Judgment

SIKRI, J. : The respondent, Swadeshi Cotton and Flour Mills, hereinafter referred to as the assessee, is a limited company which owns and runs a textile mill at Indore. For the assessment year 1950-51 (accounting year, calendar year 1949), which was its first year of assessment under the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) it claimed that under S. 10(2) (x) of the Act it was entitled to an allowance in respect of the sum of Rs. 1,08,325/- which it had paid as bonus for the year 1947 in the calendar year 1949, as a result of the award of the Industrial Tribunal dated January 13, 1949. The claim of the assessee was not accepted by the Income-tax authorities. The Appellate Tribunal held that it was a liability relating to an earlier year and not the year 1949. However, on an application by the assessee it stated a case and referred two questions. We are concerned only with one which reads thus :

"Whether on the facts and in the circumstances of the case the assessee is entitled to claim a deduction of bonus of Rs. 1,08,325/- relating to the calendar year 1947 in the assessment year 1950-51?"

2. The High Court of Madhya Pradesh answered the question i