KALEKHAN MOHAMMAD HANIF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income -tax Act, 1961, at the instance of the assessee, referring to us for our opinion the following question of law :

(2.) THE assessee, a bidi manufacturer, for the assessment year 1970 -71 claimed deduction of Rs. 3,48,406 as wages of the workers. Under the Madhya Pradesh Beedi and Cigar Workers (Conditions of Employment) Rules, 1968 (hereinafter referred to as 'the Rules'), framed under the Beedi and Cigar Workers (Conditions of Employment) Act, 1966 (hereinafter referred to as 'the Act'), any manufacturer of bidis is also required to pay wages to the workers for substandard or chhat bidis as provided under Rule 29(2). Rule 29 of the Rules reads as under :

(3.) THE assessee appealed to the Appellate Assistant Commissioner of Income -tax but without any success. The assessee then filed a second appeal before the Income -tax Appellate Tribunal. The Tribunal was of the opinion that the said Rule 29 does not itself create a liability to pay wages in respect of rejected bidis as sub -standard and the liability arises after determination by an authority appointed for that purpose under the Act or is settled in an industrial dispute. The right to payment under Rule 29, the Tribunal states, accrues to the workers only after the determination of the question as to whether there was any wilful negligence on their part or not. The wages are payable to the workers weekly and the workers had not claimed anything up to the close of the relevant accounting year. Since no demand has been made by the workers for the wages for excess bidis rejected, the liability remained a contingent liability payable on determination. The Tribunal observed as under :