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TMI Blog1984 (1) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ignoring the fact that no appeal lies against provisions of section 214 of the Act. The assessee is following mercantile system of accounting and closes the books of account on 30th June. During the accounting period ending 30-6-1978, the assessee made a provision of Rs. 1,42,139 for payment of bonus to the workers at 20 per cent of their salary and wages. The ITO observed that during the previous year, the company had suffered loss and there was no allocable surplus available from which the bonus at the rate of 20 per cent on salaries and wages could be paid. Under the Bonus Act, since there was no allocable surplus, the liability of the company was only in respect of minimum bonus to the extent of 8.33 per cent of salaries and wages. Any excess bonus over the minimum payable was not admissible as deduction under section 36(1)(ii) of the Act and, therefore, he disallowed this excess sum of Rs. 81,914. The submission of the assessee that 20 per cent bonus was provided on the basis of an agreement entered into with the workers was rejected. 2. On appeal, on behalf of the assessee, reliance was placed on the decision of the Tribunal in IT Appeal No. 3274 (Bom.) of 1980 decided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 40(c) or section 40A(5), it was submitted that the department wanted to keep the issue alive as the decision of the Special Bench was not accepted by the department. 7.3 In respect of the interest under section 214, it was submitted that the payments of advance tax were made as under : Date Amount Rs. (i) 10-1-1979 1,50,000 (ii) 16-1-1979 1,00,000 (iii) 17-3-1979 50,000 (iv) Refund for earlier adjusted during March 1978 1,28,416 ---------- Total 4,28,416 ---------- It was submitted that payment in response to the notice under section 210 of the Act would only be considered as advance tax payment. Reliance was also placed on the decisions in the case of Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339 (AP) and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into an agreement with its workmen on 29-4-1974 according to which the assessee was liable to pay bonus at the rate of 20 per cent of the wages. The plea of the assessee that during the previous year the liability to make the payment of bonus did exist even as per the agreement which was entered into prior to the beginning of the previous year, i.e., on 29-4-1974 as also under the Bonus Act, if applicable, was accepted. It was with these facts that the deduction to the extent of 20 per cent was held to be allowable. However, the facts of the case under appeal are different. It is an admitted fact that agreement with the employees was arrived at only on 26-9-1978, i.e., after the accounting year ended. Though the terms of settlement do include the payment of bonus even for the year under consideration, this aspect has no bearing on the point of allowability of the expenditure. The Commissioner (Appeals) was in error in not distinguishing these features of the case under appeal. There was no question of applicability of decision of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) because in this case, the liability was a statutory liability which accrued on the specified s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 214. 12.2 This aspect can also be looked from another angle. It is an admitted fact that payments were made on advance tax challans and they were taken as advance tax in the assessment order as also in the tax calculation forms. Having accepted such payments as advance tax payments on the record of the revenue how would it be open to the ITO to change the stand while granting the interest under section 214 on excess advance tax payments ? Once the assessee made the payments on the advance tax challans, if the ITO did not wish to accept the payments as advance tax payments, it was his duty to return the payments or at least write to the assessee that payments are accepted though not as advance tax payments. Because sections 59 to 61 of the Indian Contract Act, 1872, lays down that when the payment is made with certain conditions and directions, the payments would be appropriated as directed, if the payment is accepted by the payee. Certainly, it cannot be the case of the revenue that the Indian Contract Act does not apply to it. The learned departmental representative, while giving the details in respect of the payments as brought to our notice that Rs. 1,28,416 pertained to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as tax which is not the case here because the amounts are already adjusted and treated as tax. 12.4 However, coming to legality regarding maintaining appeal against non-grant of interest, the grievance of the revenue is justified. It is not clear from the order of the Commissioner (Appeals) that whether the ITO had objected to this ground of appeal by stating that no appeal lies against non-grant of interest. The order of the Commissioner (Appeals) is also silent on the point as to how he has decided this ground though no specific right is given for appeal under section 246 of the Act (see the Special Bench decision in the case of Indian Tyre Rubber Co. (I.) (P.) Ltd. It is because of the fact that in draft order the ITO had made specific mention regarding allowability of interest under section 214, he presumed that the ITO had no objection in deciding appeal on this ground. Therefore, on legality of this aspect of appeal for non-grant of interest the matter is sent back to the Commissioner, (Appeals) to consider the same and pass the appropriate order in accordance with law. Hence, the decision of Commissioner (Appeals) regarding grant of interest under section 214 is se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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