India United Mills Ltd. Vs. Commissioner of Income-tax, Bombay City-i - Court Judgment

Tulzapurkar, J.

1. The following four question of law arising out of the order of the Tribunal have been referred to us for our decision :

'(1) Whether, on the facts and in the circumstances of the case, the amount of Rs. 19,11,658 being the company's initial contribution to the gratuity fund, could be deducted in determining in determining the company's profits under section 10 of the Income-tax Act either for the assessment year 1952-53 or 1953-54

(2) Whether on the facts and in the circumstances of the case, the amount of Rs. 2,65,701 being the company's yearly contribution to the gratuity fund relating to the year 1951 could be deducted in determining the company's profit under section 10 of the Income-tax Act for the assessment year 1952-53 or for 1953-54

(3) Whether the Tribunal refusal to direct the Income-tax Officer to give effect to the circular of the Central Board of Revenue, dated 3rd November, 1951, in regard to contribution to the gratuity fund in making assessments for the assessment years 1952-53 and 1953-54, was in accordance with law

(4) Whether, on the facts and in the circumstance of the case, the assessee was entitled to a deduction in respect of the payment made to the Bombay Hospital Trust in determining the business profits of the company for the assessment years 1952-53, 1953-54 and 1954-55 ?'

2. The first three questions relate to deduction claimed in respect of payments made towards gratuity payable to the employees of the assessee mills while the last question relates to certain payments made to the Bombay Hospital Trust for the purpose of meeting the medical expenses of the employees who under an arrangement were to be treated by that hospital during the relevant years. We shall deal with the first three questions together and the last question separately.

3. The assessee is a public limited company owing a chain of textile mills in Bombay City. The assessment years in question are 1952-53, 1953-54 and 1954-55 and the corresponding previous years are calendar years 1951, 1952 and 1953. In an arbitration between the Bombay Mills owners' Association and the employees in the textile industry under the Bombay Industrial Relations Act, 1946, the industrial court gave an award dated 28th October, 1948, whereby the demand on the part of the employees for gratuity was adjudicated upon and the gratuity directed to be paid on certain terms was indicated in the award as follows :

'I, therefore, direct that gratuity should be paid to all employees covered by the reference on the scale laid down below :

(1) On the dearth of an employees while in the service of the company (mill) -

One month's salary for each years of service subject to a maximum of 15 months' salary to be paid to his heirs or executors or nominees. (2) On voluntary retirement or resignation of an employee after 15 years' continuous service in the company - 15 months' salary.

(3) On termination of his service by the company -

(a) After 10 years' continuous service but less than 15 years' service in the company - 3/4th of one month's salary for each year of service.

(b) After 15 years' continuous service in the company - 15 months' salary.

(4) A gratuity will not be paid to any employee who is dismissed for dishonesty or misconduct, but will be paid to the employees who have been discharged between the 1st January, 1948, and the date of the publication of this award in the official Gazette.

Salary for the purpose of calculating gratuity shall mean substantive salary (exclusive of allowance) an employee on the date the employee ceases to be in the employment of the mill. The mills may at their discretion grant gratuity in excess of the above.'

