2018 (4) TMI 746

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.... 3. This appeal has been admitted on the following substantial question of law: "Whether on the facts and circumstances of the case, the Tribunal was right in holding that the amount of Rs. 50,000/- per month paid to the widow of the Managing Director of the company, who passed away is allowed as a deduction" 4.The facts leading to the filing of the appeal are as follows: The respondent Assessee was established during the year 1970 and at the time of inception one Mr.K.R.Sundaram joined the respondent Assessee as General Sales Manager, he was promoted to the post of General Manager in the year 1979 and further promoted as Managing Director of the Company in 1988 and while he was functioning as Managing Director of the Company, he died ....

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....nfused this expression with that of 'Dying in the course of employment'. The Assessing Officer should have known that 'Died in Harness' would mean that a person dies while he was in service and does not mean that while on duty. This erroneous interpretation has led to an erroneous Assessment Order. Unfortunately, the CIT (A) also did not take note of the factual position that a resolution was passed by the Respondent Board and came to the conclusion that the payment given to the widow of Mr.K.R.Sundaram is purely discretionary and not a pension. The question would be whether the board of Respondent company could pass a resolution granting payment in the nature of pension to the widow or legal heirs of the employee as there s....

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...., would ensure full and active co-operation of the employees in he smooth running of the business. The resolution would generate in the minds of the employees goodwill towards the assessee and would promote good relationship between the employer and employees. We are of the view that the payment was made on the ground of commercial expediency. 10. Considering the development in law in the payment of family pension, the Gujarat High Court in CIT Vs. Laxmi Cement Distributors (P) Ltd., (1976) 104 ITR 711 (Guj) held as follows (headnote): "The payment of family pension or gratuity to the dependants of a deceased employee is now a recognized concept in the field of employment and it has received statutory recognition. It cannot any longer b....

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....n Woodroffe Leather Mfg. Co Vs. CIT (supra), are fully satisfied on the facts of the case. The resolution authorizing the payment of pension shows an expectation on the part of the employee of getting the pension. Further the pension was made out of commercial consideration and in order to facilitate the carrying on the business smoothly. It is well-settled that the tests laid down by the Supreme Court are independent and alternative and on satisfaction of any one test, the payment can be treated as a permissible deduction." 6. In the case on hand also, there is a resolution, which has been passed by the Board of the Assessee company recognizing the service rendered by Mr.K.R.Sundaram for over 30 years. The Commissioner of Income Tax (Appe....