High Court Of Delhi
CIT vs. Indian Implements Manufacturing Co.
Sections 256(2), 37(1)
Asst. Year 1975-76
B.N. Kirpal & C.L. Chaudhry, JJ.
IT Case No. 157 of 1986
25th July, 1989
Rajendra & D.C. Taneja, for the Revenue : R.C. Beri, for the Assessee
B. N. KIRPAL, J.:
This is a petition under s. 256(2) of, the IT Act, 1961, with a prayer for directing the Tribunal to state the case and refer the following question of law to this Court:
“Whether, on the 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 the date of taking over of the assessee’s business by another concern ?”
2. It appears that the respondent, which is a partnership firm, sold its business to Tiger Locks Ltd., w.e.f. January 1, 1974. On April 2, 1974, an agreement was entered into between the respondent and its workmen for payment of bonus. The deduction which is claimed by the respondent was disallowed by the IT authorities on the ground that, w.e.f. December 31, 1973, business had been closed and transferred by the respondent to Tiger Locks Ltd. The Tribunal, however, on an application having been filed under s. 254(2) of the IT Act, rectified its earlier order and allowed the deduction by purporting to follow its earlier order for earlier years.
It is in the aforesaid circumstances that the petitioner filed an application under s. 256(1) for referring the aforesaid question of law. On the Tribunal dismissing the said application, the present petition has been filed.
In our opinion, the answer to the aforesaid question is self-evident. It cannot be disputed that the payment of bonus is clearly linked and related to the carrying on of the business. It is not in dispute that on April, 2, 1974, an agreement was entered into between the respondent and the workers which resulted in payment of bonus. The liability to pay the bonus, therefore, arose on that date. This being so, the respondent could have claimed deduction only in that previous year which was relevant to the asst. yr. 1975-76. Even if the assessee’s concern and the business were taken over by Tiger Locks Ltd., 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 has been transferred. In our opinion, the answer to the aforesaid question is self-evident.
The petition is, accordingly, dismissed.
[Citation :180 ITR 336]