Law:

Section:

Section 7 of the wealth-tax act, 1957-Valuation of asset-Interest of partners in firm-assessees were partners in a firm, in kerala, which was engaged in manufacture of cashew kernels-after a kerala high court's , a practice crystallised in cashew industry of kerala that workers demanded and obtained leave with wages without regard to number of days they worked-whether while computing assessee's interest in firm, provision made by firm for payment of leave with wages was deductible as debt owed-held, on facts, yes Facts The assessees were partners of a firm in Kerala, which was engaged in the business of manufacturing and exporting cashew kernels. While calculating their interests in the firm for the purpose of wealth-tax, the assessees claimed deduction in respect of amounts payable by the firm by way of leave with wages. Though the ITO disallowed the assessees' claim, the AAC, on appeal, allowed the assessees' claim. On appeal by the revenue, the Tribunal found, inter alia, that after the decision of the Kerala High Court in South India Corporation v. All Kerala Cashewnut Factory Workers' Federation AIR 1960 Ker. 208, a practice had crystallised in cashew industry of Kerala, under which irrespective of the technical aspects of section 79 of the Factories Act, the workers of the cashew industry, demanded and obtained leave with wages without regard to the number of days they worked. They were paid additional wages for one day for every 20 days of work. The concept of 'leave with wages' in the cashew industry, in Kerala, had over the years lost its association with leave and had thus become pure and simple additional wages. The management, as a matter of obligation, had to make provisions for payment towards this liability incurred during the relevant period. It, accordingly, observed that the amounts payable towards the impugned liability had to be treated as 'additional wages. Therefore, the Tribunal upheld the assessees' claim. On reference: Held The amounts in question did not relate to a contingent or future liability, but to existing liability; liability which had already been incurred as a result of the practice, which had, as found by the Tribunal, came…

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