Bonus Provision under Payment of Bonus Act,1965 is ascertained liability for MAT calculations

The position in law is clear that if the provision for bonus had been computed on the basis of Payment of Bonus Act, 1965 then it would be an ascertained liability. However, if it was only estimation then it could not be regarded as an ascertained liability. Since, the position is not clear on facts, we direct that the assessing officer should determine as to whether the computation of the provision for bonus was on the basis of Payment of Bonus Act, 1965. If so, the said provision would have to be treated as an ascertained liability. On the contrary, if he finds the provision for payment of bonus was not in accordance with the provisions of the Payment of Bonus Act, 1965 and it was merely estimation then the original assessment of the assessing officer would hold.

HIGH COURT OF DELHI

 Judgment delivered on: 14.02.2013

ITA 20/1999

O.B.C.
versus

COMMR. OF INCOME TAX-1 & ANR.

JUDGMENTBADAR DURREZ AHMED, J (ORAL)

This appeal under section 260A of the Income Tax Act, 1961 has been filed by the assessee being aggrieved by the order dated 23.02.1999 passed by the Income Tax Appellate Tribunal, New Delhi in ITA No.331/Del/93 relating to the assessment year 1989-90. On 29.10.1999 this Court had framed the following questions for consideration: –

“1. Whether Section 115-J is applicable to a banking company?

2. Whether the phrase “ascertained liability” as used in Explanation (c) of Section 115J(1A) of the Income Tax Act, 1961 includes in its sweep, the entire amount set aside for payment of bonus or merely the actual payment of bonus?