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2020 (11) TMI 874 - HC - Income TaxExpenditure incurred toward payment of voluntary retirement compensation of the employees taken over - As per revenue Expenditure not incurred solely and exclusively for the purpose of business - assessee formulated the scheme wherrein sum was paid as retirement benefit to the employees who availed benefit of the scheme not only for past services but also for remaining years of service with the company - HELD THAT:-Scheme was admittedly sanctioned by the Chief Commissioner for the exemption under Section 10(10C) of the Act and it was a contractual obligation and was an ascertained liability. It is also pertinent to mention here that the genuineness of the scheme was not doubted by any of the authorities, rather the same was approved by Chief CIT. CIT(Appeals) as well as the tribunal held that payment of compensation under the scheme was to induce workmen to retire prematurely and the decision of the assessee was purely on the ground of commercial expediency to curtail the expenditure in future and to facilitate for carrying on the business. Thus, the expenditure incurred under the scheme has been treated as revenue expenditure. It is pertinent to mention that Supreme Court in 'EMPLOYERS IN RELATION TO THE MANAGEMENT OF INDIAN CABLE CO[1972 (4) TMI 100 - SUPREME COURT] has also held that expenditure incurred by the company under the scheme has to be treated as an item of expenditure incurred by the company on the ground of commercial expediency and the same is allowable under Section 37(1) of the Act. In view of aforesaid enunciation of law by the Supreme Court, the expenses incurred by the assessee under the scheme have been incurred solely and exclusively for the purposes of business and are entitled for deduction under Section 37(1) of the Act. - Decided in favour of assessee.
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