Commissioner of Income-tax Vs. K. AminuddIn and Sons - Court Judgment

1. This is an income-tax reference under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the I. T. Act') at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer of this court, which reads as under :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the liability of the assessee for the amount of Rs. 61,642 was an ascertained liability under Section 26 of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966, and that the said amount was deductible in computing the income of the assessee ?'

2. The brief facts giving rise to this reference are thus : The assessment year involved in this case is 1976-77, the previous year ending March 31, 1976, The assessee has been assessed in the status of a registered firm. The assessee claimed Rs. 61,642 by way of deduction for holiday wages and leave with wages under Sections 21, 26 and 27 of the Bidi and Cigar Workers (Conditions of Employment) Act, 1966 (hereinafter referred to as 'the Act of 1966'). This claim was rejected by the Income-tax Officer and the same was affirmed by the Commissioner of Income-tax (Appeals). Thereafter, the matter was taken up in second appeal before the Tribunal and the Tribunal in a very brief order, allowed the appeal of the assessee relying on the decision of this court in the case of Kalekhan Mohd. Hanif v. CIT--decided on April 22, 1981, reported in : [1987]163ITR769(MP) . Hence,the Revenue approached the Tribunal for making a reference before this court, which was declined by the Tribunal, by order dated July 18, 1983. Hence, the Revenue approached this court for calling for a reference under Section 256(2) of the Act and this court by order dated December 7, 1988, called for the reference and the aforesaid question of law was referred by the Tribunal for answer of this court.

3. We have heard learned counsel for the parties and perused the records. So far as the principle of law, which has been laid down in Kalekhan's case : [1987]163ITR769(MP) is concerned, there is no dispute. All the statutory liability can be permitted to be deducted as an accrued liability under section 37. But, in the present case, the question is whether the assessee has established that the liability has accrued. In this connection, suffice it to say that the appeal was preferred by the assessee before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) observed :

' In my opinion, the decision of the Income-tax Officer rests on proper foundation. Last year, under identical circumstances, the claim in respect of such a provision was withdrawn at the time of hearing before me. The position is exactly the same this year. None of the workers had made a claim with the appellant-firm in regard to the encashment of leave. When a worker becomes entitled to take leave, such an entitlement does not result in the incurrence of a financial liability by the appellant-firm. Such a liability comes into existence only when the worker does not take leave and exercises his right to encash it. The appellant-firm cannot presume that none of the workers would avail of leave and that every one of them would encash it. Learned counsel admitted that no claim for encashment had been made by any of the workers. The addition made by the Income-tax Officer is, therefore, confirmed. No relief is due to the appellant on this account.'

4. Therefore, in view of the factual aspect, it is established that no worker at any point of time, has approached for encashing such wages. It is true that Section 27 of the Act of 1966, provides the relief to the employees, but whether such relief has been claimed by any worker or not, i.e., the factual aspect, has to be established by the assessee. But, on the contrary, the assessee has not discharged this burden by leading any evidence. On the contrary, the assessee has abandoned their claim before the Income-tax Appellate Commissioner in appeal and in earlier cases. In the present case also, the assessee has not been able to satisfy whether such liability has accrued or not. Hence, in this view of the matter, the view taken bythe Tribunal docs not appear to be well-founded and hence we answer this reference in favour of the Revenue and against the assessee.