4. In order to implement this award the assessee-company provided or set apart during the year 1951 an amount of Rs. 21,77,359 for a gratuity find. This amount included Rs. 19,11,658 on account of initial contribution and Rs. 2,65,701 on account of annual contribution for the year 1951. The initial contribution was calculated on the basis of gratuity to which the existing employees were entitled up to the beginning of 1951, by a reference to the number of years put in by each employees while the annual contribution was calculated by a reference to the additional liability which arose by reason of the service put in by each employee during the year of account. It appears that after some correspondence with the Central Board of Revenue, the company at last created a trust to hold the funds contributed to the gratuity fund and the trust was created by executing a deed on 20th February, 1952, and by making a payment of Rs. 20 lakhs to the trustees of that fund on 28th February, 1952, and a further sum of Rs. 1,50,466 on 4th March, 1952. Gratuity Fund Rules were also framed governing the disposal of the funds that were contributed to that trust and theses rules came into force on 1st January, 1951. Rule 16 is material and it provides that an employee classified in rule No. 5(a) (being a members of the clerical staff) who has been dismissed for dishonestly or misconduct shall not be entitled to claim gratuity and any amounts contributed by the company on his account shall be transferred to 'Lapse and forfeiture Suspense Account' and in the second part of rule 16 a similar provision has been made in respect of employees classified in rule No. 5(B) (being a member of the technical and/or supervisory staff). Rule 11 is another important rule and it provides that all interest due for a year and all monies lapsed and/or forfeited during a year under these rules shall be held under separate accounts called the 'Interest Suspense Account' and 'Lapse and Forfeiture Suspense Account', respectively, and the trustees shall in the first instance utilise the balance to the credit of these who accounts to make up for the difference payable by the company as stated in rule 10 and shall then ask for the difference from the company and the company shall pay the amount of such difference in respect of its annual contribution for the year. Under rule 29 it has been provided that the amount standing to the credit of the 'Lapse and forfeiture Suspense Account' and 'Interest Suspense Account', after meeting any loss on sale of securities, will be distributed amongst the employees in such manner and proportions as the board may think fit. The aforesaid rules make one position clear that even if a contingency arose of an employee forfeiting the benefit of gratuity, the amount standing to his credit was to be credited in the lapse and forfeiture suspense account and ultimately the amount standing to the credit of this account was to be distributed amongst the employees and the same was never to revert to the assessee-company in any manner.

5. The assessee-company claimed a deduction of the amounts contributed to the gratuity fund while determining its profits for the assessment year 1952-53 or 1953-54. The Income-tax Officer disallowed the deduction claimed on the ground that actually the liability on the company to make a payment of gratuity would arise as and when employees retire or resign or die. On this reasoning since during the assessment year 1952-53 a sum of Rs. 25,643 had been actually paid to the persons who had retired in that year by debiting the suspense account with that amount, he allowed the deduction of Rs. 25,643 as an admissible expense, but the balance of the deduction claimed was added back while computing the total income of the assessee. The assessee preferred an appeal to the Appellate Assistant Commissioner and in addition to the ground on which the deduction was claimed initially, namely, that the same was in the nature of revenue expenditure, a further ground was put forward that relief in respect of such contribution to gratuity fund could be granted by virtue of a circular bearing No. 70(XI-3) of 1951, dated 3rd November, 1951, issued by the Central Board of Revenue and it was urged that in view of the instructions contained in the circular which was binding on the Income-tax Officer, the Appellate Assistant Commissioner should issue a direction to the Income-tax Officer to grant relief in respect of the sums so contributed to the gratuity fund. The Appellate Assistant Commissioner, however, rejected the plea of the assessee and did not allow the deductions on either of the grounds sought. When the matter was taken to the Tribunal, the Tribunal dealt with the three aspects separately. As regards the circular issued by the Central Board of Revenue, the Tribunal took the view that the relief laid down in the circular relied upon by the assessee was essentially an extra legal relief and it was not for the Tribunal to consider reasonableness or otherwise of the assessee's request for relief in that behalf. In regard to the initial contribution the Tribunal agreed with the Appellate Assistant Commissioner's order but for different reasons. It rejected the claim on the ground that the said expenditure was of capital nature. It also took the view that what the industrial tribunal had fixed was not a liability to create a provisions but the liability to pay gratuity as and when the employees left service and that, therefore, the company could either charge gratuity as and then paid or it could at the most make a properly calculated provisions for gratuity strictly relating to the year of account if it was possible to ascertain the correct figure of the provisions. On the question of yearly contribution it took the view that the amount of Rs. 2,65,701 was charged to the profits and loss account in the year 1951 though the trust was created in 1952 and the amounts were paid in February and March, 1952, and for the year 1951 it was essentially in the nature of a provisions and had been rightly disallowed by the Income-tax Officer. The Tribunal further held through the assessee was following the mercantile method of accounting, even that method of accounting only permitted a deduction on account of liabilities which were actual and present during the accounting year and which could be ascertained with a fair degree of precision and in the instant case the liability was not present and actual and it was not possible to ascertain it with a fair degree of precision. In substance the Tribunal held that it was in the nature of contingent liability and the deduction claimed could not be allowed.

