MANCHANDA J. - This is a case stated under section 66(2) of the Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is :
'Whether the amount of Rs. 6,975, awarded by the Labour Appellate Tribunal in a subsequent year was allowable as a deduction in the assessment year in questio ?'
The material facts are these : The assessee is a Private limited company. In the relevant previous year for 1952-53 assessment year, the assessee carried on the business of manufacturing woollen rugs, blankets and cloth. The accounting year of the company relevant for 1952-53 assessment year was the year ending on 30th June, 1961. In the return filed for 1952-53, the assessee claimed a deduction of bonus amounting to Rs. 16,275 which represented the bonus for the accounting year ended on 30th June, 1949. Even though the assessees accounting year closed on 30th June each year, bonus was declared on the basis of the calendar year. In the course of the accounting year ending on 30th June, 1949, but the management refused to pay any bonus as there was no profit in the half year ending 30th June, 1949. The union took the case to the case to the labour court in July, 1950, and the conciliation officer, as he was then called, rejected the workers claim. An appeal thereupon was preferred to the industrial court in July, 1950, and the conciliation officer, as he was then called, rejected the workers claim. An appeal thereupon was preferred to the industrial court which remanded the case to the conciliation officer with the direction that bonus should be allowed on the basis of the profits of the full accounting year. The system of bonus payment was charged from the calendar year, hitherto followed by the assessee, to the accounting year. The conciliation officer considered the case again on the lines directed by the industrial court and gave his award on 12th May, 1951, allowing a bonus at Rs. 9,300 for the half year ended 30th June, 1949. Appeals were filed both by the assessee and the workers union to the Labour Appellate Tribunal and the appeals were finally decided on 8th August, 1951, increasing the bonus to Rs. 16,275. As the date of the award by the Labour Appellate Tribunal was the 8th August, 1951, which was after the close of the accounting year (30th June, 1951), the Income-tax Officer disallowed the entire amount of Rs. 16,275, as in his opinion this amount of Rs. 16,275 was not the liability of the relevant accounting year. The assessee preferred an appeal to the appellate Assistant commissioner who held that as the industrial court had given its award within the accounting year on 12th May, 1951, and allowed the bonus of Rs. 9,300 for the half year ended 30th June, 1949, the said sum should be allowed as a deduction against the profits of the accounting year ended 30th June, 1951. The balance of Rs. 6,975 was disallowed by the Appellate Assistant Commissioner on the ground that this was not an ascertained liability in the relevant accounting year. Against that order the assessee filed a second appeal to the Tribunal which confirmed the order of the appellate Assistant Commissioner and disallowed the allowance of Rs. 6,975 was, however, allowed by the Tribunal in the subsequent assessment year. Aggrieved by the order of the Tribunal for the relevant assessment year, the assessee asked for a reference under section 66(1) of the Act but this was refuses. Thereupon, an application under section 66(2) of the Act was moved and this court directed the question to be referred.
At the time when this court called for a statement of the case under section 66(2) of the Act, there was a decision of the Bombay High Court in Commissioner of Income-tax v. Nagri Mills, where a view had been taken that, even in the case of an assessee who follows the mercantile system of accounting, the bonus, subsequently determined, relating to an earlier assessment year, can be allowed in the earlier assessment year. Since then, however, a decision of the Supreme Court in Commissioner of Income-tax v. Swadeshi Cotton and Flour Mills has been delivered. It was there laid down that an employer who follows the mercantile system of accounting incurs the liability to pay the bonus only when the claim to profit bonus, if made, is settled amicably or by industrial adjudication and further that the system of reopening of accounts does not fit in with the scheme of the Income-tax Act. The decision concludes the matter against the assessee. This court has also, following the Supreme Court decision, taken the same view in New Victoria Mills Co. Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Amrit Banaspati Co. Ltd.
For the reasons given above, the question is answered in the negative and against the assessee. In the circumstances of the case, there will be no order as to costs. Counsels fee is assessed at Rs. 200.
Question answer in the negative.