Commissioner of Income Tax vs Janta Central wholesale and Retail Co-operative Consumers Stores Ltd.

V.A. Mohta, J.—At the instance of the revenue, the following question is referred by the Tribunal u/s 256(1) of the income tax Act, 1961 (''the Act''): Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Commissioner (Appeals) erred in confirming the disallowance of Rs. 40,000 being the amount of provision made for the payment of purchase bonus?

The assessee is a co-operative society and material assessment year is 1976-77. The assessee claimed a deduction of an amount of Rs. 40,000 as purchase-bonus. The bonus related to the purchases made during the period from 1-4-1974 to 31-3-1976. The amount of bonus had been first provided on adhoc basis of Rs. 40,000 without fixing the actual percent age. The percentage was to be fixed on the basis of the applications to be received by 30-4-1976. The ITO disallowed the deduction, inter alia, on the ground that the liability was neither relating to the assessment year 1976-77 nor was it ascertained when provided for in the profit and loss account for the year under consideration, nor had any reasonable proportion to the profits earned by the assessee from the transactions. Taking an overall view, it was not treated as a business expenditure.

The Commissioner (Appeals) maintained the order. The Tribunal, however, allowed the appeal of the assessee on the ground that liability was, in fact, incurred though at the close of the accounting period. Payment was made purely out of business consideration and the real income of the assessee could be ascertained only after making an allowance of Rs. 40,000. Reliance was also placed on the circulars issued by the Board on the subject.

After hearing the learned counsel for the parties and taking into consideration the material on record, we feel that the question of law referred to this Court cannot be decided by us finally on the facts found by the Tribunal; and it would be necessary to ask the Tribunal to submit a supplementary statement on the case on certain points.

In the statement of the case, it is stated that (i) in the meeting of the Board of Directors on 31-3-1976 it was decided to give a total sum of Rs. 40,000 as bonus to the purchasers, (ii) public advertisement was inviting applications for bonus from the customers calling upon them to furnish details of the purchases made during the year, (iii) initially the bonus was fixed at 2 per cent on the annual purchases, and (iv) sums of Rs. 30,162 and Rs. 9,837 were paid as bonus in previous years 1976-77 and 1977-78, respectively.

It is not clear as to what exactly was decided in the said meeting. Whether only a fixed sum was decided or some basis was also decided. If so, what the said basis was? It is not clear as to when and how the said advertisement was given, and what were the contents and how many such applications were received and during which period. It is also not clear as to on what basis the AAC has stated that initially bonus was to be given at 2 per cent on annual purchase. It is not clear whether the amounts of Rs. 30,162 and Rs. 9,837 were claimed as deductions in the previous years 1976:77 and 1977-78, respectively, and whether deductions were allowed in these years. It is not clear whether the purchase-bonus was paid in pursuance of any directions or guidelines from Government or semi-Government authorities and whether such purchase-bonus was paid in earlier years or later years. If so, when? It is also not clear whether other societies are also paying such bonus and whether there was any business practice or business expediency for such payments.

With a view to answer the question referred to this Court, we deem it necessary to call for a supplementary statement of the case on all the points, mentioned in the earlier para. We, accordingly, direct the Tribunal to make within a period of six months from today a supplementary statement of the case and to submit the same to this Court along with the printed balance sheet and all material documents referred to in the statement of the case and which may be relied on for ascertaining the above facts including the Circulars or D.O. letters of C.B.D.T.

No order as to costs.