TMI Blog2010 (9) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT (A) is justified in holding that payment of compensation to the canteen contractor on termination of the contract was akin to that under voluntary retirement scheme to the employees, hence allowable deduction as business expenditure. 3. We have heard the learned DR as well as the learned AR and considered the relevant record. This is a case regarding the disallowance of compensation paid to the contractor. The search and seizure act ion u/s 132 of the Act was carried out at the business premises of the assessee. The AO not iced that the assessee had made claim of compensation of ₹ 29,80,000/ -. While finalizing the original assessment under sect ion 143(3) on 16.2.2004, the AO disallowed the above said claim of Rs. .29,80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company. The assessee vide its letter dated 12.12.2008 has submitted as under : Compensation paid to contractor amounting to ₹ 29,80,000/ - The said amount was already disallowed while passing the assessment order under sect ion 143(3) of the IT Act, 1961 for the AY 2001-02 by the then assessing officer. Against this addition made the assessee company had filed an appeal before the ld. CIT(A) and the same was a decided in the favour of the assessee. Your honour has then filed an appeal before ITAT against the order of the ld. CIT(A). However, the assessee company contended that the company had a factory at Thane where they were manufacturing carbon papers and some other allied products. During the FY 2000-01, Canteen con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not justified to make the addition. Therefore, in view of the detailed reasons in appellate order dated 19.1.2005 passed by my predecessor the addition made at ₹ 29,80,000 is hereby deleted 6. I t is to be noted that the search was carried on 19.9.2006 whereas the original assessment under sect ion 143(3) was passed on 16.2.2004. Thus, it is clear that at the time of search on 19.9.2006, the assessment under sect ion 143(3) was already completed in which the AO made the same disallowance regarding the said compensation amount which was deleted by the CIT(A) vide order dated 19.1.2005 in paragraph 3.2 as under : 3.2 I have considered the submission of the appellant and in my opinion, the above expenditure which has been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor is required to be considered as wholly and exclusively for the purposes of business. I t may be mentioned that the above expenditure is more akin to the voluntary retirement scheme (VRS scheme) to its retiring employee which is definitely required to be considered as revenue expenditure in view of Supreme Court decision of Indian Cable Company V/s Workman 1972 (059) AIR (SC) 2195. Accordingly, I am of the view that the assessee is entitled to get deduction of ₹ 29,80,000/ -. The AO is directed to al low the above claim of expenditure in respect of compensation paid to canteen contractor 7. Nothing has been brought on record by the revenue to show that the said order of CIT(A) dated 19.1.2005 was either stayed or set aside o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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