COMMISSIONER OF INCOME TAX Vs. RAVINDRANATHAN NAIR K

JUDGEMENT

(1.) The references are at the instance of the Commissioner of Income Tax, Kerala-I, Ernakulam.

(2.) The assessee, an individual, has been carrying on business in processing cashew nuts. He owned ten processing units, one in Andhra Pradesh, five in Tamil Nadu and four in Kerala. Out of these 10 units 5 were held on lease. The labour trouble in the units in Kerala resulted in a lock out in those units from 7th October 1969. On 21st November 1970 the dispute was settled and the payments to be made as per the settlement was scheduled to be made on or before 30th November 1970. The agreement is dated 21st November 1970.

(3.) While the lock out continued the assessee as per an agreement (Annexure A), dated 9th March 1970 with Messrs. Pratap Cashew Company (P) Ltd. of which the assessee and his wife are the only directors, leased out 2 units in Kerala to the said company. Clause.3 of the said agreement provided that the company should treat the services of the employees in these units as continuous without any break and that the terms and conditions of services the employees shall not in any way be less favourable to them. The said clause further provided that the company will be liable to pay the retrenched employees retrenchment compensation as if their services under the company continued uninterruptedly. The two other units in Kerala which the assessee was holding under lease, were surrendered before the expiry of the period. By a further agreement (Annexure B) dated 21st November 1970, Clause.3 in Annexure A was modified after modification it read that in the event of the retrenchment of the employees, compensation on the basis that the employees continued to be in the service of the assessee up to October 1969, will be paid by him.