COMMR OF INCOMETAX Vs. PREMA LAXMAN

JUDGEMENT

(1.) Pursuant to the common judgment of this Court in OP. 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.) The assessees are partners of a firm called Indian Nut Products, Quilon which is engaged in the business of manufacturing and exporting cashew kernals. For the assessment year 1974-75 relevant to the valuation date 31-12-1973, the assessees claimed, while calculating their interests in the firm for the purpose of wealth tax, deduction in respect of amounts payable fey the firm by way of leave with wages. The Wealth Tax Officer disallowed the assessees' claim. The assessees appealed to the Appellate Assistant Commissioner who allowed the assessees' claim. On appeal by the department, the decision of the Appellate Assistant Commissioner was affirmed by the Tribunal by their order in WTA. No. 63 (Cochin) 75-76. The Tribunal held that provisions made for leave with wages bad 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 S. I. Corporation v. C. F. W. federation ( 1960 KLT 20 ), 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 under S.79 of the Factories Act irrespective of the number of days they worked. This practice arose on the strength of what this Court stated in the following words: