Law:

Section:

Section 145 of the Income-tax act, 1961-Method of accounting-Year in which liability/ expenditure deductible-Assessee-company made provision for additional bonus in accounting year ending December 1969-Settlement for payment of such bonus reached between assessee and its employees after end of 1969-Whether tribunal right in holding that assessee's liability to pay impugned bonus did not arise during accounting year 1969-Held, on facts, no [case remanded back to tribunal to decide whether there was any understanding or adjustment or arrangement between parties in year 1969 for payment of impugned bonus ; if so, amount was deductible in that year] Facts In addition to the minimum bonus paid under the Payment of Bonus Act to the workmen, the assessee-company also made provision for ex gratia payment of bonus and claimed deduction on that account also during the assessment year 1970-71 (accounting year being the calendar year 1969). The ITO disallowed the claim on the ground that it was a provision for ex gratia compensation and that the liability was neither ascertained nor quantified. On appeal, the AAC found that the memorandum of settlement for payment of the impugned bonus had been signed on 15-1-1970, that is to say, the matter was still under dispute till the end of the accounting year in question, and held that the liability did not arise during the year under consideration. On further appeal, the Tribunal found (i) that the assessee had been paying bonus in the past and the earlier settlement in respect of bonus between the assessee and its workmen came to an end in 1967 ; (ii ) that under the settlement, the parties were required to settle the formula, that is, the basis of liability (not mere quantification of liability) ; (iii) that on the execution of the settlement on 10-1-1970 the liability was fastened; and (iv) that a tentative decision had been taken during the year 1969 but no finality could be attributed to it as a formal document was executed on 10-1-1970 and until that was done the settlement could not become final or legally enforceable. Accordingly, the Tribunal upheld the AAC's order. On reference, the assessee contended that the fact that…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492