Finalised bonus liability is deductible against the relevant year's profits when it relates to that accounting period.

A bonus liability finally determined by an industrial tribunal award was treated as deductible against the profits of the accounting year to which it related for income-tax purposes. The Supreme Court's reasoning, applied on the same footing as the connected contemporaneous decision, was that where the liability is crystallised and referable to the relevant previous year, the deduction is allowable against that year's profits for assessment year 1950-51. The claim was therefore allowed in favour of the assessee.

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Issues: Whether bonus paid in respect of an earlier calendar year was allowable as a deduction against the profits of the relevant previous year for the assessment year 1950-51.

Analysis: The claim for deduction arose from a bonus liability settled by an industrial tribunal award in January 1949 and was considered on the same footing as the connected decision delivered contemporaneously. The liability was held to be deductible against the profits of the previous year relevant to assessment year 1950-51.

Conclusion: The question was answered in the affirmative and the deduction was allowable in favour of the assessee.

Ratio Decidendi: Where a bonus liability is finally determined and relates to the accounting year in question, it is allowable as a deduction against the profits of that year for income-tax purposes.

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