Assessee  debited a certain amount representing provision for salary and wages arising out of Justice Palekar Award for period 1-1-1986 to 30-6-1986 on basis of memorandum of settlement between management and employees signed on 8-5-1987 and claimed deduction of same as expenditure in assessment year 1987-88.  Assessing Officer disallowed assessee’s claim. Tribunal held that liability for salary and wages arising out of Justice Palekar Award is  not allowable as expenditure in assessment year in question but only in year in which agreement between management and employees was entered into. On appeal the Court held that  since services were rendered by employees during relevant previous year, Tribunal is not right in its view. Accordingly the liability for salary and wages was allowable as expenditure in assessment year in question. Court also held that ex-gratia bonus paid to employees over and above eligible bonus under Payment of Bonus Act, 1965 was allowable as expenditure. (AY. 1987-88)