TMI Blog1983 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation as per section 25FF of the Industrial Disputes Act, 1947 ? " In order to decide the aforesaid question, certain salient features of the case may be noticed : M/s. Ellora Silk Mills, Bombay, the assessee-firm was running a manufacturing unit and carrying on business in the manufacture and sale of art silk, linen and nylon fabrics and was also dealing in all types of yarn in Bombay. By virtue of an agreement dated 1st April, 1965, the running business carried on by the assessee in the name of M/s. Ellora Silk Mills with all its assets and liabilities was sold to a private limited company in the name of M/s. Ellora Silk Mills (P.) Ltd. as on 31st March, 1965. The assessee claimed a sum of Rs. 22,569 by way of retrenchment compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the order of the AAC, the assessee preferred an appeal before the Tribunal. The Tribunal, after going into the matter, held that the retrenchment compensation for which a provision was made by the assessee in its books of account on 30th March, 1965, was an ascertained liability and, hence, it was rightly claimed as a deduction by the assessee in its profit and loss account for the accounting period relevant to the assessment year 1966-67. The relevant observations of the Tribunal are as follows: " 7. We have heard the learned representatives of the parties and gone through the records and, in our opinion, the assessee deserves to succeed. The liability to pay retrenchment compensation to the workers arose by virtue of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Workmen), wherein their Lordships held that even contingent liabilities discounted and valued as necessary can be taken into account as trading expenses if they are sufficiently certain to be capable of valuation and if profits cannot be properly estimated without taking them into consideration., In the above case, their Lordships were considering the question of estimated liability under a scheme of gratuity and it was held that the estimated liability for the year on account of a scheme of gratuity should be allowed to be deducted from the gross profits. 8. Similar view has been taken by the Allahabad High Court in [1973] 92 ITR 503 (Madho Mahesh Sugar Mills (P.) Ltd. v. CIT). In the above case their Lordships held that (headnote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity was also ascertainable and there was no question in this case of the discounted present value of the liability not being ascertainable. No doubt the actual payment of the gratuity was deferred to a later date on the happening of a certain event, viz., death or voluntary retirement of the employee, but these were not uncertain events. For the reason that gratuity might not be payable to an employee if he were dismissed from service or even in cases of retirement, it could not be said that the liability of the assessee for payment of gratuity to its employees under the agreement did not accrue during the relevant years.' Now, in the present case, the liability to pay retrenchment compensation to its workers arose by virtue of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced above has been referred for our decision. In spite of service, no one appears for the assessee. After hearing the learned counsel for the petitioner we find that the answer to the question has to be in favour of the Revenue. Section 25FF of the Industrial Disputes Act reads as under : " Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law on the basis that his services had been continuous and not been interrupted by such transfer ; that all the three conditions referred to in s. 25FF stand satisfied, with the result that there was no liability of the assessee to pay the retrenchment compensation nor did such a liability arise during the assessment year 1966-67. The Tribunal has completely ignored the clauses of the proviso to s. 25FF. The transferor-firm and the transferee firm ensured that the services of all the employees were not to be interrupted by such a transfer, that the terms and conditions of service applicable to such employees after such transfer were not in any way less favourable to them than those applicable to them immediately before the transfer and that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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