9911796707
TMI Blog1970 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... e United Kingdom and carrying on business in buying and processing tobacco and as commission agents for other non-resident companies. It has a branch for the purchase and processing of tobacco in Guntur in the Andhra Pradesh State. It employs large number of Indian personnel and labour to carry on its business. Shri D. N. Murthy, an Indian national, took up employment in the company in 1938 as the resident manager of the branch at Guntur on a salary of Rs. 500 and a bonus. In 1949, he became a director of the company and was remunerated by a salary and a commission on purchase of tobacco leaf. He was, however, not admitted to the benefits of provident fund scheme introduced in 1946, to which all other employees were entitled. The terms of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Murthy's past services to the corporation since 1938, in the capacity of resident manager and then resident director, he be granted a pension of Rs. 10,000 per annum payable to him or to his estate, as the case may be, for a period of ten years certain, the first payment to commence in April, 1961. " Sri Murthy eventually retired from the service of the company in October, 1960. The assessee-company on December 8, 1960, resolved to entrust the liability for payment of pension to Shri Murthy to the Life Insurance Corporation by making an outright payment. The resolution was in the following words : " The company having assumed the liability to pay Mr. D. N. Murthy a pension of Rs. 10,000 per annum payable on 1st April, in each year, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses that there was a long and frank discussion between Sri Murthy and the managing committee on the subject of his retirement which would give an indication that while the assessee-company was anxious to retain him for a further period of three years, Sri Murthy was not willing to continue in service on the same terms and conditions and ultimately the prior agreement of service dated July 4, 1950, was modified by way of Minute No. 7 and Minute No. 8 recorded on December 19, 195 7. In view of those resolutions the service agreement of Sri Murthy itself stands modified. While Sri Murthy agreed to continue and render the important services required of him to the company for a period of three years, the company on its part agreed to not only p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible and unimpeachable evidence of what transpired, those resolutions regulate the business of the company as well as its rights and liabilities vis-a-vis its employees and sometimes even the third parties. There is no basis for rejecting these resolutions as inadmissible and requiring further proof of the variation of the terms of employment of Sri Murthy. That apart, the genuineness of those resolutions cannot be doubted ; there was no occasion for a British company to pay an Indian national a large sum of money gratuitously. It was, however, argued on the strength of a decision of the Supreme Court in Gordon Woodroffe Leather Manufacturing Co. v. Commissioner of Income-tax that : " The proper tests to apply in a case like this are wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Supreme Court, in our opinion, did not intend to lay down that any payment made contraryto the practice prevailing as the payment of pension or gratuity should necessarily be held to be an inadmissible deduction. In our opinion, what the Supreme Court intended to lay down was that if there is such a practice it would go a long way to satisfy the main test laid down by the Supreme Court, viz., that it was not a gratuitous payment and that it was a payment on the ground of commercial expediency to facilitate the carrying of, the business. It is clear from the judgment of the Supreme Court that these are two alternative tests that could be applied to determine whether such a payment could be held to be a permissible deduction. In the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
