Deductibility of additional bonus turns on a genuine employer-workmen understanding; unilateral provision is not an accrued liability.

Additional bonus is deductible only if it accrues as a legally enforceable liability during the accounting year, arising from an understanding, adjustment, or agreement between employer and workmen under the Payment of Bonus Act and the Income-tax Act. A unilateral tentative provision by the assessee, without a bilateral arrangement, does not create an accrued liability for that year. The Tribunal's findings were incomplete on whether the payment reflected a genuine settlement or merely a unilateral decision, so the question was not decided on merits and was remitted for fresh factual determination.

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Issues: Whether the assessee's claim for deduction of additional bonus of Rs. 1,32,795 accrued in the relevant accounting year as a legally enforceable liability under the Payment of Bonus Act, 1965 and the Income-tax Act, 1961.

Analysis: The liability could be deductible if it arose from an understanding, adjustment, or agreement between the employer and workmen during the accounting year, even if the formal document was executed later. If, however, the amount represented only a unilateral tentative decision by the assessee without any bilateral arrangement, no accrued liability would arise for that year. The findings of the Tribunal did not clearly establish whether the payment was pursuant to a genuine settlement or only a unilateral provision, and the factual basis necessary to apply the legal test was incomplete.

Conclusion: The question was not answered on merits, and the matter was remitted to the Tribunal for fresh determination of whether there was an understanding, adjustment, or agreement in the relevant year.

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