COMMISSIONER OF INCOME TAX Vs. SWAMIJI MILLS LTD

JUDGEMENT

(1.) The tax case appeal is filed by the Revenue against the common order of the Tribunal, Chennai "C" Bench, dt. 26th June, 2001, in ITA No. 786 of 1993 relating to the asst. yr. 1989-90, raising the following substantial question of law :

(2.) The assessee took the contention that the AO should have deducted the bonus paid, viz., Rs. 9,59,501 as well as the donation amounting to Rs. 11,151 from the net profit arrived at Rs. 24,85,760, since the donation and the bonus were actual cash outgoings from the current year's profit, 30 per cent should have been deducted from the net profit. The CIT(A) pointed out that the net profit for the purpose of s. 115J of the Act was to be computed in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act. Item F1 of sub-cl. (x), cl. (3) of Part II of Sch. VI to the Companies Act shows that apart from wages and salaries, bonus has to be set out in the P&L a/c. So too, the information regarding miscellaneous expenses also needs to be disclosed therein. Thus, the CIT(A) held that the donation and the bonus have to be deducted in arriving at the profit under s. 115J of the Act. Aggrieved by the same, the Revenue filed an appeal before the Tribunal questioning the said deduction. As against certain disallowance, the assessee also went on appeal before the Tribunal.

(3.) By a common order, the Tribunal pointed out that the bonus paid was a liability, which accrued only in the relevant previous year; hence in computing the income under the IT Act, as per the normal computation, this expenditure was considered and given deduction too. However, when the liability had accrued for the first time in the relevant previous year and the same had been exhibited in the relevant previous year with reference to the requirements under Sch. VI to the Companies Act for the purpose of the IT Act, the same cannot be treated as relating to prior period, because, in the prior period, the liability itself had not accrued to the assessee. Thus, the Tribunal agreed with the assessee and dismissed the Revenue's appeal. Aggrieved by the same, the Revenue is on appeal before this Court.