SRINIVASAN J.

The Tirunelveli Motor Bus Service, a private Company, is the assessee. For the assessment year 1950-51 the return of income was for Rs. 14, 555. For failure of the assessee to comply with the requirement of the notice under section 22(4) and section 23(2) of the Act, an assessment was made under section 23(4). The best of judgment assessment of the net income was Rs. 1, 80, 000, which was later reduced on appeal to Rs. 1, 30, 000. In that year, the assessee had debited its accounts with the sum of Rs. 71, 949 in respect of its liability to pay bonus for its employees. The debit did not represent any actual payment. In the account year relevant to the assessment year 1957-58, the claim of the employees to bonus for the account year relevant to the assessment year 1950-51 was settled at Rs. 17, 470, and that was paid to the employees. The difference between the original debit and the actual payment, i.e., Rs. 54, 479 was credited to the profit and loss account of the company In the assessment for the year 1957-58, the Income-tax Officer brought this amount to tax. He purported to do so under section 10(2A) of the Act. He repelled the contention of the assessee that since the original assessment for the year 1950-51 was made under section 23(4), there was no call for the department to examine the allowability of any item of expense such as the one under consideration. He thought that the estimate of the net income impliedly meant that the allowances which the assessee was entitled to had been given. On appeal, the Appellate Assistant Commissioner accepted this view as correct. Though he observed that there was nothing on record to show that the Income-tax Officer specifically dealt with this particular allowance, an inference to that effect could be reasonably made from the circumstances. On further appeal to the Tribunal, however, the Tribunal took a different view. The Tribunal felt that since it was an estimate that was made, the book position must have been disregarded. It stated

"unless the department is able to identify any particular item of expense as having been already allowed as deduction in an earlier assessment conclusively, section 10(2A) is not available for recoupment" *

. It accordingly upheld the assessee's contentionOn the application of the Commissioner of Income-tax, the Tribunal has referred the following question for the determination of this court

"Whether on the facts and in the circumstances of the case, the sum of Rs. 54, 479 is assessable in the year 1957-58 under the provisions of section 10(2A) of the Income-tax Act of 1922 ?" *

The above provision, section 10(2A), provides that where for the purpose of computing profits or gains, an allowance or a deduction has been made in the assessment for any year in respect of any expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained some benefit in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the benefit accruing to him shall be deemed to be profits or gains of the business during that previous year. The section is perfectly clear. Applying it to the facts of this case, what it means is that if the assessee had incurred a particular liability, such as for bonus, of the sum stated earlier in the account year relating to 1950-51 and thereafter in any subsequent year that particular trading liability had become less, as in the present case which had been brought down to Rs. 17, 470, since the assessee had obtained the benefit of a deduction of a larger amount in the earlier year, he shall be deemed to have made a profit to the extent of the difference between the original liability and the reduced liability in the subsequent year. It is the case of the department that notwithstanding that no allowance or deduction was purported to have been made in the earlier year, as the computation of the inc