COMMISSIONER OF WEALTH TAX Vs. PREMA LAXMAN

JUDGEMENT

(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 :

(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 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 :