Deductibility of bonus provision depends on proof of accrued or admitted liability, not a bare entry in the accounts.

A provision for staff and labour bonus is deductible only if factual enquiry shows it represents an accrued or admitted liability, not a mere accounting entry. The High Court noted that the record did not establish whether the provision arose from an admitted obligation, past practice, an understanding with workmen, a board resolution, or a settled claim by agreement or adjudication. Because those factual foundations were missing, the deductibility question could not be answered on the existing material and required fresh examination on the basis on which the bonus provision was made.

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Issues: Whether the provision made for staff and labour bonus was deductible as a liability in computing the assessee's profits for the assessment year, or whether the question required further factual enquiry before an answer could be given.

Analysis: The liability to bonus could not be determined merely from the existence of a provision in the accounts. The material on record did not show whether the provision was based on an admitted liability, an established past practice, an understanding with the workmen, a resolution of the assessee, or a claim settled by agreement or adjudication. In the absence of findings on these matters, the court could not decide whether the amount represented an accrued and deductible liability. The matter therefore had to be examined on the factual basis on which the bonus provision was made.

Conclusion: The question could not be answered on the existing facts and the matter was remanded to the Tribunal for fresh enquiry and decision according to law.

Ratio Decidendi: A bonus provision is deductible only if it is shown, on proper factual enquiry, to represent an accrued or admitted liability and not a mere unexplained provision in the accounts.

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