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TMI Blog2003 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of the assets treating the gratuity liability as part of the actual cost of the assets and allow depreciation accordingly - - - - - Dated:- 26-6-2003 - Judge(s) : D. K. SETH., R. N. SINHA. JUDGMENT D.K. SETH J.-The appeal was admitted on the following two questions: "(a) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing to recompute the cost of the assets treating the gratuity liability as part of the actual cost of the assets and allow depreciation accordingly? (b) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the consideration of Rs. 2 crores shown in the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices payable under the Payment of Gratuity Act or otherwise including for the entire period of service with the vendor shall be on the purchaser's account and shall be met by the purchaser." It is clear from clause 6 of the agreement that the accrued gratuity liability for the entire period of service of the employees with the vendor would be on the purchaser's account in addition to the said Rs. 2 crores being the consideration mentioned in clause 1(A) above. Pursuant to those conditions, the actual cost of the liability accrued till the date of the transfer of the mill, on account of gratuity was assessed at Rs. 3,44,58,852. In the assessment year 1989-90, the learned Tribunal had held that in addition to the amount of Rs. 2 crores, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1997] 226 ITR 680 (Mad). But having regard to the facts and circumstances of this case, it appears that all these decisions are distinguishable on facts. Inasmuch as in the first two cases, the amounts were found to have been inflated and on that ground it was not allowed. In the third case, namely, Kumudam Printers (P.) Ltd. [1997] 226 ITR 680 (Mad), the liability was that of the vendor that accrued after the date of the purchase. It could not be treated to be the liability of the assessee and that too when the sum was agreed to be paid voluntarily without taking over the liability therefor. Even then the liability could not have been taken over because it was not a liability on that date when the property was acquired. It was a liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice is reckoned to be continuous, though payable on superannuation or retirement or resignation or death or disablement due to accident or disease. Subsection (2) prescribes fifteen days' wages based on the rate of wages last drawn by the employee for every completed year of service or part thereof in excess of six months. Thus, with the continuation of employment, the gratuity continues to accrue on account of the respective employee. The right to receive gratuity is a right vested in the employee on completion of five years continuous service receivable from the date from which continuous service is reckoned. The employees, whose service was continuing after the transfer of the undertaking, were entitled to claim gratuity from the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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