04 December 2019
The Bonus rule for set on and set off of allocable surplus states as under:
Where for any accounting year the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under section 11, then, the excess shall, subject to a limit of 20% of the total salary or wages of the employee employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus in the manner illustrated in the fourth schedule. Our confusion is as under:
There is set on of Rs. 50,000/- in the accounting year 2014-15. This amount of set on should be carried forward in 2015-16, 2016-17, 2017-18 and 2018-19 and nullified in 2019-20 or should be carried forward in 2015-16, 2016-17, 2017-18 and nullified in the year 2018-19 ? The confusion has arisen by the words “being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year “. For the accounting year 2014-15, the first succeeding accounting year is 2015-16, 2nd year is 2016-17, 3rd year is 2017-18 and 4th year is 2018-19. Therefore the set on should be carried on up to 2018-19 and should be nullified in accounting year 2019-20. However, if the 1st year is to be taken as accounting year 2014-15 itself, then 4th year is 2017-18 and therefore the amount of set on should be nullified in 2018-19.
We request the club member to help me in the matter.
11 July 2024
The confusion seems to arise from the interpretation of the phrase "being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year" regarding the carry forward of allocable surplus for payment of bonus under the Payment of Bonus Act.
Let's break down the interpretation:
### Understanding the Carry Forward Rule:
1. **Initial Set On Year (2014-15)**: - Let's say there is a set on amount of Rs. 50,000 in the accounting year 2014-15.
2. **Subsequent Accounting Years**: - According to the rule, this amount should be carried forward "up to and inclusive of the fourth accounting year."
3. **Interpreting "Succeeding Accounting Year"**: - The confusion arises whether the first "succeeding accounting year" starts from 2014-15 itself or from the next year, i.e., 2015-16.
4. **Clarification**: - The phrase "succeeding accounting year" typically means the year immediately following the current year. Therefore: - If we consider 2014-15 as the starting year, then the subsequent years, and the fourth year would be 2018-19. - This interpretation suggests that the Rs. 50,000 set on should be carried forward and utilized for the purpose of payment of bonus up to and inclusive of the accounting year 2018-19.
5. **Nullification Year**: - Following this interpretation, the nullification or expiration of the set on amount would occur in the accounting year immediately after the fourth year. Therefore, if 2018-19 is the fourth year, the amount would be nullified in the accounting year 2019-20.
### Conclusion:
Based on the usual interpretation of "succeeding accounting year," the set on amount of Rs. 50,000 from the accounting year 2014-15 should be carried forward and utilized for payment of bonus up to and inclusive of the accounting year 2018-19. It would then be nullified in the accounting year 2019-20.
This interpretation aligns with the sequential progression of years starting from the initial set on year, ensuring that the allocable surplus can be utilized over the specified period as per the provisions of the Payment of Bonus Act.
If there is any specific legal advice required or if the Payment of Bonus Act has been updated with amendments, it's advisable to consult with a legal expert or a labor law consultant who can provide precise guidance based on current regulations and case precedents.
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