Kochu Thommen, J.
1. Pursuant to the common judgment of this court in O.P. No. 2342 of 1977 (Kum. Preethi Laxman, respondent) and O.P. No. 2363 of 1977 (Kum. Prema Laxman, respondent), the following two 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, the assessee is entitled to claim deduction, under the Wealth-tax Act, in respect of provision made by the firm for payment of leave with wages ?
2. Whether, on the facts and in the circumstances of the case, and on the basis of the materials on record, the Tribunal is right and reasonable in law and fact in holding that in the cashew circles in Kerala leave with wages is merely an additional wage available to every worker and it has nothing to do with leave at all?'
2. The assessees are partners of a firm called Indian Nut Products, Quilon, which is engaged in the business of manufacturing and exporting cashew kernels. For the assessment year 1974-75 relevant to the yaluation date, December 31, 1973, the assessees claimed, while calculating their interests in the firm for the purpose of wealth-tax, deduction in respect of amounts payable by the firm by way of leave with wages. The WTO disallowed the assessees' claim. The assessees appealed to the AAC who allowed the assessees' claim. On appeal by the Department, the decision of the AAC was affirmed by the Tribunal by their order in W.T.A. No. 63 (Coch) 75-76. The Tribunal held that provision made for leave with wages had to be deducted while ascertaining the interests of the assessees in the firm, and that the amounts payable towards that liability had to be treated as additional wages.
3. The contention of the assessees before the authorities has been that, subsequent to the decision of this court in South India Corporation v. All Kerala Cashewnut Factory Workers' Federation : (1960)IILLJ103Ker , a practice came to be crystallised in the cashew industry in Kerala making it obligatory for the management to pay the workers leave with wages contemplated underSection 79 of the Factories Act irrespective of the number of clays they worked. This practice arose on the strength of what this court stated in the following words (p. 211):
'All that section 79 provides is that a worker who has worked for a period of 240 days or more during a calendar year shall be allowed, duringthe subsequent calendar year, leave with wages at the rate of one day for 20 days in the case of an adult and one day for 15 days in the case of a child. Every employer is thus bound to grant such leave with wages but there is no provision either in section 79 or any other section of the Factories Act which operates as a bar to the grant of leave with wages for workers in seasonal industries which from their nature cannot be carried on for 240 days in a year. It cannot, therefore, be held that the Tribunal had no jurisdiction to grant leave with wages irrespective of the total number of working days in a calendar year. '
4. Although that was a case which arose from proceedings before the Industrial Tribunal, the dictum laid down by this court, as found by the Tribunal, gave rise to the custom or practice which has come to be accepted as a liability on the part of the management and a right vested in the workers. Irrespective of the technical aspects ofSection 79 of the Factories Act, the workers of the cashew industry, which is generally of a seasonal character, demanded and obtained 'leave with wages' without regard to the number of days they worked. They were paid, additional wages for one day for every 20 days of work. The concept of 'leave with wages' in the cashew industry in Kerala has over the years lost its association with leave and has thus become pure and simple additional wages. The management, as a matter of obligation, had to make provisions for payment towards this liability incurred during the relevant period. So found the Tribunal.
5. The Tribunal considered the effect of certain agreements in various years. The Tribunal examined the books of account and concluded that the books reflected the provision made for amounts payable towards leave with wages respecting the period during which the workers in question had already rendered work. The Tribunal referred to the details of the provision made for liabilities already incurred. The Tribunal thus accepted that for every worker who worked during the year amounts had to be paid or provided for towards the liability for 'leave with wages'. This is a question of fact which the Tribunal found. As a matter of practice, the Tribunal stated, the firm had been making provision every year for the workers who had worked prior to the valuation date. In regard to the assessment year 1974-75, which is now in question, the Tribunal found that on December 31, 1973, which is the relevant valuation date, amounts had already been set apart towards leave with wages in respect of persons who worked during the year 1973. This is what the Tribunal said at the end of paragraph 6 of the order :
'On 31-12-1973, the last day of the accounting year, a further credit of Rs. 50,874.99 was made, being provision under this A/c for the year 1973, and this is carried forward to next year.'
6. The Tribunal concluded in paragraph 8 of the order :
'In view of the discussion above, it would appear that leave withwages is merely an additional wage available to every worker and it hasnothing to do with leave at all...... '
7. Appearing for the Department, Shri N.R.K. Nair, refers to Chhaganlal Textile Mills (P.) Ltd. v. CIT : 62ITR274(MP) and CIT v. Rajkumar Mills Ltd. : 80ITR244(Bom) , among other decisions. These decisions do not apply to the facts of this case, for they dealt with provision made towards a contingent liability respecting leave with wages and not a present liability.
8. In the present case, the amounts in question did not relate to a contingent or future liability, but to an existing liability, a liability which has already been incurred, as a result of the practice which has, as found by the Tribunal, come to be crystallised in the cashew industry following the decision of this court cited earlier. This liability, as stated by the Tribunal, could be arithmetically worked out as on the valuation day.
9. The Tribunal which is the final authority on facts has examined the relevant records including the agreements and the books of account and satisfied itself as to the correctness of the claim made by the assessees, and as to the existence and force of the practice followed in the industry.
10. The Tribunal has found that the agreement in question did not create the liability, but only evidenced the liability. The agreements relate to bonus and not specifically to leave with wages, for they were the outcome of disputes which related solely to bonus. But the agreements contain certain terms providing for various payments to workers, one of which relates to payment towards leave with wages. Referring to this aspect of the agreements, the Tribunal, rightly in our view, found on the facts of the case, that the agreements only evidenced the position which prevailed in the industry. That being the finding, so long as the practice is prevalent in the industry and accepted as obligatory in respect of amounts payable for the period during which the workers in question rendered service, those are amounts in the nature of debts which can be taken into account for computation under the W.T. Act. In the circumstances, we agree with the conclusion drawn by the Tribunal on the question of law arising in the case.
11. Accordingly, we answer question No. 1 affirmatively, that is, in favour of the assessees and against the Department. In view of what we have stated in regard to question No. 1, it is unnecessary to answer question No. 2. Question No. 2 is not answered.
12. A copy of this judgment shall, under the seal of the High Court and the signature of the Registrar, be sent to the Appellate Tribunal, Cochin Bench.