Kochu Thommen, J.
1. The following five questions have been referred to us by the Income-tax Appellate Tribunal, Cochin Bench :
`'1. Whether, on the facts and in the circumstances of the case, 10, 250 paid by the assessee to three of its directors as compensation for loss of office is an allowable deduction for the assessment year 1973-74 ?
2. Whether, on the facts and in the circumstances of the case, 589 claimed as loss was only a notional loss for the assessment year under consideration ?
3. Whether, on the facts and in the circumstances of the case, the marriage allowance paid by the assessee to its employees was part of the salary and did not constitute perquisite for the assessment year under consideration ?
4. Whether, on the facts and in the circumstances of the case, the car allowance paid by the assessee to its employees was of a perquisite to be taken into consideration for computing the disallowance, if any, to be made under Section 40A(5) of the Income-tax Act, 1961, for the assessment year under consideration ?
5. Whether, on the facts and in the circumstances of the case, the expenditure incurred by the assessee in the maintenance of its bungalows in which its employees had been permitted to reside free of rent and the depreciation on such bungalows are to be considered as perquisite for the purpose of computing the disallowance, if any, to be made under Section 40A(5) of the Income-tax Act, 1961, for the assessment year 1973-74?'
2. Except questions Nos. 4 and 5 which were referred at the instance of the Revenue, the other questions have been referred at the instance of the assessee. Question No. 2 does not require to be answered as it is not pressed by the assessee. Question No. 3 is answered in the affirmative, that is, in favour of the assessee and against the Revenue, in the light of the decisions of this court in CIT v. Toshiba Anand Lamps Ltd. : 145ITR563(Ker) and Travancore Tea Estates Co. Ltd. v. CIT : 153ITR444(Ker) . Question No. 4 is answered in the negative, that is, in favour of the assessee and against the Revenue, in the light of our decision in I.T.R. Nos. 242 and 243 of 1979-- : 153ITR444(Ker) . Question No. 5 is answered in the affirmative, that is, in favour of the Revenue and against the assessee, in the light of the decision of a Full Bench of this court in CIT v. Forbes Ewart & Figgis (P) Ltd. : 138ITR1(Ker) . We shall now deal with question No. 1.
3. The assessee is a company owning tea estates and engaged in the business of manufacture and sale of tea. During the accounting year relevant to the assessment year 1973-74, the Travancore Tea Holdings Ltd. ceased to be the managing agent of the assessee. The Ceylon Tea Plantations Holdings Limited was thereupon appointed as the managing agent ofthe assessee. Consequent on this change, three members of the board of directors of the assessee submitted their resignation with effect from June 2, 1,972, and left India for Britain, Before they left India, but subsequent to their decision to resign, the assessee at the meeting of its board of directors held on June 5, 1972, resolved to pay each of the three directors 3,000, 4,250 and 3,000, respectively, as 'compensation for loss of office '(see annexure A). The total sum thus paid was 10,250. The assessee claimed this sum as an expenditure laid out or expended wholly and exclusively for its business. This claim for deduction was disallowed by the ITO by his order dated November 29, 1975 (annexure B). The Officer found that the amount was paid as an ex gratia payment and was excessive being not commensurate with the remuneration of the three former directors. The order of the ITO was affirmed by the AAC and the Tribunal.
4. It is contended on behalf of the assessees that compensation was paid to the three former directors in the best interest of the assessee and for the better management of its business. It is stated that for the purpose of a change of managing agency, the termination of the three directors was necessary. Counsel refers to annexure A and contends that the expense incurred for this purpose was an allowable deduction in terms of Section 37(1) of the I.T. Act, 1961.
5. Counsel for the Revenue submits that the amounts paid as compensation for loss of office were not laid out or expended wholly and exclusively for the purposes of the business of the assessee. He submits that the board of directors of the assessee resolved to pay the amounts subsequent to the decision of the three directors to resign. They resigned voluntarily and not as a result of any inducement, threat or compulsion. It has been so found by the AAC and the Tribunal has not found to the contrary.
6. The wording of the resolution (annexure A) is far from clear. But what appears to be not in doubt is that the decision of the Board dated June 5, 1972, to pay compensation was subsequent to the agreement of the three directors to resign from the Board with effect from June 2, 1972. The amounts were paid as compensation for loss of office. There is nothing to show in annexure A that the compensation was paid following a prior understanding with the three directors, as an inducement to resign. There is no suggestion that, but for the compensation paid, the three directors would not have resigned. In such circumstances, can it be said that the expenditure incurred was wholly and exclusively for the purposes of the business of the assessee ?
