Bonus liability accrues when due; extended time for payment does not defer deduction under the Payment of Bonus Act.

Bonus liability accrues in the accounting year in which it becomes due under the Payment of Bonus Act, 1965; an extension of time for payment under section 19 affects only the date of payment and does not postpone accrual. Section 36, which deals with exemption, does not by itself defer the liability. On that basis, bonus already due in the earlier year could not be claimed as a deduction in later assessment years, and the deduction claim was rejected.

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Issues: Whether the liability towards bonus, in the facts of the case, accrued in the accounting year in which it became due under the Payment of Bonus Act, 1965, or stood postponed to later years because time for payment was extended.

Analysis: Section 36 of the Payment of Bonus Act, 1965 confers a power of exemption from the operation of the Act and does not itself postpone the accrual of a liability to pay bonus. The relevant provision governing the time for payment is section 19 of the Payment of Bonus Act, 1965, under which the appropriate Government may extend the period for payment. Such extension affects only the date of payment and does not alter the point of accrual of the liability. The bonus had already become due and payable in the accounting year to which it related, even though payment was permitted at a later date.

Conclusion: The liability to pay bonus accrued in the earlier accounting year and was not deductible in the later assessment years claimed by the assessee. The claim was rightly rejected.

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