9911796707
TMI Blog1983 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein together with the land as per the sale deed executed on 29th Dec., 1976. For the period form 6th Dec., 1976 to 31st March, 1977, it made sales turnover of cotton yarn, cotton waste and yarn waste to the extent of Rs. 35,88,420. Out of the total number of workers 415 only 29 workers were retrenched and retrenchment compensation to the extent of Rs. 30,625 was paid. The assessee also incurred inauguration expenses amounting to Rs. 4,256. Both the claims were disallowed by the ITO. The retrenchment compensation was disallowed on the ground that u/cl 5 of the sale deed, the assessee had undertaken the future liability that may arise on account of retrenchment of the employees, and therefore, the expenditure in respect of the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concerned case was in respect of taking over the assets and liabilities by Govt. and as a consequence employees were retrenched. He further held that since the assessee had taken over business of the erstwhile mill of the ex-employer the liability, if at all, would have been that of the ex-employer. In respect of the inauguration expenses, he confirmed the disallowance by holding that inauguration expenses was capital in nature. Even the reliance placed by the assessee on Board Circular dt. 3rd Oct., 1968 in respect of the customary payment on Diwali and Mahurat was rejected by him on the ground that the Circular did not cover the type of expenditure claimed. 4. At the time of hearing, the ld. counsel for the assessee submitted to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be allowable. 5. We have considered the rival submissions and materials placed before us. We shall first take up the claim in respect of the retrenchment compensation. The short question which we have to decide is whether any part of expenditure was not disallowable because the same related to liability of previous owner, and therefore, capital in nature. The liability for payment of retrenchment compensation by the vendor firm could arise only u/s 25FF of the Industrial Disputes Act, 1947. The section reads as under: "25FF. Compensation to workmen in case of transfer or undertakings where the ownership or management of an undertaking is transferred. Whether by agreement or by operation of law, from the employer in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endor firm got the benefit of saving under proviso to above section it cannot be said that assessee has met any part of vendor's obligation. The reference regarding the payment, if any, for retrenchment compensation in the conveyance deed is only clarificatory and such clauses generally are incorporated out of abundant caution so as to annihilate, to maximum extent, possibility of future quarrel between the parties to the agreement. Besides though the basis of payment of retrenchment compensation relates to period of service which in fair cases under appeal also covers period for which the workmen had rendered service to vendor cannot have bearing on the time of accrual of liability for payment, because liability for payment of such type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily". Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under section 10(2)(xv) of the Act, even though there was no compelling necessity to incur such expenditure. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under section 10(2) (xv) of the Act if it satisfies otherwise the tests laid down by law." The question of deduction of such expenditure under the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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