Dr. O.K. Narayanan, A.M. - (1.)THIS appeal is filed by the assessee. The relevant assessment year is 2001-02. The appeal is directed against the Revision order passed by the Commissioner of Income-tax-9 at Mumbai on 7-12-2004.
(2.)The assessee-company was earlier a division of M/s. Hindustan Ciba Geigy Limited. The division had its works at Goa-There was a labour dispute between the assessee and its workmen on a charter of demands. When the labour dispute was going on, the said division of M/s. Hindustan Ciba Geigy Limited, was separated from the said company as an independent unit. The demerger scheme was approved by the Bombay High Court by its order dated 25-7-1997 pursuant to which the erstwhile division of M/s. Hindustan Ciba Geigy Limited has been converted to the assessee-company as a separate legal entity. As the company has become a separate legal entity severed from M/s. Hindustan Ciba Geigy Limited, the liability of labour dispute was inherited by the assessee-company. As the labour dispute was persisting for so many years, assessee-company was making provisions for the liability towards additional wages from year to year. Even though such annual provisions for wages liability were made by the assessee- company in its books of account, such provisions were not claimed as deductions in working out the taxable income of the assessee -company for those assessment years. Assessee- company carried forward those provisions from year after year in its balance sheet in the form of liabilities. Later on the dispute was referred to the Labour Tribunal of Goa for adjudication. While the matter was so pending before the Labour Tribunal, a settlement was arrived at by the workmen and the assessee-company on the basis of which the assessee- company accepted the monetary demands of the workmen to a certain extent and paid off the additional wages on the basis of the settlement agreed upon between them. The settlement was later placed before the Labour Tribunal and the case was adjudicated by the Tribunal on the basis of the said settlement. In effect, the settlement was judicially approved by the Tribunal.
In the above scenario, the assessee-company had claimed a deduction of Rs. 3,61,57,568 as payment of salary and wages made on the basis of the agreement, by way of deduction. In the course of assessment proceedings, details were called for by the assessing authority and he allowed the claim of the assessee except for a certain period on the ground that the liability for the said periods did not crystallize during the previous year relevant to the assessment year under appeal. The assessee took up the matter of such disallowance made by the assessing authority in the normal channel of appeal before the Commissioner (Appeals). When the disallowances made by the assessing authority was thus subjudice before the Commissioner (Appeals), the Commissioner of Income-tax called for the records of the assessment in the case of the assessee-company and examined them. On the basis of the examination made by him, he came to a conclusion that the assessing authority has erroneously allowed as deduction an amount of Rs. 37,58,063 claimed by the assessee towards payments of wages. The said amount related to two periods, for the period from 1-1-1994 to 31-3-1996 and the period from 1-4-2000 to 30-8-2000, the amounts being Rs. 30,41,226 and Rs. 7,16,837 respectively. The assessee had given extensive reply to the notice of the Commissioner of Income-tax stating that the payments were made on the basis of the settlement agreed upon between the assessee-company and its workmen and it was only a discharge of contractual liability and the liability was crystallized during the relevant previous year and, therefore, the assessing officer has rightly allowed the said amount by way of deduction. But this position was not accepted by the Commissioner of Income-tax. He held that the reference made before the Labour Tribunal was pending during the relevant previous year and no finality could be attributed to the liability of the assessee-company before the conclusion of the proceedings before the Labour Tribunal and therefore, the claim made by the assessee-company was premature for the reason that the corresponding liability did not crystallize during the previous year relevant to the assessment year under appeal. Accordingly, the Commissioner of Income-tax held that the assessing authority was not correct in allowing deduction of Rs. 37,58,063 towards payment of wages. He accordingly set aside the order of the assessing authority on this point and sent back the file to the assessing authority with a direction to pass necessary order in accordance with law, after considering and verifying the facts highlighted by the Commissioner.

(3.)THE present appeal is against the above Revision Order.