Bonus provision not deductible where liability arose after year-end and remained only a contingent liability.

A provision for bonus set aside after the accounting year could not be deducted because the liability had not accrued during that year. The bonus obligation arose only after the year-end, following a subsequent government notification, so no existing liability had fastened on the assessee when the accounts closed. The amount was therefore only a contingent provision, not an allowable deduction under the Indian Income-tax Act, 1922. The Court affirmed that a mere provision for a later-accruing liability is not deductible on identical facts.

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Issues: Whether the amount provided towards bonus for the relevant assessment year was an allowable deduction when the liability to pay bonus arose only after the close of the accounting year.

Analysis: The accounting year ended before the Bonus Act came into force, and the obligation to pay bonus was created only by a subsequent government notification. Since no existing liability had fastened on the assessee during the relevant accounting year, the amount set apart was only a provision for a contingent liability. A mere provision for a liability that had not accrued in the accounting year could not be deducted under the relevant provisions of the Indian Income-tax Act, 1922. The conclusion is consistent with the earlier decisions relied upon by the Court on identical facts.

Conclusion: The deduction was not allowable and the issue was answered against the assessee.

Final Conclusion: The assessee was not entitled to deduct the bonus provision for the assessment year in question, and the appeal failed.

Ratio Decidendi: A deduction cannot be claimed for a mere provision made in respect of a bonus liability that accrues only after the close of the accounting year.

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