COMMISSIONER OF INCOME TAX Vs. ASSOCIATED ELECTRICAL AGENCIES

JUDGEMENT

(1.) THE assessee was an unregistered firm. For the assessment year 1991-92, the assessment of the assessee was completed under Section 143 (3) of the Income-tax Act on 29. 3. 1994 on a total income of Rs. 36,27,580/ -. In the course of assessment proceedings, the assessing officer noticed from the profit and loss account that the assessee has claimed a sum of Rs. 3,27,895/- towards bonus, however, in the balance sheet as on 31. 3. 1991, the assessee has shown a sum of Rs. 84,01,475. 98ps. under the head "accounts payable". The assessing officer called for the details regarding payment of bonus. The assessee's representative stated that the bonus was paid to the staff on 31. 10. 2001 after drawing the cash from the Bank. On verification of the accounts, the assessing Officer found that though there was cash withdrawal from the Bank on 31. 10. 2001, there was no entry in the books of accounts relating to disbursement of bonus and even the vouchers did not contain the date of receipt except in a few cases wherein the date of receipt of bonus was mentioned as 2. 11. 1991. In the absence of any materials to vouchef the payment of bonus on 31. 10. 2001, the assessing officer was of the view that the bonus could not have been disbursed on the same day for the staff working at Cochin and Bangalore Branches. Finally, it was conceded that the bonus was disbursed to the staff of Madras Branch on 1. 11. 1991, Cochin Branch on 2. 11. 1991 and Bangalore Branch on 2. 11. 1991. In view of the above, the assessing officer disallowed the claim of bonus payment of Rs. 3,27,895/- applying the provisions of Section 43-B.

(2.) AGGRIEVED by the disallowance made by the assessing officer, the assessee filed appeal before the Commissioner of Income-tax (Appeals ). The appeal came to be dismissed on the ground that the bonus has not been actually paid on or before 31. 10. 1991. In the second appeal filed in I. T. A. No. 2190/mds/94, the Tribunal by its order dated 6. 11. 2003 held that actually the cash was withdrawn on 31. 10. 1991 itself; that the delay in distribution of bonus was occurred while transmitting the money from one branch to another through Bank and thus the delay was justifiable and acceptable. On that basis, the Tribunal has concluded that the claim made by the assessee was an allowable expenditure and on that reason, set aside the order of the lower authorities. The revenue filed the present appeal questioning the correctness of the order of the Tribunal by formulating the question of law as follows:

(3.) THOUGH the appeal was filed by the revenue, learned counsel appearing for the assessee/respondent contended that considering the tax effect involved, which is very negligible, this is not a fit case to entertain the appeal for consideration by relying on instruction No. 1979 issued by the Central Board of the Central Board of Direct Taxes in Circular F. No. 279/126/98-ITJ, dated 27. 3. 2000.