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Issues Involved:
The judgment involves two main issues: 1. Whether the provision for monetary value of unavailed leave salary of employees should be allowed as a deduction. 2. Whether the sum paid as retrenchment compensation and notice pay to voluntarily retired employees is an admissible deduction. Issue 1 - Provision for Leave Salary: The Revenue did not press the first question regarding the provision for unavailed leave salary. Hence, no answer was provided on this issue. Issue 2 - Retrenchment Compensation and Notice Pay: The assessee claimed Rs. 23,084 as compensation paid to voluntarily retired employees, contending it as business expenditure. The Income-tax Officer initially disallowed the claim, stating it was not a statutory liability under Industrial Disputes Act. However, the Appellate Assistant Commissioner allowed the claim, citing a previous Tribunal decision. The Tribunal upheld this decision on further appeal by the Revenue. The key question was whether the payment was voluntary or a legitimate business expenditure. The payment of Rs. 23,084 was made as per an agreed scheme between the assessee and employees. Referring to a previous case, it was established that such payments, even if not legally mandated, could be considered business expenditure if made for business purposes and maintaining good labor relations. The court found no difficulty in answering the second question in favor of the assessee, allowing the sum as a deduction. The Revenue was directed to pay costs amounting to Rs. 500. This judgment clarifies that voluntary payments made as part of a business scheme, even if not legally required, can be treated as business expenditure if they serve business purposes and maintain good labor relations, as established in previous legal precedents.
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