COMMISSIONER OF INCOME TAX Vs. CENTRAL ART PRESS

JUDGEMENT

(1.) IN this tax case reference under Section 256(2) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following questions of law have been referred to this court for its opinion :

(2.) THE assessee is a registered firm engaged in the business of running a printing press. In the course of the assessment proceedings for the accounting period ending on March 31, 1969, relevant for the assessment year 1969-70, the claim of the assessee for deduction of a sum of Rs. 70,000 paid as retrenchment compensation and gratuity was allowed by the Income-tax Officer, but he, however, later, reopened the assessment and disallowed the claim of the assessee on the ground that the retrenchment compensation and gratuity amounts were paid only in view of the closure of the business and, therefore, not entitled to deduction under Section 37(1) of the Act On appeal by the assessee before the Appellate Assistant Commissioner, he took the view that the payments were made by the assessee owing to the closure of its business and hence cannot be subjected to tax treatment as expenses incurred by the assessee wholly and exclusively for the purposes of the business and upheld the disallowance. On further appeal by the assessee before the Tribunal, on the view that the liability had arisen before the actual closure of the business and also for the purposes of the business, it upheld the claim of the assessee and that has given rise to the questions of law referred to earlier.