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TMI Blog1993 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in treating retrenchment compensation of Rs. 1,03,147 as allowable under section 37 of the Income-tax Act, 1961?" For the assessment year 1983-84, J. C. Budharaj and Co. (Raising of chrome ore, Kalarangi 'E' Quarry), a partnership firm (hereinafter referred to as "the assessee") filed its return of income before the Income-tax Officer, Ward A, Bhubaneshwar (in short, "the ITO"). The return was filed on December 30, 1983, disclosing a total loss of Rs. 12,98,443. During the assessment, it was noticed that the assessee had claimed a sum Of Rs. 1,03,147 under the head " Compensation expenses". The Income-tax Officer was of the view that the amount was payable to the workers at the closure of the mines and, therefore, was relatable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its work in some areas. It did not allow the assessee to continue the work beyond a certain depth. As a result of the restraints put by the OMC, considerable loss was caused to the assessee. Since no amicable settlement could be reached in regard to continuation of the work, the assessee decided to suspend its raising activities in OMC mines at the earliest. Since indefinite retention of the workmen would have entailed further loss, the assessee considered retrenchment of some of its workmen from July 1, 1982, even while the operational activities were still continuing. Notices were served on all concerned as required under the provisions of the Industrial Disputes Act, 1947. In conformity with the provisions of section 25F of the said Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving found that the contract with the OMC could no longer be executed as per agreement, the assessee thought it expedient to dispense with the services of those employees who were engaged for that particular work, as their indefinite retention would have meant further loss to the assessee. There fore, payments in terms of section 25F were made by the assessee. The Revenue carried the matter in appeal before the Tribunal. The conclusions of the Commissioner of Income-tax (Appeals) were affirmed by the Tribunal. On being moved by an application under section 256(1) of the Act, the Tribunal referred the question aforeindicated for opinion. Mr. Ray, learned counsel for the Revenue, has urged that there was no quantification of the liability and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensation therefor. Section 25F of the Industrial Disputes Act, 1947, operating with effect from October 24, 1953, provides that, in such a case of retrenchment, the workman shall be entitled to compensation. Payment of accrued liability on such account is an allowable deduction as business expenditure. The position is, how ever, different where a provision is made in respect of future liability. Section 25F has application to cases of retrenchment during the continuance of business. Section 25FFF was introduced with effect from November 28,1956, making provision for payment of notice salary and compensation even on closure of the business. The manifest object is to compensate the workman for loss of employment so as to provide him with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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