1987 (11) TMI 66

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..... ing the bonus payment, relatable to the period up to the date of take over of the business, in excess of 8 1/3% as a deduction from the income of the assessee for the assessment year 1975-76 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the previous owner did not have a liability higher than 8 1/3% as bonus ? 3. Whether the payment of bonus in excess of the statutory minimum was a capital expenditure in the hands of the assessee ? " The assessee is a private limited company which purchased its present, business on December 1, 1973, during the assessment year 1974-75. The assessment year in question now is 1975-76. The assessee agreed with the vendor that it would settle w .....

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..... bonus paid in the accounting year relevant to the assessment year 1975-76 towards the liability of the previous accounting year treating that amount as revenue expenditure. It cannot be gainsaid that in agreeing on the price at which the business was taken over by the assessee from the vendor, all the liabilities as well as the assets of the firm had been taken into account. One of the liabilities obviously was the liability towards bonus for the period preceding the date of the take-overs It was known to the assessee that as a consideration for the take-over, it would have to incur the liability to the full extent finally determined as the amount payable as bonus for the period preceding the date of the take-over. The amount thus spent .....

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..... properly be described as a loss sustained by him on income account. It is a sum which was payable by him in order to get possession of the colliery, not a sum expended by him in the carrying out of the colliery. It is not rent for any period of his possession, nor is it an expenditure incurred by the assessee for the purpose of earning the profits or gains of the colliery business. If the assessee paid it without any legal liability or necessity on his part to do so, such voluntary payment is not a permissible deduction from income. Their Lordships are, therefore, of the opinion that in the circumstances of this transaction, the question should be answered in the negative. " (emphasis supplied) The facts of the case and the principle deal .....

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