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TMI Blog1998 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1947, dated September 26, 1977, is allowable as a deduction in computing the income of the assessee-firm for the accounting year November 3, 1975, relevant for the assessment year 1976-77 ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal had valid materials to hold and was justified in holding that there was only a reorganisation of the business in the process of transferring the manufacturing business hitherto carried on by the assessee ? (3) Whether, the Appellate Tribunal had valid material to conclude that the reorganisation of the business was made in the interest of the business for earning better profits from the continuing business, if the answer to the second question, is in the affirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim on the ground that the agreement referred to by the assessee was between the union of the workers and the newly formed company and the assessee-firm, was not a party to the agreement and the liability to pay retrenchment compensation as well as the gratuity arose on account of the change of ownership or transfer of the business and it cannot be said to be revenue in nature. The above view of the Income-tax Officer was confirmed by the Commissioner of Income-tax (Appeals), Madras, on the appeal preferred by the assessee. The assessee carried the matter in appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal recorded a clear finding that the manufacturing activity as well as the trading activity of the assessee forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643 and W. T. Suren and Co. Ltd. v. CIT [1998] 230 ITR 643. In the later decision the Supreme Court held that in so far as the gratuity liability is concerned, the obligation was a present liability and even though there was a transfer or closure of the business, the assessee would be entitled to deduction of the same. Learned counsel for the Revenue submitted that on the basis of the decision of the Supreme Court in the case of CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643, the decision of this court in India Manufacturers (Madras) P. Ltd. v. CIT [1985] 155 ITR 774 and the decision of the Calcutta High Court in the case of Binani Printers (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the manufacturing unit in favour of another company and there were certain surplus employees in the assessee-firm who have to be retrenched. Though the assessee was not a party to the settlement arrived at before the Labour Officer, the order of the Labour Officer clearly shows that the assessee was required to pay retrenchment compensation to the employees and their services were also terminated. The assessee in compliance with the orders of the Labour Officer had paid the same. The question that arises is whether such a payment can be regarded as business expenditure. The finding of the Appellate Tribunal is that there was a unity of control and unity of management of both the units of the business, viz., the manufacturing activity as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is established that there are no materials for such a conclusion. It is not possible for the court, sitting in reference jurisdiction to go into the question of evidence on which it recorded a finding. Further, when the Tribunal rendered a finding that it was not disputed by the Revenue before it that two units constituted a single business the statement as to what happened before the Tribunal has to be given due effect and cannot be lightly brushed aside, In view of the finding of the Appellate Tribunal that both the businesses constituted a single business, the assessee would be entitled to the deduction of retrenchment compensation as well. The decision relied upon by learned counsel for the Revenue related to cases of two different b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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