1978 (10) TMI 28 - HC - Income Tax

Summary

The High Court of Allahabad considered whether retrenchment compensation paid on business closure is deductible under s. 37 of the I.T. Act. The Tribunal sided with the revenue, following the Supreme Court's ruling in CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643, which held that such compensation is not deductible as it arises only upon closure, not during business operation. The court ruled in favor of the department, stating that the liability for compensation is not of a revenue nature and is not deductible under s. 10. The Commissioner was awarded costs of Rs. 200.