MANCHANDA J. - This is a case stated under section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred are :
'1. Was the sum of Rs. 1,08,884 an allowable deduction for the assessment year 1953-54, because this payment related to the previous year ending March 31, 1953, even when the Industrial Tribunal gave an award on January 17, 1955, and the amount was debited in the books of the assessment year 1955-5
2. Was the sum of Rs. 3,43,278 an allowable deduction for the assessment year 1954-55 because the payment related to the previous year ending March 31, 1954, even when the Industrial Tribunal gave an award on January 12, 1955, and the amount was debited in the books of the assessment year 1955-5
The material facts are these : The assessee is a public limited company. The relevant assessment years are 1953-54 and 1954-55, the previous years being the respective financial years ending 31st March, 1953, and 31st March, 1954. The company had some disputes regarding dearness allowance that was to be paid to the workers and the matter was taken by the labourers to the Industrial Court of Bombay on 19th December, 1953. The Industrial Court by Bombay gave an award allowing 15 per cent. of the basic earnings of the workers as dearness food allowance to the mill workers. The company went in appeal and in pursuance of an order of the Labour Appellate Tribunal of India at Bombay, dated the 17th January, 1955, the dearness allowance was fixed at 20 per cent. of the basic earnings of the workers. This extra allowance of 5 per cent. amounted to Rs. 1,08,884, for the year ending 31st March, 1953, and Rs. 3,43,278 for the year ending March 31, 1954. The said amounts were actually debited in the books of the company for year ending 31st 1955. The assessments for the years 1953-54 and 1954-55 were pending before the Income-tax Officer when the Labour Appellate Tribunal passed its order and the assessee-company put in a revision claim for the relevant assessment years claiming the aforesaid sums as permissible deductions in those two years. The Income-tax Officer rejected this claim and held that these payments on the ground of dearness allowance were only deductible in the year in which they were actually paid. The Appellate Assistant Commissioner confirmed the order passed by the Income-tax Officer. Being aggrieved, the matter was taken to the Tribunal who, relying on Commissioner of Income-tax v. Nagri Mills Co. Ltd. allowed the payments as permissible deductions as they related to the relevant previous years. Against that order a reference under section 66(1) has been made and the question aforesaid are referred to this court for opinion.
The question referred now stand concluded against the assessee by a recent decision of the Supreme Court in Commissioner of Income-tax v. Swadeshi Cotton and Flour Mills Private Ltd. where it has been laid down that an employer, who follows the mercantile system of accounting, incurs liability towards profit bonus only when the claim, if made, is opening accounts does not fit in with the scheme of the Income-tax Act and, as far as the receipts are concerned, there can be no reopening of deduction, therefore, is only admissible in the year when the liability under the award is finally determined. The Nagri Mills case though not specifically considered by the Supreme Court, must be taken to have been overruled by necessary implication as that cased proceeded on the basis that even though the final adjudication by the Industrial Tribunal might be for a particular year, yet it would relate back to the year to which the bonus related.
For the reasons given above, both the questions are answered against the assessee. The reference is answered accordingly. In the circumstances of the case, the parties are left to bear their own costs. Counsels fee is assessed at Rs. 100.
Questions answered accordingly.