Law:

Section:

Section 37(1), read with section 28 of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1967-68 - Whether since liability to pay compensation to workers under section 25FFF of the Industrial Disputes Act 1947 is one arising on closure of business, it can not be said to be an expenditure incurred for carrying on business or expenditure laid out wholly and exclusively for purpose of business - Held, yes - Whether therefore, said expenditure is not an allowable deduction under section 37(1) or section 28(i) - Held, yes FACTS During the relevant assessment year, the partners of the assessee-firms decided to dissolve the firms and close down the factory. An agreement was entered into between the management of the assessee-firms on the one hand and the workers on the other hand, under which the amount of compensation and notice pay payable to the workers under section 25-FFF of the Industrial Disputes Act, 1947, on the basis that the factory would be closed on 10-4-1967, was determined. As a matter of fact, the factory was not closed on 10-4-1967, and it was agreed before the Tribunal that the factory was actually closed on 15-7-1967, and the payments to the workers were made thereafter. The assessee in each of the cases claimed the amounts paid to the workers pursuant to this agreement on the closure of the factory as a deductible. The ITO, the AAC and the Tribunal rejected the assessee's claim item for the relevant assessment year, the account year ending 13-4-1967. On reference : HELD In the instant case, it was not the question of the ascertainment of the liability, but it was only the question of accrual or arising of the liability. The point for consideration was when actually the liability to pay the compensation to the workman arose or accrued in this case. It was true that originally the assessees wanted to close the business on 10-4-1967. But they actually closed the business on 15-7-1967, only. With reference to section 25FFF, the liability is one arising on the closure of the business. Thus, closure of the business and the accrual or arising of the liability to pay the compensation are concurrent and, therefore, from the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492