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L.H. Sugar Factories and Oil Mills P. Ltd. Vs. Addl. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 272 of 1975
Judge
Reported in[1979]116ITR937(All)
ActsIncome Tax Act, 1961 - Sections 254; Uttar Pradesh Industrial Disputes Act, 1947 - Sections 3
AppellantL.H. Sugar Factories and Oil Mills P. Ltd.
RespondentAddl. Commissioner of Income-tax
Appellant AdvocateA. Gupta, Adv.
Respondent AdvocateR.S. Dhawan, Adv.
Excerpt:
- - [1967] 66 itr 710 is clearly applicable......to raise this plea. it filed the actuarial valuation report dated february 25, 1973, and on that basis claimed an amount of rs. 72,399 as deductible. the tribunal, however, did not permit the assessee to raise this ground. it held that before the ito claim was made on a vague basis and not on the basis of any actuarial report. permitting this ground would mean examination of facts, namely, the gratuity scheme, in the light of the provisions of the u.p. industrial disputes act. the actuarial report cannot be taken on its face value. it will have to be adjudged in the light of the scheme and the provisions' of the act. it was also noticed that the company itself had not made provision in the relevant accounts for the assessment year in question, namely, 1973.74. the entire argument was.....
Judgment:

Satish Chandra, C.J.

1. The assessee claimed an allowance on account of liability for gratuity payable to workmen. It was claimed that this was a statutory liability under Section 3 of the Industrial Disputes Act read with the Sugar Industries Workmen Gratuity Scheme. This claim was made before the ITO on account of the gratuity payable for the previous year and earlier years in terms of the Wage Board Award. The ITO repelled the claim because no details or materials were furnished by the company.In appeal this plea was not specifically urged before the AAC. When the matter reached the Tribunal, the assessee desired to raise this plea. It filed the actuarial valuation report dated February 25, 1973, and on that basis claimed an amount of Rs. 72,399 as deductible. The Tribunal, however, did not permit the assessee to raise this ground. It held that before the ITO claim was made on a vague basis and not on the basis of any actuarial report. Permitting this ground would mean examination of facts, namely, the gratuity scheme, in the light of the provisions of the U.P. Industrial Disputes Act. The actuarial report cannot be taken on its face value. It will have to be adjudged in the light of the scheme and the provisions' of the Act. It was also noticed that the company itself had not made provision in the relevant accounts for the assessment year in question, namely, 1973.74. The entire argument was based on the actuarial report which was made in May, 1973. On these findings, the Tribunal refused to entertain the claim at that stage.

2. The Tribunal has, at the instance of this court, referred the following question of law for our opinion :

'Whether the Tribunal erred in law in not allowing the applicant to raise and argue the following question, i.e., whether, on the facts and in the circumstances of the case, the claim for deduction of Rs. 72,399 being statutory liability incurred during the relevant previous year for gratuity payable to workmen was liable to be deducted in computing the total income of the assessee ?'

3. The facts mentioned by the Tribunal are not disputed. It is apparent that the assessee did not lay any claim on the basis of the actuarial report before the ITO. There the claim was made on the basis of the Wage Board Award. The point was not reiterated in appeal before the AAC. The Tribunal's judgment is dated July 24, 1973. The appeal must have been heard by the Tribunal some time before that. This court in Madho Mahesh Sugar Mills (P.) Ltd. v. C1T [1973] 92 ITR 503, decided on August 4, 1972, held that though no part of the gratuity may have been payable by the assessee in any of the earlier years, the past services of the employees have to be taken into account merely to arrive at the quantum of the liability which became payable after the notification. The liability for payment of gratuity ascertained on actuarial calculation in which all contingencies are taken into consideration, is a liability in praesenti and is capable of ascertainment and was hence a permissible business expenditure in the concerned assessment year. It appears that after this decision was rendered by this court the assessee woke up to the true ground for the claim. It obtained an actuarial valuation report in May, 1973, and filed it before the Tribunal and, on its basis, laid a claim for deduction of Rs. 72,399.

4. It is apparent that this is a case where the assessee has sought to change the ground on which the claim for deduction was originally based. The original ground which was pressed before the ITO but repelled by him was not reagitated before the AAC. That ground has not been sought to be reagitated before the Tribunal either. The claim for deduction of liability for gratuity was sought to be sustained on a different ground before the Tribunal. Originally the ground related to the liability under the Wage Board Award. Before the Tribunal the ground was in line with the decision of this court in Madho Mahesh Sugar Mills' case [1973] 92 ITR 503, namely, on the basis of the actuarial valuation. No doubt this ground was not taken earlier. But the claim was dismissed. The decision of the Supreme Court in CIT v. Mahalakshmi Textile Mills (P.) Ltd. [1967] 66 ITR 710 is clearly applicable. There it was emphasised by the Supreme Court that there is nothing in the I.T. Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the Tribunal. If, for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to the assessee on another ground is justified, it will be open to the departmental authorities and the Tribunal to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. It is thus apparent that the claim for gratuity could be sustained on a footing other than that on which it was based before the lower departmental authorities. Before the Tribunal, the assessee could justifiably change the ground. The Tribunal was under a duty to entertain this submission and decide on merits.

5. Accordingly, we answer the question referred to us in the affirmative, in favour of the assessee and against the department. The assessee will be entitled to costs which are assessed at Rs. 200.


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