TMI Blog1995 (1) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to accept or reject the application and such action has to be communicated to the employee by 21-5-1984 and in case, the company accepts the application, the effective date of retirement of the employee will be 30-5-1984. From the date of retirement the employee concerned will cease to be in service and will no more be eligible for the pay and the allowances when he was in service. Under the scheme, an employee whose application under the VRS is accepted will be paid monthly pension at 50% of the salary for the month of April 1984 in respect of the lesser of the following two periods from the month of June 1984 : (a) 1/2 the employee's service with the company. (b) Till the employee reaches the age of sixty. The assessee shall pay the usual benefits to the employee such as gratuity, provident fund, encashment of privilege leave, etc. As per clause 5 of the Scheme, in the event of death of the concerned employee before completion of the stipulated pension period, the company will continue to pay the pension to the employees' nominees for the unexpired period. Clause 9 provided that notwithstanding anything contained in the scheme the management reserves the right to withh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shows that the liability itself is contingent and, therefore, the claim cannot be allowed. 6. On a consideration of the rival contentions we are of the view that the disallowance cannot be upheld. Having regard to the terms of the VRS and the fact that under the Scheme 430 members of the staff have actually retired during the year, we are of the view that the liability to pay pension in future years is not a contingent liability but is a real, definite and ascertained liability. Clause 9 of the scheme which empowers the assessee-company to stop payment of pension if it is found that the employee acts in a manner prejudicial to the assessee does not detract from the nature of the liability. That clause does not make the liability contingent upon any particular event. Under the said clause it is only the payment which is contingent upon the continued good behaviour of the employee. But that does not mean that the liability itself is contingent. In the present case, the existence of the scheme is not disputed. That 430 members of the staff took retirement under the scheme and actually retired during the relevant previous year is also not disputed. The moment they retired the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a definite obligation, will be a permissible outgoing or deduction in computing the taxable profits of a trader, even if in certain conditions the obligation may cease to exist because of forfeiture of the right" [Emphasis supplied]. 7. In our opinion, therefore, the departmental authorities fell into an error rejecting the assessee's claim as a contingent liability. 8. The other objection based on the absence of book entries cannot also be accepted. It should make no difference in principle, whether the liability is a statutory liability or a contractual liability. The existence of the VRS as well as the fact that 430 members of the staff actually retired during the year of account have not been disputed. On these facts, if the liability itself is definite and certain, the fact that there was no entry in the books of account as regards the liability, in our opinion, is not very relevant for the purpose of deciding the validity of the claim. At best it may be bad accounting but as held by the Madras High Court in the case of K.S. Narayanaswami Iyer v. CIT [1956] 29 ITR 515 at page 521 bad accounting cannot nullify the general principles concerning the computation of the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess received over and above the cost of the undertaking was taxable as capital gains. 13. The assessee is in further appeal before us questioning the applicability of section 41(2) of the Act to what it contends to be a "slump transaction". The judgment of the Supreme Court in the case of CIT v. Mugneeram Bangur Co. (Land Department) [1965] 57 ITR 299 is cited in support of the contention. It is claimed that there was no itemised sale but the sale was of the entire undertaking which was the Rallis Chemical Factory. Inasmuch as what was sold was the entire undertaking together with its assets and liabilities for a slump price and no price was fixed item-by-item in respect of the different assets belonging to the undertaking, no part of the surplus could be assessed u/s 41(2) of the Act. The learned D.R. pointed out that there was an apportionment of a part of the sale consideration towards the immovable assets and, therefore, it cannot be stated that there was a slump sale not attracting the provisions of section 41(2). It was, therefore, contended that the assessment of the profits which represent the depreciation on the machinery allowed earlier should be upheld. 14. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings, and the embedded plant and machinery. 15. On the aforesaid facts the only question is whether it can be said that there was an item-by-item sale of the plant and machinery or that there was an item-by-item fixation of the sale price so as to attract the provisions of section 41(2). The learned CIT(A) has held that the judgment of the Gujarat High Court in the case of Jayantilal Bhogilal Desai v. CIT [1981] 130 ITR 655 was applicable. We have gone through this judgment carefully and we find that the facts are slightly different. In that case, there were three agreements. The first agreement was dated 30-6-1966 and it was in respect of machinery, goodwill, stock, furniture, etc., of the business which was sold to a firm. The second agreement was dated 1-7-1966 and it was styled as sale deed in respect of sale of movable properties. This agreement narrated the salient features of the earlier agreement and also recorded the fact that the possession of the goods sold was handed over to the purchasers on 30-6-1966. In a further deed dated 4-12-1966 it was clarified that the consideration of Rs. 3.25 lakhs fixed in respect of the movables represented the consideration for machine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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