VENKATESA COLOUR WORKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Act has referred the following questions of law for the opinion of this court in the two referred cases, respectively :

(2.) THOUGH there are two references and two questions have been referred to this court, the point involved is the same. The assessee in T.C. No. 422 of 1971 is a partnership firm consisting of three partners, namely, P. G. Bala-subramaniam, R. Natarajan and M. N. Nair, and the assessee in T.C. No. 421 of 1971 is a partnership consisting of P.G. Balasubramaniam and R. Natarajan only. The year of assessment for both the firms is 1967-68 and the year of account ended on April 13, 1967. Some time prior to the end of the year, the partners of both the firms decided to dissolve the firms and as a result to close down the factory. Their intention originally was to close the factory with effect from April 10, 1967. The labour officer was aware of this and there were meetings between the representatives of the factory, labour and the assessees. As a result, an agreement was entered into on April 7, 1967, between the management of the assessee-firms on the one hand and the workers on the other hand, under which the amount of compensation and notice pay payable to the workers under Section 25-FFF of the Industrial Disputes Act, 1947, on the basis that the factory would be closed on April 10, 1967, was determined. As a matter of fact, the factory was not closed on April 10, 1967, and it was agreed before the Tribunal that the factory was actually closed on July 15, 1967, and the payments to the workers were made thereafter. The assessees in each of the cases claimed the amounts paid to the workers pursuant to this agreement on the closure of the respective factories as a deductible item for the assessment year 1967-68, the account year ending April 13, 1967, as pointed out already. The Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal have rejected this claim and hence the present reference to this court in the two tax cases at the instance of the assessees.

(3.) UNDER these circumstances, we are of the opinion that the conclusion of the Tribunal is correct and we answer the questions referred to us in the affirmative and against the assessees.