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TMI Blog1993 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 2,500 paid to Viswamangal Trust ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to weighted deduction under section 35B of the Act in respect of Rs. 8,390 being audit fee and Rs. 1,16,127 being sales commission incurred at Malaysia for the maintenance of the foreign branch ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing that the deduction of the sum of Rs. 22,49,424 be allowed as bonus in the computation of income of the assessee for the assessment year 1975-76 ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income-tax Officer could not have disallowed the assessee to create a reserve for the purpose of development rebate for 1975-76 assessment year, if in his opinion, the assessee had a positive income in that year and in that view in allowing the assessee's claim of setting off the unabsorbed development rebate brought forward and of opportunity to create development rebate reserve in the assessment year 1975-76 ? Assessment year 1976-77 : 6. Whether, on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer did not allow weighted deduction in respect of the payment of commission as aforesaid on the ground that the same was paid in India. Both the Commissioner of Income-tax (Appeals) as well as the Tribunal directed the Income-tax Officer to allow weighted deduction on the said commission following the decision of the Special Bench of the Tribunal in the case of J. Hemchand and Company in Income-tax Appeal No. 3255/(Bom) of 1976, if it was found that the commission was paid for securing export orders. This issue was considered in detail recently by the Kerala High Court in CIT v. Kerala Nut Food Co. [1991] 192 ITR 585. There, the Kerala High Court held that weighted deduction is admissible on commission paid in India to agents who bad rendered positive and specific services for marketing the assessee's goods outside India. This court also held in CIT v. G. E. C. of India Ltd. [1991] 192 ITR 559 that commission paid in India to Project and Equipment Corporation Ltd., who obtained orders for export of the products and goods manufactured by the assessee is entitled to weighted deduction under section 35B of the said Act. Respectfully following the aforesaid decisions, we answer questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-77. However, alternatively, it was submitted that since the Income-tax Officer had computed the assessee's income for each of the said two years at positive figures, he should have given the assessee an opportunity for creating reserve for development rebate in this year on the basis of the circular dated January 30, 1976, issued by the Central Board of Direct Taxes. The Tribunal found that the assessee had no taxable income in the previous year relevant to the assessment year 1975-76 as a result of the various reliefs allowed to the assessee-company by the Tribunal. In this view of the matter, it is obvious that no development rebate can be actually allowed to the assessee in the previous year relevant to the assessment year 1975-76. As such, there was no need to create any development rebate reserve in the accounts for the calendar year 1974 corresponding to the assessment year 1975-76. The assessee-company has admittedly created full development rebate reserve in its accounts for the calendar year 1975 corresponding to the assessment year 1976-77. In our view, therefore, the Tribunal was fully justified in directing the carry forward of development rebate to the previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer disallowed the assessee-company's claim to the extent of Rs. 22,49,424 on the ground that it was nothing but a recoverable advance. On appeal before the Commissioner of Income-tax (Appeals), it was, inter alia, submitted that the advance salary and wages paid in 1975 were adjusted in 1977 against the liability for bonus provided in the accounts of the assessee-company in the calendar year 1974 and that the company did not recover the advance from its employees in order to maintain industrial peace. It was also submitted that the workers were not satisfied with the minimum bonus of four per cent. under the Payment of Bonus Act, 1965, and that after protracted negotiation, the management agreed to pay 10.5 per cent. as bonus, although in the books of account, the sum paid was shown as an advance. It was also submitted that the restrictions contained in section 36(1)(ii) of the said Act were not applicable in respect of the assessment year 1975-76 and there was no restriction to pay bonus to workers at the rate of 10.5 per cent. of their salaries and wages. The Commissioner of Income-tax (Appeals) also rejected the contentions of the assessee-company on the ground that it was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory liability to pay bonus under the Payment of Bonus Act, 1965, is allowable in the assessment year 1971-72 even when it was finally adjusted and settled on October 15, 1971, i.e., long after the close of the relevant previous year. This court held that the liability having accrued in a particular year, its subsequent quantification will not defer the liability to the year in which the quantification takes place. We find that the amount of Rs. 22,49,424 was actually paid to the workers and employees in terms of the agreement reached with the workers' union on September 30, 1975. The amount in question was provided as bonus payable to the workers in the calendar year 1974 being the previous year relevant to the assessment year 1975-76 and claimed as business deduction. It is true that the amount of advance was adjusted against bonus liability provided in the year 1974 or treated by way of ex gratia payment in the calendar year 1977, but the fact remains that the assessee-company had been paying bonus even in the earlier years calculated at the rate of 10 to 12 pet cent. of the salary/wages. Having regard to the past practice, it was nothing unusual for the assessee-company to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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