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Issues Involved:
1. Deductibility of extra printing charges under section 37 of the Income-tax Act, 1961. 2. Deductibility of estimated gratuity payable to non-working journalists based on a legal and scientific basis. Issue-wise Detailed Analysis: 1. Deductibility of Extra Printing Charges: The first issue concerns whether the extra printing charges of Rs. 1,27,245 paid by the assessee to M/s. Indian Express Private Ltd. are an admissible deduction under section 37 of the Income-tax Act, 1961, for the assessment year 1969-70. The assessee printed the Vijayawada edition of the "Indian Express" and its Sunday Edition for Indian Express (Madurai) Private Ltd., while the Madurai company printed the "Andhra Prabha Illustrated Weekly" for the assessee. The Madurai company increased the printing charges due to the costlier offset process used. The Income-tax Officer (ITO) disallowed the claim, considering it not bona fide and lacking a supporting agreement. The Appellate Assistant Commissioner (AAC) confirmed this disallowance. However, the Tribunal allowed the deduction, finding no material suggesting an oblique motive and noting that the Madurai company was taxed at a higher rate than the assessee, negating any tax advantage. The Tribunal's conclusion was that the expenditure was wholly and exclusively for business purposes, and the absence of a written agreement did not preclude the allowance. The High Court affirmed this view, stating that the payment was bona fide and commercially justified, thus answering the first question in the affirmative and in favor of the assessee. 2. Deductibility of Estimated Gratuity: The second issue pertains to the assessee's claim for the deduction of Rs. 1,32,653 as gratuity payable to employees. The ITO disallowed this amount, and the AAC upheld the disallowance, citing a change in the method of accounting and lack of a legal or scientific basis for the provision. The Tribunal found that the gratuity liability was based on a scheme and agreement for non-journalists and statutory provisions for working journalists. The Tribunal directed the ITO to allow the deduction if the provision was based on a legal or scientific basis. The High Court examined the relevant statutory provisions, including section 36(1)(v) and section 40A(7) of the Income-tax Act, which govern the deductibility of gratuity payments. It concluded that the provision for gratuity, calculated on a scientific basis, represents an accrued liability and should be allowed if it aligns with accepted commercial practices and trading principles. The Court referred to precedents, including the Supreme Court's decisions in Badridas Daga v. CIT and Metal Box Company of India Ltd v. Their Workmen, which support the deductibility of such provisions. The Court also distinguished this case from CIT v. Carborundum Universal Ltd., noting that no specific provision precluded the deduction. Consequently, the second question was also answered in the affirmative and in favor of the assessee. Conclusion: Both issues were resolved in favor of the assessee, affirming the deductibility of the extra printing charges and the provision for gratuity, provided the latter is based on a legal or scientific basis. The assessee was awarded costs, with counsel's fee set at Rs. 500.
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