6. On the first two question claimed raised for our consideration, though considerable arguments were advanced at the bear by counsel foe either side in support of each one's case, in our view, the position on the nature of payment in respect of the liability of gratuity payable under law or statute or under a notification or award has been clarified in Madho Mahesh Sugar Mills (P). Ltd. v. Commissioner of Income-tax. In that case the U. P. Government had issued a notification in 1961 with regard to the sugar industry imposing a liability on person running sugar mills to provide gratuity to their workmen in accordance with the scale provided in that notification. In pursuance of this notification the assessee set apart the sum of Rs. 1,37,811, representing the sum that the assessee would be required to pay to his workmen as gratuity and made an appropriate entry in its books of accounts, crediting the gratuity account and debiting the profits and loss account for the assessment year 1962-63. This sum was claimed by the assessee as business expenditure but the claim was disallowed by the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal. On a reference to the High Court it was contended for the revenue that at best the assessee could claim only the gratuity relevant to the previous year. The discounted value of the assessee's liability to pay gratuity based on actuarial valuation was determined at the instance of the High Court at Rs. 1,05,200. It was held that the Government order provided that the gratuity would be payable to an employee not only in respect of his future services but also for his past services. Thus, in order to ascertain the quantum of liability as on the date the order came into effect, the past services of the employees has also to be taken into account. In the circumstances every businessman would make provision every year for his liability under the notification. Though no part of the gratuity may have been payable by the assessee in any of the earlier years, the past services of the employees had to be taken into payable merely to arrive at the quantum of the liability which became payable after the notification. The liability for payment of gratuity ascertained on actuarial calculations, in which all contingencies are taken into consideration, is a liability in present and is capable of ascertainment and, therefore, the sum of Rs. 1,05,200 was a permissible business expenditure in the assessment year concerned. A contention was undoubtedly raised before the Allahabad High Court that the liability of the assessee for payment of gratuity was a contingent liability and in regard to this contention the Allahabad High Court observed as follows :

'Now, it cannot be disputed that even expenditure incurred by an assessee wholly and exclusively for purposes of business is to be allowed as deduction in the computation of the net profits of a business for the purpose of assessment to income-tax. It can also not be disputed that the payment of gratuity to workmen of a business concern would be an expenditure of that nature but the expenditure which is allowable in a particular year must be certain and capable of ascertainment. If the liability is uncertain and contingent, it cannot be allowed as a deduction, Under the notification workmen in accordance with the scale provided in that notification. The gratuity is payable when a workmen dies, retires, resigns or is removed from service. These events no doubt take place in the further but they cannot be said to be uncertain. The services of every workman are bound to come to an end on account of a one to the other causes enumerated above. Under the scheme every employee is bound to pay gratuity to a workman for his past and further services. In the circumstances every businessman would make provision every year for his liability under the notification. Under the mercantile system of accounting an expenditure is admissible not only when it is actually paid but when the liability for the expenditure is incurred. The only question is as to whether such a liability can fairly and accurately be ascertained in a particular year.'

