1984 (3) TMI 37 - HC - Wealth-tax

Summary

Issues:
1. Entitlement to claim deduction under the Wealth-tax Act for provision made by the firm for payment of leave with wages.
2. Determining whether leave with wages in the cashew industry in Kerala is an additional wage or actual leave.

Analysis:
The case involved two questions referred to the High Court by the Income-tax Appellate Tribunal regarding the entitlement of the assessees, partners of a firm, to claim a deduction under the Wealth-tax Act for provision made for leave with wages. The Tribunal had allowed the claim, considering the provision for leave with wages as additional wages to every worker, irrespective of the number of days worked.

The contention of the assessees was based on a practice in the cashew industry in Kerala, where workers were paid leave with wages as additional wages for every 20 days of work, regardless of the total number of working days in a year. This practice was considered a liability on the part of the management and a right vested in the workers, as established by a previous court decision.

The Tribunal examined the agreements, books of account, and provision made for liabilities already incurred, concluding that the provision for leave with wages was an existing liability, not a contingent or future liability. The Tribunal found that the agreements only evidenced the prevailing practice in the industry, which was obligatory for the management.

The High Court agreed with the Tribunal's findings, stating that the practice in the industry established a liability for amounts payable for the period workers rendered service, which could be considered in computation under the Wealth-tax Act. Consequently, the High Court affirmed the entitlement of the assessees to claim the deduction under the Wealth-tax Act.

In conclusion, the High Court answered the first question in favor of the assessees and against the Department, rendering the answer to the second question unnecessary. The judgment was to be sent to the Appellate Tribunal, Cochin Bench for further action.