High Court Of Madras
CIT vs. Sri Venkatesa Mills Ltd.
Section 43B
Asst. Year 1994-95
K. Raviraja Pandian & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 446 of 2004
16th March, 2009
Counsel appeared :
J. Naresh Kumar, for the Appellant : None, for the Respondent
JUDGMENT
K. Raviraja Pandian, J. :
The Revenue is on appeal against the order of the Tribunal, Madras “A” Bench, dt. 25th Nov., 2003, made in ITA No. 2428/Mad/1996.
2. The assessee is a company engaged in the business of manufacture and sale of yarn and fabrics. The assessment for the asst. yr. 1994-95 was completed on 23rd Feb., 1996 on a total income of Rs. 56,16,750. In the course of the assessment proceedings, the AO found that the assessee had provided in the accounts a sum of Rs. 73,42,496 as bonus and ex gratia payable to the employees. It was explained by the assessee that on account of a strike by the workers from 6th Nov., 1994 to 15th Dec., 1994, the assessee was not able to pay the full bonus on or before the due date for filing the return of income. The assessee handed over a sum of Rs. 59,77,503 on 25th Nov., 1994, by cheque drawn on Karur Vysya Bank Ltd. to the Trustees of Venkateswara Mills Ltd. Workers’ Bonus Payment Trust and it was explained that this was an irrevocable trust with the object of disbursing bonus payable to the workers. The assessee, therefore, contended that by this act the assessee had complied with the provisions of s. 43B(c). The AO held that the payment made to the trust could not be considered as disbursement of bonus to the workers. The payment of bonus had not been done on or before 30th Nov., 1994. The AO allowed a sum of Rs. 14,01,726 actually paid before the due date for filing the return and disallowed the balance of Rs. 59,40,770 under s. 43B (c) of the Act. Aggrieved by that order, the assessee filed an appeal before the CIT(A). The CIT(A) held that the payment to the trust being irrevocable actually amounted to payment of bonus to the workers within the stipulated time-limit and, therefore, deleted the portion of the amount disallowed by the AO. Aggrieved by that order, the Revenue has filed an appeal before the Tribunal. The Tribunal dismissed the appeal filed by the Revenue. Hence the Revenue has filed the present appeal by formulating the following questions of law :
“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the transfer of the amount payable as bonus to the workers to a trust before the due date for filing of the return was sufficient compliance with s. 43B(c) of the IT Act, 1961 and therefore, the amount could not be disallowed ?
Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount transferred to the trust was allowable as a deduction even though no such deduction was allowable as clearly laid down by s. 40A(9) ?”
We heard the learned counsel appearing for the Department and perused the materials on record.
4. From the finding recorded by the Tribunal, it is clear that the amount of bonus, which has been disallowed by the AO has been parted with by the company well prior to the date prescribed for payment of such bonus and prior to 30th Nov., 1994, and it is also an admitted case that payment to the trust being irrevocable, it actually amounted to payment of bonus to the workers. What is the requirement of the provision is payment prior to the date prescribed. The second proviso to s. 43B of the IT Act as it stood prior to the Finance Act, 1989 w.e.f. 1st April, 1989, reads as follows : “no deduction shall, in respect of any sum referred to in cl. (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below cl. (va) of sub-s. (1) of s. 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date.”
5. The assessee is entitled to the deduction made towards bonus. The assessee had made the payment prior to the date of omission of the proviso, the payment made to the trust being irrevocable would tantamount to payment of bonus to the workers. When that being so, we do not find any error in the order passed by the Tribunal and as such, the questions of law are answered in favour of the assessee and as against the Revenue. Accordingly, the tax case appeal is dismissed.
[Citation : 326 ITR 508]
