TaxTMI 
TaxTMI 
1977 (7) TMI 15
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Employees' Payment of Gratuity Act the number of completed years of service of every employee prior to the accounting year can also be taken into consideration? (2) Whether the Tribunal had any material before it in holding that the assessee is the owner of the business and the employer and that the liability to pay gratuity is that of the assessee ? " The assessee is a private company doing business in the processing of raw cashew-nuts. The relevant assessment year is 1971-72 and the accounting year is the period of twelve months ending with September 30, 1970. During the accounting period, the assessee-company had entered into agreements with the owners of three cashew factories whereby "the management of the business carried on in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial Employees' Payment of Gratuity Ordinance came into force which was later replaced by the Kerala Industrial Employees' Payment of Gratuity Act, 1970 (hereinafter called "the Act"). Under s. 4 of the Act-the same provision was contained in the Ordinance-gratuity shall be payable to an employee, (a) on his superannuation, (b) on his retirement, resignation, retrenchment, discharge or dismissal from service after completion of a minimum period of five years of continuous service, and (c) on his death or total disablement due to accident or disease. In their books of account the assessee had debited Rs. 1,25,952 as representing the liability for payment of gratuity under the Act and a claim for deduction in respect of the said amount was pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t it did not bear an actuary's authentication. Thereafter the department carried the matter in further appeal before the Tribunal. The Tribunal agreed with the AAC's view that even though the assessee is not the owner of the factory building and premises, it had the liability to pay gratuity to the employees under s. 4 of the Act on the basis of the total length of service put in by the employees in the respective factories both prior to and after the date of the agreement evidenced by annexure "A". Overruling the contentions raised by the department that the liability for payment of gratuity was only a contingent one and that unless it was actually crystallised by the happening of any of the events mentioned in s. 4 of the Act no deduction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith the goodwill and all rights and liabilities subject to the condition that the said arrangement of transfer was liable to be put an end to by either party by giving three months' notice in writing. It is not an arrangement of lease of the factory building or premises but a transfer of the right to conduct the business coupled with the liability to engage all the existing employees working in the three factories without any break in service and on the same terms and conditions as were applicable to them prior to the transfer. It is expressly stipulated in the agreement that the assessee was to be liable to pay the statutory compensation to the employees in the event of their retrenchment on the basis that their services had been continuou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR 803 (Ker), a Division Bench of this court consisting of Govindan Nair C.J. and one of us (Kochu Thommen J.) had occasion to consider with reference to ss. 36 and 37 of the I.T. Act, 1961, the question regarding the admissibility of a claim made by the assessee for deduction of an amount representing the liability for gratuity payable under s. 4 of the Act. The Division Bench observed that even though the actual obligation to pay the gratuity will arise only on superannuation, resignation, retrenchment, dismissal or death of the employees, no prudent employer would wait for the actual occurrence of the events mentioned in s. 4 without making provision for the liability either by creating a fund or determining his profits for the year by t....