JUDGMENT
Arijit Pasayat, C. J.
On being moved by the revenue under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), the following question, pertaining to the assessment year 1974-75, has been referred for the opinion of this court by the Income Tax Appellate Tribunal, Delhi Bench-B, New Delhi (hereinafter referred to as “the Tribunal”) :
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sum of Rs. 20,000 representing liability for bonus for the period 1-4-1972, to 31-12-1972, which arose when Prithvi Pal Singh was carrying on proprietary business was an allowable deduction for the assessment year 1974-75”?
2. The factual position, which is almost undisputed, is as under:
For the assessment year 1974-75, a claim of Rs. 20,700 as bonus payable to staff was disallowed. It is the stand of the Assessing Officer that the said expenses related to an earlier period and were not relatable to the year in question. It is to be noted that the proprietorship concern of the previous proprietor was taken over by the private limited company, the present assessee, with effect from 3-1-1973. The assessee’s stand was that the bonus related to the period 1-4-1972, to 31-12-1972, and since the accounts were closed on 30-6-1972, this amount was payable by the assessee as the assets and liabilities of the proprietorship concern were taken over. The Appellate Assistant Commissioner of Income Tax (hereinafter referred to as “the Appellate Assistant Commissioner”), found that the liability related to the period from 1-4-1972 to 31-12-1972, while the concern was proprietorship. The matter was carried in further appeal to the Income Tax Appellate Tribunal which disposed of the matter with the following observations:
“We have carefully considered the facts of the case. In our opinion, the case is fully governed by the dictum laid down by the learned judges of the Supreme Court in Eastern Investment Ltd. v. CIT (1951) 20 ITR 1, followed by the judges in CIT v. Amalgamated Developments Ltd. (1967) 65 ITR 395 (SC). May be the assessee-company might not have spent the money out of the necessity or with a view to a direct or immediate benefit to the trade but it has been spent on the grounds of commercial expediency in order indirectly to facilitate the carrying on of the business. Therefore, we have to hold that the money spent was expended wholly and exclusively for the purpose of the trade.”
3. We find that the Tribunal has not indicated any reason as to why it felt that the amount was allowable. Whether it was on the ground of commercial expediency was not relevant in the background that the claim related to an earlier period and the liability did not accrue during the assessment year in question. That being the position our answer to the question is in the negative, i.e., in favour of the revenue and against the assessee.
