Surtax liability and bonus provision under the Bonus Act were not deductible in computing taxable income.

Surtax liability was treated as not deductible in computing taxable income, following earlier High Court precedent. The claimed amount set aside as bonus under section 15(1) of the Payment of Bonus Act, 1965 was also held not allowable as business expenditure, relying on decisions of the Madhya Pradesh and Andhra Pradesh High Courts. The operative result is that neither item could be claimed as a deduction, and both issues were answered against the assessee.

---

---

Issues: (i) whether surtax liability was allowable as a deduction while computing taxable income; (ii) whether the amount set on as bonus under section 15(1) of the Payment of Bonus Act, 1965 was allowable as business expenditure.

Issue (i): whether surtax liability was allowable as a deduction while computing taxable income.

Analysis: The question was treated as concluded by earlier decisions of the same High Court and another Division Bench, which had already taken the view that surtax liability was not deductible in computing taxable income.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): whether the amount set on as bonus under section 15(1) of the Payment of Bonus Act, 1965 was allowable as business expenditure.

Analysis: The question was treated as concluded against the assessee by decisions of the Madhya Pradesh High Court and the Andhra Pradesh High Court, which held that such a claim was not an allowable deduction.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered entirely against the assessee, leaving no deduction allowable on either issue.

Ratio Decidendi: Where the point is already concluded by binding or persuasive precedent, surtax liability and the amount set on for bonus under section 15(1) of the Payment of Bonus Act, 1965 are not allowable deductions in computing taxable income.

---