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TMI Blog1991 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of early retirement benefits ? 3. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the provisions of section 32A of the Income-tax Act, 1961, the Tribunal was justified in law in sustaining the order of the Commissioner of Income-tax (Appeals) allowing the assessee's claim for investment allowance in respect of assets like electrification, fire extinguishers and time-office equipments ? " Question in R. A. No. 1113(Cal) of 1986 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining the order of the Commissioner of Income-tax (Appeals) allowing the assessee's claim for compensation of Rs. 3,49,842 paid to the employees for early retirement treating the same as a revenue expenditure ?" The facts relating to this reference are that, for the assessment years 1978-79 and 1979-80, the Income-tax Officer disallowed the assessee's claim of Rs. 1,18,578 and Rs. 3,49,842, respectively, being the amount paid to the employees for early retirement on the ground that the payment was not a liability of the assessee and that the same was in the nature of ex gratia payment. The assessee app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax (Appeals), the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) on the point. At the hearing before us Mr. Mitra, appearing for the Revenue, has contended that there is a distinction between the payment for retirement and payment made as an incentive for early retirement. It is his contention that the amount, which has been paid, is by way of ex gratia and it is not for commercial expediency and as such not liable to be treated as a revenue expenditure. We are, however, unable, to accept the contention of Mr. Mitra. The Tribunal has relied on a decision of a Division Bench of this court in CIT v. Assam Oil Co. Ltd. reported in [1985] 154 ITR 647. In that case, the assessee was a non-resident company which had been prospecting and extracting petroleum and also ran a refinery. It was granted prospecting licence by the Government of India on the condition that it would ultimately transfer the new area to a resident company. The resident company known as Oil India Ltd. was incorporated in 1959 and the assessee transferred its new areas to it. The assessee's business stood restricted to its operations at Digboi and its refinery located t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to retired workmen at Jamshedpur Workshop under a voluntary retirement scheme. This scheme is exhibit G and it was framed on August 9, 1965. The scheme states that the company has been suffering from an acute shortage of imported raw materials in view of the difficulty in getting foreign exchange and as such production could not be maintained for some considerable time. In view of these difficulties it is stated that the company has found it necessary substantially to reduce the number of workers in the workshop. The scheme offered substantial benefits to workmen who chose to retire voluntarily, namely, ex gratia payment equal to retrenchment compensation under section 25F of the Industrial Disputes Act, and gratuity admissible to the workmen. There is evidence on the side of the company that about 450 workmen availed themselves of the voluntary retirement scheme and a sum of Rs. 18,24,047 was paid. This item has been included in the profit and loss account under the heading 'Salary, wages, bonus and retirement gratuities'. The company gave a break-up of these items in answer to the interrogatories furnished to it by the workmen. The contention on behalf of the unions is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in sustaining the order of the Commissioner of Income-tax (Appeals) allowing the assessee's claim for deduction of Rs. 75,000 in respect of incentive wages paid to the employees for better performance ? " In our view, this question is now well-settled. If the employer pays any amount to the employee which is by way of an incentive, in that event such amount shall be treated as additional emoluments and such payment is inextricably connected with the business and necessarily for commercial expediency. It cannot be said that the claim which has been made is de hors the business of the assessee. As will appear from the narration of facts, it was found that it was the payment made by the assessee for better performance and, accordingly, it must be held that such payment was for commercial expediency and incurred wholly and exclusively for the purpose of business. In our view, the Tribunal, on the facts, came to a correct conclusion and, accordingly, the second question in R. A. No. 1112 (Cal) of 1986 is answered in the affirmative and in favour of the assessee. The only other q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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