Judgment

HIDAYATULLAH, J. : This appeal by special leave of this Court, has been filed against the judgment and order of the Bombay High Court dated August 27, 1954, by the Ahmedabad Manufacturing and Calico Printing co. Ltd., Ahmedabad, hereinafter called the assessee Company. By that judgment, the High Court of Bombay answered the first of the two following questions referred to it by the Income-tax Appellate Tribunal, Bombay, in the negative, and declined to answer the second question, inasmuch as, in its opinion, that question did not arise in view of the answer to the first question:

1. "Whether in law, if there is an obligation on the employer to pay a certain bonus, the E. P. T. Officer is bound to allow it as a deduction and is precluded from exercising his discretion under Rule 12(1) of the First Schedule of the Excess Profits Tax Act.

2. If the answer to the first question is in the affirmative whether on a true construction of the agreement between the assessee and his employees and the Provident Fund Rules, the assessee Company is under obligation to pay the bonus without deducting the Excess Profits Tax."

2. The facts out of which the reference arose were as follows: The a