Judgement

SHAH,J.:- The Union Co-operative Insurance Society Ltd., hereinafter called the assessee Company -carries on general insurance business. Bye-law 52 of the assessee Company provides that bonus shall be paid on those policies (not being Reinsurance Policies) on certain conditions, the following of which are relevant :

"1. That the premium on that policy is more than Rs. 5/-.

2. That there has been no claim on that policy.

3. That the policy was insured during the year for which bonus is declared.

4. That the bonus amount will be paid only if the policy is renewed on expiration and the bonus amount may be credited towards premium under the renewed policy".

2. In proceedings for assessment of the income of the assessee Company for the assessment years 1957-58 and 1958-59 the assessee Company claimed allowance of Rs. 29,615 and Rs. 44,920 respectively, paid under the bonus scheme under Bye-law 52 in the computation of its taxable income. The Income-tax Officer rejected the claim holding that payment of bonus was made after its profits for the relevant years were determined and on that account it was only case of appropriation of profit after it was earned, and that in any event s