Bonus liability accrues on the agreement date, and business transfer does not alter the deduction year.

Bonus liability under an agreement with workmen accrued only when the agreement was executed, and the deduction was therefore claimable in the previous year relevant to that accrual. The transfer of the business to another concern did not change the assessee's continued existence for tax purposes or shift the year in which the liability arose. Because bonus is directly connected with the carrying on of business, the legal question was answered in favour of the assessee and against the Revenue, and the request for reference was dismissed.

---

---

Issues: Whether bonus liability arising from an agreement executed after the transfer of the assessee's business was deductible in the year in which the agreement was entered into and, if so, whether the Tribunal was right in refusing to refer the question of law.

Analysis: The liability to pay bonus arose only on the date of the agreement with the workmen. Bonus is directly connected with the carrying on of business, and deduction can be claimed only in the previous year relevant to the assessment year in which the liability accrued. The fact that the business had been transferred to another concern did not displace the assessee's continued existence for tax purposes or alter the year in which the liability arose.

Conclusion: The question was answered against the Revenue and in favour of the assessee, and the petition for reference was dismissed.

---