7. We might usefully refer to a decision of the Supreme Court in Metal Box Company of India Ltd. v. Their Workmen, where also the question of allowing a deduction in respect of the amount set apart for meeting the liability under the scheme of gratuity in respect of the accounting year arose for consideration and it was held that where the liability under a schemed of gratuity in respect of the accounting year was stated in profits and loss account, in the absence of any challenge by the workmen to the correctness of the method of valuation and in the absence of a challenge that such liability could not be estimated on any fair standard, the amount claimed according to the profits and loss account should be presumed to be genuine and allowed. In that case a sum of Rs. 18.38 lakhs being estimated liability under two gratuity schemes framed by the company was deducted from the gross receipts in the profits and loss account. In 1960, the company introduced a gratuity schemed for its employees other then its officers under which gratuity was payable on the termination of an employee's service either due to retirement, death or termination of service, the amount of gratuity payable being dependent on his wages at that time and the number of years of service put in by him. The company had worked out on an actuarial valuation its estimated liability and made provisions for such liability not all at once but spread over a number of years. Thus, in 1959-60, 1960-61 and 1961-62 the company allocated towards this liability Rs. 5 lakhs, Rs. 10 lakhs and Rs. 5 lakhs, respectively, from out of the profits, debiting these amounts in the profits and loss account. In all Rs. 40 lakhs had been provided in the aforesaid manner against the said liability. The practice followed by the company was that even year the company worked out the additional liability incurred by it on the employees putting in every additional years of service. Whenever an employees retired, the amount of gratuity payable to him was debited against and amount provided for as aforesaid. Two questions were raised : (1) whether it was legitimate in such a scheme of gratuity to estimate the liability on an actuarial valuation and deduct such estimated liability in the profit and loss account while working out the net profit and (2) if it was, whether such appropriation amounts to a reserve or a provisions In the instant case it is only the first question that was raised before the Supreme Court that would be material and with regard to that question this is what the Supreme Court observed :

'In the case of an assessee maintaining his accounts on mercantile system, a liability already accrued though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid. Just as receipts, though not actual receipts, but accrued due are brought in for income-tax assessment, so also liability accrued due would be taken into account while working out the profits an gains of the business..... The question that concerns us is whether, while working out the net profits, a trader can provide from his gross receipts his liability to pay a certain sum for every additional year of service which he receives from his employees. This, in our view, he can do, if such liability is properly ascertainable and it is possible to arrive at a proper discounted present value. Even if the liability is a contingent liability, provided its discounted present value is ascertainable, it can be taken into account. Contingent liabilities discounted and valued as necessary can be taken into account as trading expenses if they are sufficiently certain to be capable of valuation and if profits cannot be properly estimated without taking them into account. Contingent rights, if capable of valuation, can similarly be taken into account as trading receipts where it is necessary to do so in order to ascertain the true profits.'

8. Since in that case the liability in praesenti had been properly assessed by adopting the method of actuarial valuation the claim for deduction was allowed by the Supreme Court.

9. In view of the aforesaid two decisions it seems to us clear that in the instant case also setting apart of the two sums which was done by the assessee-company in 1951 will have to be allowed as business expenditure provided it could be said that the amount claimed as deduction had been arrived at by adopting a scientific method of evaluating the said liability. It was, however, urged by Mr. Joshi for the revenue that in the instant case setting apart of the two sums of Rs. 19,11,658 as initial contribution and Rs. 2,65,701 as annual contribution for the year 1951 had not been done by the assessee-company by adopting any actuarial valuation and, relying upon a decision of this court in Official Liquidator of the Sakeeria Cotton Mills Ltd. v. Commissioner of Income-tax, he contended that since no scientific method had been adopted for evaluating the liability arising in present though payable in future, the deduction claimed could not be allowed. He pointed out that in the aforesaid decision also a provisions for gratuity made by the assessee-company under the every award passed on 28th October, 1948, under the Bombay Act of 1946, came up for consideration before the court and for three calendar years 1951, 1954 and 1955 the assessee had made calculation of gratuity which it would become liable to pay under the award and the calculation were made as if the employees were eligible to be paid gratuity as at the end of each accounting year and the amounts so calculated were shown in the assessee's books of account as a provision for gratuity and the assessee claimed the said amounts as permissible deductions under section 10(2) (xv) of the Act and the court held that the sums shown as provision for gratuity in the accounts for the relevant previous years were not allowable deductions in computing the business income of the assessee for 1952-53, 1955-56 and 1956-57, as the sums for which provisions were made were no based on any legal or scientific basis. Mr. Joshi also invited out attention to an English decision reported on 36 Tax Cases 602 (Owen (H. M. Inspector of Taxes) v. Southern Railways of Peru Ltd.) where also a provisions made for retirement benefits granted to employees was not allowed as a deduction on the ground that while evaluating the liability for the year of account in respect of retirement benefits to be paid at a further date several factories had not been taken into account, particularly the factor of discount, though he conceded that the House of Lords did recognise the principle that the assessee would be entitled to charge against each year's receipts the cost of making a provision for retirement benefits which would ultimately become payable as the assessee had the benefit of the employees' services during that year provided the present value of the further payment could fairly be estimated Mr. Kolah, however, has invited our attention to the manner in which the initial contribution of Rs. 19,11,658 as well as the annual contribution of Rs. 2,65,701 had been calculated and after referring to the statements which had been prepared and put forward before the taxing authorities (statement being annexure 'B' (Colly) to the statement of the case) the pointed out that the correctness of those statements had not been challenged by the revenue and in fact the Tribunal had given a finding in its order dated 15th January, 1963, to the following effect :

