1. This is an application by the Commissioner under s. 256(2) of the I.T. Act, 1961, for directing the Income-tax Appellate Tribunal to refer to the court for determination the following question and to state a case for that purpose :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the additional bonus of Rs. 1,75,650 agreed on January 21, 1977, by negotiation to be paid in relation to the accounting year 1974-75, over and above the minimum bonus at 4% debited in the accounts for that year on account of the net loss incurred, was deductible, without considering the limitation in the first proviso to section 36(1)(ii) of the Income-tax Act, 1961 ?'
2. It is only necessary to set out very few facts. The relevant accounting period is from October 1, 1974, to September 30, 1975, and the assessment year in question is 1976-77. The assessee maintained books of account on mercantile basis. In the books of account, during the relevant accounting period, the assessee provided for bonus to its employees at 4%. Pursuant to certain conciliation proceedings, an additional amount of Rs. 1,75,650 was paid by the assessee as bonus to the employees. The assessee claimed this amount as deduction by way of a revised return. In the books of account of the assessee, the liability for the payment of this amount as well as the payment were entered after the accounting year. The ground on which the ITO disallowed this deduction was that this liability was neither crystallized in the accounting year nor entered in the books of account of the assessee during the relevant accounting period. On an appeal by the assessee, the Commissioner of Income-tax (Appeals) upheld the claim of the assessee for deduction, and the appeal preferred by the Department to the Tribunal was also dismissed. The order of the Tribunal dismissing the appeal makes it clear that the only contention taken up by the Department against allowing of this deduction was that notwithstanding the fact that the assessee maintained its books of account on the mercantile system, the liability for the additional bonus was neither claimed nor quantified nor paid during the relevant accounting period and, hence, the deduction could not be allowed against the profits in the relevant accounting period. The question which the Department seeks to refer is altogether a new question, namely, whether the Tribunal was in error in allowing this deduction without considering the limitation under the first proviso to s. 36(1)(ii) of the I.T. Act, 1961. This question was neither raised before the Tribunal nor at any earlier stage nor has it been dealt with by the Tribunal. A reading of the proviso to s. 36(1)(ii) of the I.T. Act makes it clear that in order to decide this contention of the Department, it would have to be investigated as to whether the establishment of the assessee was one to which the Payment of Bonus Act was applicable. In the event of it being held that the proviso applied only to the payment of profit bonus, it would have further to be ascertained as to whether the additional bonus paid by the assessee as aforesaid was in the nature of profit bonus or not. These questions have not been investigated at all or dealt with by the Tribunal, because no contention, as is now sought to be raised by the Department, was advanced before the Tribunal. As this question was neither raised before the Tribunal nor dealt with by it, it is clearly not a question which arises from the order of the Tribunal, and no such question can be directed to be referred.
3. In the result, the application fails and the rule is discharged with costs.