Law:

Section:

Section 36(1)(ii) of the Income-tax Act, 1961 - Bonus - Assessment year 1975-76 - Assessee-firm sold its business to t with effect from 1-1-1974 - Whether assessee was entitled to deduction in respect of bonus payment made by it to its workmen in accordance with an agreement entered into between assessee and its workmen on 2-4-1974 - Held, yes FACTS The assessee-firm sold its business to T with effect from 1 -1 -1974. On 2-4-1974 an agreement was entered into between the assessee and its workmen for payment of bonus. For the assessment year 1975-76, the ITO disallowed the assessee's claim for deduction of bonus on the ground that the business had been closed with effect from 31-12-1973. On second appeal, the Tribunal allowed the deduction as claimed by the assessee. On reference: HELD It was not in dispute that on 2-4-1974, an agreement had been entered into between the assessee and the workers which resulted in payment of bonus. The liability to pay the bonus, therefore, arose on that date. That being so, the assessee could have claimed deduction only in that previous year which was relevant to the assessment year 1975-76. Even if the assessee's concern and the business were taken over by T, the assessee continued to exist and its income was being taxed. The bonus must be in respect of the year in which the business was being carried on by the assessee though the liability arose after the business had been transferred. The answer to the aforesaid question was self-evident. The Tribunal was, therefore, justified in allowing the assessee's claim. Rajendra and D.C. Taneja for the Applicant. R.C. Beri for the Respondent. JUDGMENT Kirpal, J.-This is a petition under section 256(2) of the Income-tax Act, 1961 ('the Act') with a prayer for directing the Tribunal to state the case and refer the following question of law to this Court: "Whether, on facts and in the circumstances of the case, the Tribunal was correct in law in allowing the deduction of Rs. 97,287 on account of 'bonus' when such liability was determined under the agreement executed much after their date of taking over of the assessee's business by another concern?" 2. It appears that the respondent,…

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