerned with the computation of income for calendar year 1975. The assessee had debited a sum of Rs. 30,368 as bonus paid during the year of this amount, Rs. 27,017 related to bonus to workers for calendar year 1974. The balance of Rs. 3,351 represented bonus paid to staff for calendar year 1975. There was a further debit of Rs. 20,000 as provision for bonus for calendar year 1975. The assessing officer allowed the claim of Rs. 27,035 and disallowed the balance of Rs. 23,333 which included Rs. 3,333 out of Rs. 30,368 as the provision for bonus of Rs. 20,000. The provision of Rs. 20,000 was disallowed on the ground that the assessee cannot make a claim bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for payment of staff in relation to 1974 during this year. It was paid, claimed and allowed in the immediately preceding year. The assessee follows mercantile system of accounting. It was in the special circumstances of the case that the payment to workers for 1974 came to be claimed during the year. The payment for 1975 is a regular provision on the basis of subsisting agreement with the workers and has to be allowed on mercantile basis. He also claimed that there is no case for disallowance of any part of the payment. The learned Departmental Representative relied on the orders of the authorities below. He insisted that the debit for bonus for staff clearly indicates adoption of cash basis for bonus. He also claimed that all the bonus p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her Merchants Association of Dindigul and Leather Tanning Workers Union. Even on the basis of the mercantile system of accounting, the liability should be taken to have accrued only during this year though it related to calendar year 1974. What could not be anticipated cannot be provided for. Actually, the ITO himself has allowed this part of Rs. 27,017, though on the mistaken ground that this is allowable on cash basis. However, he limited the allowances by Rs. 3,333 on the ground that the allocable surplus fell short by this amount. But the payment of Bonus Act came into effect on 25th Sept., 1975 while the forms relates to calendar year 1974 and the payment was also completed by 7th April, 1975. Hence, no part of the payment would get hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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