'The company, in order to implement this award, created a gratuity fund and provided for an amount of Rs. 21,77,359. The initial continuation was calculated on the basis of gratuity to which the existing employees were entitled up to the beginning of the accounting year by reference to the number of years put in by each employee. The annual contribution was calculated by reference to the additional liability which arose by reasons of the years of service put in by each employee during the year of account.'

10. In order words, according to Mr. Kolah, the Tribunal could be said to have accepted the position that the calculation had been made on scientific basis, for according to him, actuarial valuation is not the only scientific method by adopting which the present value of the liability, though arising in praesenti but payable in future, could be arrived at. Mr. Joshi for the revenue, however, rejoined by contending that the calculations could be shown not to have been made on scientific basis, for he pointed out that the initial contribution of Rs. 19,11,658 actually represented the payment which the company would have been required to pay to the employees concerned had those employees either retired or resigned from service at the end of the year of account before 31st December, 1951, and if that was so, the liability was not to be met on 31st December, 1951, but was to be met in future as and when the employees or such of them would be retiring and if the factor of discount had been taken into account, much lesser amount could have been required to be set apart for the relevant accounting year and, therefore, according to him, the estimate of the liability had not been properly arrived at by adopting proper scientific method.

11. However, in our view, it is really unnecessary for us to decide this particular issue, whether the present value of the liability payable in future has been correctly estimated or not and whether the assessee has set apart of made a provisions of the correct amount representing the present value of such liability in view of what has actually happened in the year 1952. In the instant case, it was undisputed that though the initial contribution and the annual contribution were made in the year 1951, by setting apart those two sums, after the assessee had some correspondence with the Central Board of Revenue the assessee had at last constituted a trusty to hold the funds contributed to the gratuity fund and such trust was created on 20th February, 1952, and it is the further admitted position that a sum of Rs. 20 lakhs was actually paid over to this trust fund on 18th February, 1952, and a further sum of Rs. 1,50,466 was paid on 4th March, 1952. In other words, by about 4th March, 1952, a sum of Rs. 21,50,466 had been actually made over by the assessee to the trustees of the gratuity trust fund and in that sense it could said to be actual expenditure incurred by the assessee-company in the assessment year 1953-54. This amount having irretrievably one out of the assessee's books was not to revert back to the assessee in any form at any time in future and in this behalf we have already referred to the relevant rules of the Gratuity Fund Rules, being rules 11, 16 and 29. It may be mentioned that in the case of Official Liquidator of the Sakeeria Cotton Mills Ltd. v. Commissioner of Income-tax there was no question of the assessee-company having made over or paid over the amounts that were meant for payment of gratuity to the employees of the assessee. Some was the position which obtained in the English decision reported in 36 Tax Cases 602 Owen v. Southern Railway of Peru Ltd. In our view, these facts constituted a distinguishing feature, on the basis of which it would not be possible to accept the department's contention before us that even for the assessment year 1953-54, the amounts which had been actually paid over to the trustees - the first one on February 28, 1952, and the other one on March 4, 1952 - cannot be allowed as deduction while computing the business profits of the assessee-company. In this behalf we may usefully refer to certain observations of the Supreme Court in Commissioner of Income-tax v. Mysore Spg. & Mfg. Co. Ltd. That was undoubtedly a case of expenditure having been incurred for maintaining two provident funds for the employees of the assessee - provident funds which were not recognised under the Indian Income-tax Act, 1922. The contention of the revenue in that case was that under section 58K of the Income-tax Act the amounts so transferred were deemed to be in the nature of capital expenditure and that, therefore, the deduction claimed should not be allowed to the assessee. The Supreme Court held that section 58K was inapplicable to the facts of the case and, therefore, the second question arose whether the expenditure that was incurred was in the nature of revenue expenditure or not and on that question the Supreme Court has observed towards the end of its judgment as follows :

