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Issues Involved:
1. Allowability of expenses of Rs. 75,317 incurred by the assessee on the maintenance of staff and establishment under section 48(i) of the Income-tax Act, 1961. 2. Allowability of retrenchment compensation of Rs. 1,36,000 under sections 28 or 37 of the Income-tax Act, 1961. 3. Treatment of Rs. 3,62,390 received by the assessee as part of the sale price or capital receipt. Issue-wise Detailed Analysis: 1. Allowability of Expenses of Rs. 75,317: The assessee claimed Rs. 75,317 as expenses for maintaining staff to finalize the compensation for the assets transferred to the Haryana State Electricity Board. The Tribunal allowed this expense under section 48(i) of the Income-tax Act, 1961, as it was necessary for safeguarding the assessee's interests in the arbitration process for compensation. The High Court upheld this decision, agreeing that the expenditure was related to the transfer and necessary for pursuing matters with the concerned authorities, including arbitration. Thus, the Tribunal's decision was affirmed, and the question was answered against the revenue. 2. Allowability of Retrenchment Compensation of Rs. 1,36,000: The assessee paid Rs. 1,36,000 as retrenchment compensation under section 25FF of the Industrial Disputes Act, 1947. The Tribunal, by majority, disallowed this amount, drawing support from the Gemini Cashew Sales Corporation case. The High Court, however, found that the retrenchment compensation was a legitimate expense incurred in anticipation of the transfer of the industrial undertaking, which was definite and certain. The Court distinguished the facts from the Gemini case, noting that the transfer was certain and the workmen were not absorbed by the transferee, making the compensation a necessary and allowable expenditure under section 37 of the Income-tax Act. The question was answered in favor of the assessee. 3. Treatment of Rs. 3,62,390: The assessee contended that Rs. 3,62,390 received should be treated as a solatium and not as part of the sale price. The Tribunal rejected this claim, and the High Court agreed, citing the Fazilka Electric Supply Co. Ltd. v. CIT case. The Court found no reason to refer this question, as the Tribunal's decision was correct. Thus, no reference was made for this item. Conclusion: The High Court upheld the Tribunal's decision on the allowability of Rs. 75,317 as expenses under section 48(i) and reversed the Tribunal's decision on the retrenchment compensation of Rs. 1,36,000, allowing it under section 37. The Court also agreed with the Tribunal's treatment of Rs. 3,62,390 as part of the sale price, not requiring a reference for this item. The references were accordingly answered, with no order as to costs.
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