1986 (2) TMI 9

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....ctors commencing from January 8, 1972, decided to retrench the employees. By a resolution dated November 14, 1972, it decided to carry on only the business of goods transport. However, by a resolution dated December 31, 1972, the assessee-company decided to sell away the lorries to an associate company, that is, Road Transport Corporation (Private) Ltd. In the year 1973, by a resolution of the board of directors dated January 3, 1973, the assessee-company again decided to make an application for bus routes and further to bid in the auction of forest coupes and later on the company took to mining. In the assessment year 1973-74, sum of Rs. 4,32,420 was claimed by the assessee on account of payment of gratuity, retrenchment compensation and n....

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.... he directed the allowance of the amount of Rs. 4,32,420. The Revenue filed an appeal before the Tribunal against the order of the Appellate Assistant Commissioner. The Tribunal on the facts found that the activities of the different departments of the assessee itself had never stopped, but there was only a period of inactivity. In view of this, the Tribunal took the view that the payment of gratuity, retrenchment compensation and notice pay was not made in the course of the winding up of the business but was made in the course of the business and it was, therefore, an admissible deduction. Two questions of law arising out of this order were sought by the Revenue to be referred and the Tribunal, therefore, referred the following two q....

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.... of the assessee-company was transport business. It was this business which consisted of transport of goods and transport of passengers. Merely because the transport of passengers was stopped, the transport business as such did not itself cease. That business continued to be carried on and this is clearly a case of a part of the activity in the business being required to be closed down as that activity being uneconomical. There is no other view possible so far as the first question is concerned. It has, therefore, to be answered in the affirmative and against the Revenue. In so far as the second question is concerned, we need merely refer to the decision of the Supreme Court in Sassoon 1. David & Co. (P.) Ltd. v. CIT [1979] 118 ITR 261, ....