JUDGMENT
B.N. Kirpal, J.
1. This is a petition under section 256(2) of the Income-tax 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 fats 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 assessed’s business by another concern ?”
2. It appears that the respondent, which is a partnership firm, sold its business to Tiger Locks Ltd., with effect from 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 income-tax authorities on the ground that, with effect from December 31, 1973, business had been closed and transferred by the respondent to Tiger Ltd. The Tribunal, however, on an application having been filed under section 254(2) of the Income-tax Act rectified its earlier order and allowed the deduction by purporting to follow its earlier order for earlier years.
3. It is the aforesaid circumstances that the petitioner filed an application under section 256(1) for referring the aforesaid question of law. On the Tribunal dismissing the said application, the present petition has been filed.
4. 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 assessment year 1975-76. Even if the assessed’s concern and the business were taken over by Tiger Locks Ltd., the assessed 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 assessed 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.