TMI Blog1979 (1) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 1967, it entered into an agreement to transfer a substantial part of its business to the Indian Overseas Bank Ltd. At the time of the transfer, the assessee paid a sum of Rs. 26,032 as " gratuity " to its employees and claimed the same as deduction in the computation of its income. The ITO disallowed the claim for deduction on the ground that the amount paid to the employees, though termed as " gratuity ", is in effect " retrenchment compensation " paid to the employees of the assessee and since the assessee had ceased its business activities even after effecting a transfer on 29th December, 1967, the amount claimed could not be allowed as deduction. The assessee appealed to the AAC who disagreed with the finding of the ITO and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . " The ITO has referred to the amount as " retrenchment compensation " while the assessee claimed it as " gratuity ". In either case, it would not be a sum referred to in s. 36(1)(ii). The amount could not, therefore, have been allowed as deduction under that provision. We have, therefore, to consider the question of the allowability of this sum under s. 37(1) of the Act. The learned counsel for the CIT contended that this amount has been paid as a result of the closure of the business and that as such it would not be an expenditure in carrying on the business which alone is allowable deduction under s. 37. We have, therefore, to consider the question whether the business in the present case has been closed. It has already been state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was transferred on 29th December, 1967, to the Indian Overseas Bank Ltd., the assessee's business did not cease, and that the assessee continued to be a banking company under the banking law. He has specifically found that the licence issued to the assessee as a banking company had not been cancelled nor has it been permitted to wind up its affairs by the issue of a requisite certificate by the Reserve Bank. On these facts, he came to the conclusion that only a part of the business had been transferred and that the remaining part of the business continued. When the matter came up before the Tribunal, the Tribunal accepted this finding of the AAC and proceeded to consider the allowability of the amount in question only on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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