- (1.) Three questions we have caused to be referred to ourselves under Section 256(2). The questions are as follows : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) deleting a sum of Rs. 11,08,658 on account of gratuity payable to the employees on transfer to telecommunication department of the State Government ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the provision of Section 40A(7) of the Income-tax Act, 1961, could not be invoked to defeat the assessee's claim for Rs. 11,08,656 on account of gratuity payable on transfer to Telecommunication Department of the State Government and that the same was allowable under Section 28 or under Section 37(1) of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of subsidy of Rs. 1,48,000 is not to be deducted from the cost of generator for the purpose of calculating depreciation ?"
(2.) In regard to the first two questions the basic facts are that the telecommunications department of the assessee was transferred to Webel, a West Bengal Government organisation, as a going concern. The employees also got transferred maintaining continuity of service.
(3.) The agreement of transfer is dated in 1978 and the memorandum of understanding involving the workers is dated February 29, 1980.;