1998 (8) TMI 46 - HC - Income Tax

Summary

Issues:
1. Deductibility of pension paid to an ex-general manager under section 5(J) of the Kerala Agricultural Income-tax Act, 1950.
2. Allowability of listing fee paid to the stock exchange as a deduction under section 5(J) of the Act.

Analysis:

*Issue 1: Deductibility of Pension*
The court deliberated on whether the pension of Rs. 39,999.96 paid to the ex-general manager could be considered an allowable deduction under section 5(J) of the Act. The Appellate Tribunal had initially disallowed the deduction, questioning the benefit derived by the company from paying pension to a former employee. The court emphasized the language of section 5(J), drawing parallels with the Income-tax Act, and highlighted that the payment of pension was a service condition agreed upon during the general manager's tenure. The court stressed that pension payments were not gratuitous but made for commercial expediency to ensure employee loyalty and productivity. Citing precedents like Sassoon J. David and Co. (P.) Ltd. v. CIT, the court established that payments made for commercial expediency were allowable deductions. It further referenced Indian Overseas Bank Ltd. v. CIT to support the business expediency of pension payments and rejected the narrow view of the Tribunal. Ultimately, the court held that the pension expenditure was incurred for commercial expediency and thus qualified as an allowable deduction under section 5(J) of the Act.

*Issue 2: Allowability of Listing Fee*
The second issue revolved around the listing fee of Rs. 2,000 paid to the stock exchange and its deductibility under section 5(J) of the Act. The court referred to a previous decision in Cochin Malabar Estates and Industries Ltd. v. Commr. of Agrl. I. T., where a similar question was addressed, ruling against the assessee. The court concurred with the earlier decision, aligning with the Revenue's stance on the deductibility of listing fees. Consequently, the court partly allowed the revision, affirming the disallowance of the listing fee as a deduction under section 5(J) of the Act.

In conclusion, the judgment clarified the deductibility of pension payments to ex-employees under section 5(J) of the Act, emphasizing commercial expediency and service conditions. Additionally, it upheld the non-deductibility of listing fees paid to the stock exchange based on established precedents and court decisions.