Law:

Section:

Section 36(1)(ii) of the Income-tax Act, 1961 [Corresponding to section 10(2) (x) of the Indian Income-tax Act, 1922] – Bonus or commission – Assessment year 1961-62 – Assessee-company claimed deduction of amount paid on account of staff and labour bonus - Tribunal allowed deduction only on basis that there was provision for bonus in accounts of assessee – There was no finding by Tribunal whether provision for bonus was made on basis of mere claims made by employees or whether it was on basis of accepted and past practice of company. It was not even found whether this provision for bonus had been made pursuant to any resolution of directors or shareholders of assessee – Whether it was necessary to ascertain on enquiry on point indicated and determine on what basis bonus was being provided for – Held, yes – Whether, therefore, matter be remanded back to Tribunal for this enquiry – Held, yes FACTS For the assessment year 1961-62, the assessee-company claimed deduction of amount paid on account of staff and labour bonus. The ITO disallowed the claim on the ground that this provision had not been made pursuant to any agreement entered into or any award passed during the year. On appeal, the AAC by following the judgment of the Supreme Court in Commissioner of Income-tax v. Swadeshi Cotton and Flour mills P. Ltd. [1964] 53 ITR 134, upheld the decision of the ITO. On second appeal, the Tribunal held that the matter related to the bonus for the current year; that the same was an existing liability and had to be allowed as such; that the facts of the instant case were distinguishable from the facts of the case before the Supreme Court relied upon by the AAC and, therefore the claim of the assessee would thus be allowed in this regard. On reference : HELD In the instant case the Tribunal had gone only of the basis that there was a provision for bonus in the accounts of the assessee. There was no finding that in the particular year there had been any payment of bonus though bonus had been paid in other years. There was no indication as to the basis on which the bonus which had been provided for in the accounts was arrived at, viz., whether it was on the basis of mere…

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