9911796707
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Interpretation of statutory liability under the Bidi and Cigar Workers (Conditions of Employment) Act, 1966 for deduction in income tax computation. Analysis: The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, where the Tribunal referred a question regarding the deductibility of a liability under the Bidi and Cigar Workers (Conditions of Employment) Act, 1966. The assessee, a partnership firm engaged in bidi manufacturing, claimed a deduction of Rs. 2,03,722 for holiday wages and leave with wages. The Income-tax Officer disallowed the claim, stating it was a contingent liability as no actual payment was made, but the Commissioner of Income-tax (Appeals) allowed the claim. The Tribunal upheld the claim based on previous judgments, including one by the High Court in a similar case. The court emphasized that the provision made in the accounts for the liability incurred under the Act was beyond dispute, and since the liability was incurred and provision made as per the mercantile system, it was a permissible deduction. The court cited previous decisions and the principle laid down by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT to support the deduction. The court highlighted that the matter was settled by previous decisions and had an academic character, as no useful purpose would be served by requiring a reference on the same point. It noted that in a previous case involving the same parties, a similar reference was rejected for the same reason, indicating consistency in approach. The court also mentioned another case where it was found that some parties had utilized the reserved amount for business purposes, suggesting that assessing authorities could investigate such instances and take appropriate action if necessary. However, in the present case, the court ruled in favor of the assessee and against the Revenue, emphasizing the legality of the deduction claimed under the Act.
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