'Hardly any argument was addressed on the decision of the High Court on the second question. The expenditure was in current in the relevant accounting years. It was something which had gone irretrievably. The amount in question had been spent and paid out in the relevant year of accounting, and was, therefore, allowable as expenditure incurred exclusively for the purpose of the business. It is not suggested that it was incurred for any other purpose. The conditions of section 10(2) (xv) had been fully satisfied in the present case.'

12. In the instant case, as we have indicated above in the assessment year 1953-54, two sums of Rs. 20 lakhs and Rs. 1,50,466 were actually paid by the assessee-company, there first amount on February 28, 1952, and the other amount on March 4, 1952, to the trustees of the gratuity fund and the amounts, having regard to the relevant rules of the Gratuity Fund Rules, must be held to have irretrievably gone out of the coffers of the assessee-company, which amounts were never to return back to the assessee-company. In these circumstances it will have to be regarded as business expenditure incurred by the assess-company wholly and exclusively for its business purpose and such deduction claimed by the assessee-company will have to be allowed under 10(2) (xv) of the Act. We, accordingly, answer the first two question as follows :

The amount of Rs. 21,50,466 comprised of Rs. 20 lakhs paid by the assessee-company on February 28, 1952, and Rs. 1,50,466 paid by the assessee-company on March 4, 1952, towards initial contribution as well as yearly contribution to the gratuity fund should be allowed as deduction in determining the company's profits for the assessment year 1953-54.

13. Since we have answered the question in the aforesaid manner, we have not gone b2 into the question as to whether the initial contribution and the yearly contribution are allowable for the assessment year 1952-53.

14. In view of our aforesaid answer to questions Nos. 1 and 2, it is unnecessary to consider question No. 3 which has been referred to us for out decision.

