Bonus payment through an irrevocable trust was treated as actual payment, allowing deduction under the Income-tax Act.

A pre-due-date irrevocable transfer of bonus funds to a trust for workers' disbursement was treated as actual payment under section 43B(c) because the assessee had effectively parted with the amount within the prescribed time. On that factual basis, the disallowance was not justified. The same transfer was also held allowable as a deduction, since section 40A(9) did not prevent deduction where the amount had been effectively paid through the trust before the due date.

---

---

Issues: (i) Whether transfer of the bonus amount to an irrevocable trust before the due date for filing the return constituted sufficient compliance with section 43B(c) of the Income-tax Act, 1961; (ii) Whether the amount so transferred was allowable as a deduction notwithstanding section 40A(9) of the Income-tax Act, 1961.

Issue (i): Whether transfer of the bonus amount to an irrevocable trust before the due date for filing the return constituted sufficient compliance with section 43B(c) of the Income-tax Act, 1961.

Analysis: The amount towards bonus had been parted with by the assessee well before the statutory due date. The payment to the trust was irrevocable and was treated as an actual payment for disbursement to the workers. The statutory requirement under section 43B was payment within the prescribed time, which stood satisfied on the facts found.

Conclusion: The transfer to the irrevocable trust amounted to payment of bonus within the meaning of section 43B(c), and the disallowance was not justified.

Issue (ii): Whether the amount so transferred was allowable as a deduction notwithstanding section 40A(9) of the Income-tax Act, 1961.

Analysis: In view of the finding that the sum had been effectively paid to the workers through the irrevocable trust before the due date, the deduction could not be denied on the facts of the case. The transfer was treated as satisfying the statutory condition for allowance.

Conclusion: The amount transferred to the trust was allowable as a deduction and section 40A(9) did not warrant disallowance on these facts.

Final Conclusion: The Revenue's challenge failed, and the assessee's claim for deduction in respect of bonus payment was sustained.

Ratio Decidendi: A pre-due-date irrevocable transfer of bonus funds to a trust for workers' disbursement can constitute actual payment for the purpose of section 43B, permitting deduction where the statutory time condition is met.

---