TMI Blog1982 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 ? The facts of the case are as follows " This reference relates to the assessment year 1969-70 only and arises out of the Tribunal's order in so far as it related to the Department's appeal, I.T.A. No. 4650 (Cal) of 1969-70. The assessee-company follows the calendar year as its accounting year. It was formerly engaged in two lines of business, one being the printing business and the other being publication of a journal called 'The Eastern Metal Review.' In the printing establishment the assessee was sustaining heavy losses from year to year. By a resolution dated 14th June, 1968, the board of directors of the assessee-company decided to close down the entire printing establishment. Pursuant to the resolution the assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of the view taken by him the ITO relied upon the ruling of the Supreme Court in CIT v. Gemini Cashew Sales Corporation [1967] 65 ITR 643. The ITO held against the assessee. The assessee went up in appeal before the AAC. The AAC observed, inter alia, as follows in disposing of the appeal: " Moreover, from the general notice it is seen that workers were intimated that the printing business will be closed from 1st July, 1968, and the workmen were asked to collect their dues on 1st July, 1968. Therefore, the workmen were borne on the pay rolls of the appellant till 30th June, 1968, and the business was not closed down on that date. Hence, the payment of the amount due on 1st July, 1968, to the workmen were ascertained liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees under s. 25FFF compensation and pay in lieu of notice consequent upon the closure of the business is absolute and not consequent upon the happening or non-happening of any events after such closure. Such liability cannot be said to be contingent unlike the liability to pay compensation and pay in lieu of notice under s. 25FF consequent upon the transfer of undertaking. However, though it is not a contingent liability which may arise after the closure of the business, still it is not an allowable deduction since such liability is incurred by the employer for the purpose of closure of the business and not for the purpose of carrying on the business. In this connection we may refer to the decision of the Mysore High Court in Mysore Standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in lieu of notice were paid by the assessee under s. 25FFF of the I.D. Act, 1947 not for the purpose of carrying on the business but with a view to the winding up or the closing down the business. Such repayments cannot, therefore, be regarded as business expenditure. We, therefore, reverse the order of the AAC and restore that of the ITO disallowing the deduction claimed by the assessee in the assessment for the assessment year 1969-70 in respect of the sum of Rs. 52,121 paid as retrenchment compensation and Rs. 10,233 paid as pay in lieu of notice under s. 25FFF of the I.D. Act, 1947. We confirm the order of the AAC allowing the assessee's claim in the assessment for the assessment year 1969-70 for deduction of Rs. 6,495 paid to the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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