7. There is no evidence--and the assessee made no attempt to adduce any--to show that the expenditure was incurred in the process of strengtheningor pruning or preserving or promoting the business of the assessee. In fact, the grounds of appeal before the Tribunal indicate that even according to the assessee, it was a retrenchment compensation 'consequent on certain changes in the management of the company'. It is with reference to such payment that the authorities said it was ex gratia, for the payment was not made in terms of or pursuant to a contract or under compulsion of any statute or other circumstances.
8. Relying upon the decision of the Supreme Court in Sassoon J. David & Co. P. Ltd. v. CIT : 118ITR261(SC) , counsel for the assessee contends that retrenchment compensation paid for the promotion of the business of the assessee and for the better management of the same is an allowable deduction in terms of Section 37(1). The present is a case where that principle squarely applies, counsel submits.
9. The Supreme Court in that case stated (p. 276) :
'In the instant case, it was the case of the company that many of the employees were old and superfluous and the business could be carried on with a smaller number and the only way in which they could reduce the number was to terminate the services of all the employees by paying them compensation and thereafter re-employing some of them only. If the company felt that that was a method which would inure to its benefit, it cannot be said that the payment of compensation was made with an oblique motive and without regard to commercial considerations or expediency.'
10. The facts of the instant case do not suggest that there was any attempt on the part of the assessee to reduce expenditure by retrenching superfluous employees. There is nothing to suggest that the three directors resigned involuntarily. On the other hand, the finding of the AAC, to which the Tribunal did not demur, is that the three directors voluntarily resigned their offices. The assessee had at no stage induced or encouraged or compelled them to resign. There is nothing to show that the amounts paid were consequent upon an earlier decision, that is, before the three directors decided to resign. The resignation of the three directors has not resulted in any saving of expenditure, for in their places three new directors have been appointed. In order to attract Section 37(1), the expenditure must have been incurred to keep the trade going by suitable rationalisation or modernisation or any other method to preserve the business. [See CIT v. Malayalam Plantations Ltd. : 53ITR140(SC) ].
11. It was the burden of the assessee to furnish the necessary details before the authorities to support the contention, if there was such a contention that the expenditure was laid out wholly and exclusively for the purposes of its business. From the evidence on record, it cannot be statedthat the assessee made any such attempt. Even the resolution (annexure A), which is far from clear, does not in any manner support the present argument of the assessee's counsel. Counsel, however, submits that the Tribunal has misdirected itself in so far as it has failed to apply its mind to certain crucial facts which ought to have been noticed. Counsel says that there is a reference in the Tribunal's order to the purchase of shares by the new managing agent. The implication of such a purchase has apparently not been examined by the Tribunal. Counsel also refers to annexure A, where there is, in language not as clear, a reference to purchase of shares of the old managing agency by the new managing agency.
12. It is not clear to us what bearing such a purchase would have had in the conduct of the business of the assessee. If shares of the old managing agency, were purchased by the new managing agency, such transaction, without evidence to indicate its object, cannot be said to have had any bearing on the interest of the business of the assessee. That the transaction effected was with the sole or main intention of promoting the interest of the assessee and was so intrinsically and intimately connected with the function of the new managing agency in relation to the business of the assessee, was a matter on which evidence should have been at the very first opportunity adduced by the assessee. The assessee is not justified in saying that, although it did not do its duty at the beginning, it ought to be given a chance to do it now. It was such a claim of the Revenue in Craddock (H.M. Inspector of Taxes) v. Zevo Finance Co. Ltd.,  27 TC 267 (HL), that was rejected outright by Lord Greene M.R. This is what the Master of Rolls stated :
'The Crown, therefore, failed before the Commissioners to establish the only measure of value for which it was contending. It was, however, suggested that this difficulty could be avoided by sending the matter back to the Commissioners, so as to give the Crown an opportunity of setting up a different measure of value supported by different evidence. Even assuming that this was the only difficulty in the way of the Crown's argument, it would not, in my opinion, have been proper to take this course. The Crown failed in its contention on a matter of fact and it must abide by the result : it would be contrary to all principles to give it another chance to establish by fresh and different evidence a quite different contention which, if it was desired to rely upon it, ought to have been advanced in the first instance. Our task is to deal with the case on the basis of the facts as found by the Commissioners upon the submissions made to them, and on this basis the value of the investments has not been established.'
13. If it has been the case of the assessee during the proceedings before the authorities, as it appears to have been, that the payments were decided to be made subsequent to the decision of the three directors to resign, such payment, in our view, does not qualify for deduction under Section 37(1). We see no justification to accede to the assessee's present request for a fresh opportunity to improve its case. In the circumstances, question No. 1 is answered in the negative, that is, in favour of the Revenue and against the assessee. We direct the parties to bear their respective costsin these Tax Referred Cases.
14. A copy of this judgment under the seal of the High Court and thesignature of the Registrar shall be forwarded to the Income-tax AppellateTribunal, Cochin Bench.