NDLI: M/s W.t. Suren and Co. Ltd Vs. Commissioner of Income Tax, Bombay

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income Tax Act 1922 : Section 10(2)(xv) 1961: S. 37(1)
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Indian Income-tax Act, 1922 (11 of 1922)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Income Tax Act, 1922 : Section 10(2)(xv). Income Tax-AY 1960-61-Business Expenditure-Gratuity-Payment of-By assessee to the transferee-company on transfer of a part of its business- Deductability of-Assessee, a private limited company, stopped and transferred the activities of its distribution unit to the transferee-However, other business of assessee continued-Assessee terminated services of the employees of that distribution unit-Transferee offered these employees similar employment with continuity of service and assured payment of gratuity due to them under it together with that accrued to them on the date of their termination if the amount thereof was higher than that calculated under the transferee's scheme-Assessee paid gratuity to those who did not join the transferee-company-However, the assessee, not of its own accord but at the instance and on behalf of the employees who joined the transferee, paid to the transferee-company the amount of gratuity due to such employees-Transferee put the amount in trust in a separate account exclusively for paying the same to such employees with the further gratuity due on account of service rendered with the transferee-Held: In the circumstances of the case, the amount of gratuity paid by the assessee to the transferee-company is an expenditure wholly laid out or expended for the purpose of business and thus an allowable expenditure-Income Tax Act, 1961, S.37(1).The appellant-assessee, a private limited company, stopped the activities of its distribution unit which business was taken over the transferee-company. However, the other business of the assessee continued. The employees working in the said distribution unit became surplus resulting in termination of their services. The transferee-company offered these employees similar employment with continuity of service and right to receive gratuity due under it together with that accrued to them on the date of their termination .If the amount thereof was higher then that calculated under the scheme of the transferee-company. The assessee paid gratuity directly to those employees who did not join the transferee-company. However, the assessee, not of its own accord but at the instance and on behalf of the employees who joined the transferee-company, paid to the transferee-company the amount due to these employees. Transferee-company put this amount in trust in a separate account exclusively for paying the gratuity to these employee with further gratuity due on account of sen•ice rendered in the transferee-company. In its income tax return for the assessment year 1960-61 the assessee claimed the amount of gratuity paid to the transferee-company as deduction under Section 10(2)(xv) of the Income Tax Act, 1922. The Income Tax Officer disallowed the claim of deduction. The Appellate Assistant Commissioner upheld the view of the Income Tax Officer. The Income Tax Appellate Tribunal allowed the appeal filed by the assessee. The High Court allowed the appeal field by the respondent-Revenue. Hence this appeal.
Judge	Hon'ble Mr. Justice D.P. Wadhwa
Neutral Citation	1998 INSC 111
Petitioner	M/s W.t. Suren And Co. Ltd
Respondent	Commissioner Of Income Tax, Bombay
SCR	[1998] 1 S.C.R. 1069
Judgement Date	1998-02-23
Case Number	479

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