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of <h1>Claim for Bonus Disallowed under Payment of Bonus Act, 1965; Surtax Deduction Denied</h1> <h3>Mysore Lamp Works Limited Versus Commissioner Of Income-Tax</h3> The court disallowed the claim of bonus set aside under the Payment of Bonus Act, 1965, as it was not an actual expenditure but a provision for a future ... Bonus Expenditure Issues Involved:1. Disallowance of the claim of bonus set on amounting to Rs. 5,11,000.2. Non-admissibility of deduction for surtax liability in computing total income.Summary:Issue 1: Disallowance of the Claim of Bonus Set On Amounting to Rs. 5,11,000The assessee claimed a deduction of Rs. 5,11,000 set apart u/s 15 of the Payment of Bonus Act, 1965. This sum was not actually paid to the workmen but was set apart as required by the statute. The Tribunal disallowed this claim, and the order was upheld throughout. The court examined whether the setting apart of this amount constituted an 'expenditure' u/s 37 of the Income-tax Act, 1961. The court referred to the Supreme Court's decision in Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66, which defined 'expenditure' as money paid out or away, irretrievably. The court concluded that the amount set apart u/s 15 of the Bonus Act was not an expenditure as it was only a provision for a possible future liability and not an actual liability. Therefore, the first question was answered in the affirmative and against the assessee.Issue 2: Non-Admissibility of Deduction for Surtax LiabilityThe assessee claimed the surtax liability as an allowable deduction, which was disallowed throughout. The court referred to its earlier decision in CIT v. International Instruments (P.) Ltd. [1983] 144 ITR 936, where it was held that surtax is an additional tax on the profits and gains of business and remains a charge on the profits and gains of the business of companies. Therefore, the assessee is not entitled to claim deduction of surtax payable in computing the total income. Following this precedent, the second question was answered in the affirmative, in favor of the Revenue and against the assessee.Conclusion:Both questions referred to the court were answered in the affirmative and against the assessee. The reference was accordingly answered.
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