1. These appeals are by the assessee and they relate to the assessment years 1977-78 to 1979-80. For the assessment year 1977-78, the assessee filed an additional Aground of appeal before the Commissioner (Appeals) that bonus payable for the assessment year 1974-75 should have been allowed in the assessment year 1977-78 as the same was payable in September 1976. The same amount was claimed for the assessment year 1978-79 as the actual payment was made during that year. But the claim was rejected by the ITO for the assessment year 1978-79 on the ground that the assessee was following the mercantile system of accounting and the last date for payment of bonus, after the extension allowed by the Labour Commissioner, which was September 1976, was not relevant to the assessment year 1978-79. The bonus was payable for the year 1974-75 relevant to the assessment year 1976-77 as the assessee closed its books on 31st of October. It had applied to the Labour Commissioner for extension of time under Section 36 of the Payment of Bonus Act, 1965.
It was claimed that until the Labour Commissioner decided the matter and issued necessary orders, the liability would not arise. Time was allowed till 30-9-1976 and, according to the assessee, the liability arose in the assessment year 1977-78. The Commissioner (Appeals) held that the cases cited by the assessee, viz., Nonsuch Tea Estate Ltd. v.CIT  98 ITR 189 (SC) and CIT v. West Chusick Coal Co. Ltd.  129 ITR 62 (Cal.), were not relevant. Section 36 did not remit any liability. It only empowered the Government to extend some concession in the matter of payment of bonus to any establishment in public interest. It was more in the nature of an executive redress and cannot be said to postpone the accrual of liability. He, accordingly, held that the liability for the payment of bonus arose for the accounting year 1974-75, i.e., assessment year 1976-77 and, thus, the ITO was right in rejecting the claim of the assessee to deduct the said payment as an allowable expenditure in the year 1977-78. The appeal for 1978-79 was also dismissed for the same reason. Similar claim to deduct bonus of Rs. 1,30,320 for the assessment year 1979-80, relating to the accounting period 1976-77, but paid in the accounting year 1977-78, was also rejected for the same reasons. The assessee is in appeal.
2. The arguments advanced before authorities below were repeated before us. Reliance was placed on Section 36. The learned departmental representative relied on Section 19 of the said Act. Section 36 is as follows : Power of exemption. - If the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of this Act thereto, it may, by notification in the Official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act.
It is, thus, clear that in Section 36 is a power given to the Government to exempt certain categories from the operation of this Act.
Thus, it would appear that the Government can exempt an establishment or class of establishments, from one or any of the provisions of this Act on the ground that it will not be in public interest to apply the provisions of this Act to the said concern/concerns. Therefore, unless the Government passes an order under Section 36, making it clear that in public interest, the concern is being exempted from the provisions of the Payment of Bonus Act, the said concern cannot claim that the liability to pay bonus did not arise at all. The order under Section 36 is to be passed having regard to public interest. Unless the necessary conditions are fulfilled, the Government also will not pass an order under Section 36. It is obvious that the provisions of Section 36 do not refer to postponement of the liability to pay bonus but a total exemption from the provisions of the Payment of Bonus Act for a specified period. This is quite different from postponing the payment of bonus which has actually accrued. The provisions regarding postponement of bonus due and payable will have to be sought elsewhere.
Time limit for payment of bonus. - All amounts payable to an employee by way of bonus under this Act shall be paid in cash by his employer- (a) where there is a dispute regarding payment of bonus pending before any authority under Section 22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute ; (b) in any other case, within a period of eight months from the close of the accounting year : Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit, so however, that the total period so extended shall not in any case exceed two years.
It is, thus, clear that the order is passed under Section 19 and not under Section 36. As rightly argued by the learned departmental representative, a postponement of the payment does not mean that the liability itself did not accrue on the said date. The bonus became due and payable in the accounting year 1974-75. It accrued in that year but the payment was postponed to the accounting year 1976-77 by virtue of Section 19. We, therefore, agree with the decision of the authorities below that the liability did not accrue in the accounting years relevant to the assessment years 1977-78 and 1978-79. The assessee's appeals for these two years are dismissed. By the same logic, the appeal for the assessment year 1979-80 is also dismissed.