15. Turning to question No. 4, the facts with regard thereto are these : On December 2, 1950, the assessee-company received a letter from the Bombay Hospital Trust whereby the Bombay Hospital Trust offered its services for medical aid to the clerical staff of the assessee-company on certain terms. It was suggested that the assessee-company would be entitled to send the members of its clerical staff for medical, surgical or any other treatment in the hospital and that such treatment would be given to its clerical staff and no fees or any kind of remuneration would be charged to such members of the clerical staff either by the hospital to by its staff, honorary or otherwise, in any of its departments. It was also suggested that such members of the clerical staff drawing a salary of not less than Rs. 200 per month would be admitted to the diet paying class of the hospital free of charge and members drawing less then Rs. 200 per month would be admitted to the free class, and the hospital undertook to reserve and provide number of beds for the purpose. For rendering those services the Bombay Hospital Trust suggested that the assessee-company should pay to the Hospital Trust every year an amount equal to one anna from every Rs. 100 of the total of its turnover. The board of directors of the assessee-company by its resolution dated January 3, 1951, accepted this offer and pursuant to this arrangement that was made for the years 1951, 1952 and 1953 the assessee-company paid an amount of Rs. 55,956 in the first year and made a provision of Rs. 16,595 in the first year. In the second year no payment was made not was any provisions made. But in the third year a payment of Rs. 1,20,910 was made and this included a payment of Rs. 57,562 for the second year and Rs. 63,348 for the third year. The company claimed a deduction of Rs. 72,551 in the assessment year 1952-53 and Rs. 1,20,910 in the assessment year 1954-55. These deductions were disallowed both by the Income-tax Officer as well as by the Appellate Assistant Commissioner and even the Tribunal disallowed the deduction on the ground that is appeared to the Tribunal that 'the preponderant consideration for the contribution to the hospital was not the need of the business of the company but disposition to charity of its directors. This is clear not only from the fact that the payment bore no relation either to the number of employees or the frequency with which they availed of the hospital facilities but also from the fact that it depended on the volume of the business done by the company.' The Tribunal took the view that the payments were, therefore, not wholly and exclusively laid out for the purpose of the business and as such deduction had been rightly disallowed. Mr. Kolah, the learned counsel for the assessee, had contended before us that the finding of the Tribunal was really based on no evidence at all the it was an inference drawn from the mere fact that the payment at all and it was an inference drawn from the mere fact that the payment that was to be made by the assessee to the Bombay Hospital Trust bore no relation either to the number of employees or the frequency with which they availed of the hospital facilities but depended upon the turnover of the company. He contended that the fact that the payment bore relation to the turnover of the assessee-company and not to the profits earned by the assessee-company in any of the concerned years was eloquent enough to suggest that the payment could not have been by way of gift or donation to the hospital trust, for even if there was loss incurred by the assessee-company in a particular year out of three years for which arrangement had been made, the company was required to make the payment to the hospital trust for the medical facility which the hospital authorities had renders to its clerical staff in those years. He further contended that normally speaking the assessee-company would have been required to incurs expenditure for providing medical facilities to its own staff but instead of the assessee-company incurring that expenditure it made this arrangement with the Bombay Hospital Trust and, therefore, the Tribunal was in error in coming to the conclusion that the payment made to the hospital trust were not wholly and exclusively laid out for the purpose of business of the Mr. Kolah and we are also in agreement with him that the finding of the Tribunal is really based on no evidence at all. In the first place, the assessee-company itself could have incurred the expenditure for providing medical facilities to its own staff and had that been done the expenditure incurred on that account would have been allowed as permissible deduction; but instead of doing that the effect which was received from the Bombay Hospital Trust was sanctioned by the assessee-company. Secondly, the Appellate Assistant Commissioner has found as a fact on the materials that were placed before him by the assessee-company that the assessee-company had been sending 100 to 125 employees during every month to the hospital for medical check-up and treatment. The total number of clerical staff during the material period was said to be about 1,200 and cut of these employees about 100 to 125 employees used to go to the hospital for medical check-up and treatment every month. Thirdly, the medical treatment included expert treatment at the hands of competent honorary doctors attached to the Bombay Hospital. It cannot, therefore, be said that the payments made by the assessee-company to the Bombay Hospital Trust under the aforesaid arrangement were excessive. It has been observed as such had been reserved for the members of the clerical staff of the assessee company. But this observation cannot be said to be quite correct, for the arrangement actually was that the Bombay Hospital had undertaken 'to reserve and provided a number of beds for the purposes'; in other words, as and when any member of the clerical staff of the assessee-company would be required to remain an indoor-patient in the hospital, the hospital authorities would make sufficient number of beds available for such members. Looking to the years in which this arrangement was made, viz., 1951, 1952 and 1953, it cannot be said that any particular reservation of number of beds was required to be made. Having regard the Tribunal on record, it is not possible for us to accept the finding of would be entitled to claim deduction in respect of such payment made to exclusively laid out for the purposes of its business. We, therefore, answer question No. 4 in the affirmative and in favour of the assessee.

16. Revenue to pay the costs of the reference.