Dear Suhas Ji,
Thanks for asking this question.
This is a complex subject and let me accept that I also do not through in this subject even after so many years of exposure in the field. However, for your ready reference I am giving below the definitions of allocable surplus, available surplus, set off, set on
"allocable surplus" means-
(a) in relation to an employer, being a company 1*[(other than a banking company)] which has not made the arrangements prescribed under the Income-tax Act for the declaration and payment within India of the dividends payable out of its profits in accordance with the provisions of section 194 of that Act, sixty-seven per cent. of the available surplus in an accounting year;
(b) in any other case, sixty per cent. of such available surplus;
"available surplus" means- the available surplus computed as under:
The available surplus in respect of any accounting year shall be the gross profits for that year after deducting therefrom the sums deductible from gross profits.
"Set on and set off of allocable" surplus means -
(1) 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 twenty per cent. of the total salary or wage of the employees 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 utilised for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule.
(2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under section 10, and there is no amount or sufficient amount carried
forward and set on under sub-section (1) which could be utilised for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.
(3) The principle of set on and set off as illustrated in the Fourth Schedule shall apply to all other cases not covered by sub- section (1) or sub-section (2) for the purpose of payment of bonus under this Act.
(4) Where in any accounting year any amount has been carried forward and set on or set off under this section, then, in calculating bonus for the succeeding accounting year, the amount of set on or set off carried forward from the earliest accounting year shall first be taken into account.
If you have any question, please please do not ask me dear. (just said it jokingly). This is a subject of CA / Accountant.
In Law / Personnel Management / Labour Law exams, there is a sure question every year on it, of good marks.