Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the I.T. Act, 1961, for the assessment year 1970-71 the following question has been referred to this court; "Whether on a true interpretation of the provisions of Section 25FFF of the I.D, Act, 1947, the notice pay of Rs. 10,233 and retrenchment compensation of Rs. 52,121 paid by the assessee thereunder to its employees of printing business was an admissible deduction under Section 37 or Section 28 of the I.T. Act, 1961?"
(2.) The facts of the case are as follows : "This reference relates to the assessment year 1969-70 only and arises out of the Tribunal's order in so far 'as it related to the Department's appeal, I.T.A. No. 4650 (Cal) of (969-70. The assessee-company follows the calendar year as its accounting year. It was formerly engaged in two lines of business, one being the printing business and the other being publication of a journal called 'The Eastern Metal Review.' In the printing establishment the assessee was sustaining heavy losses from year to year. By a resolution dated 14th June, 1968, the board of directors of the assessee-company decided to close down the entire printing establishment. Pursuant to the resolution the assessee-company issued a general notice to the employees that the printing establishment would be closed down and the services of all workers borne on the pay roll and attendance register of the printing establishment would be terminated with effect from the 1st July, 1968, which, it may be stated here, fell within the previous year relevant to the assessment year 1969-70. The employees were further informed that they would all be paid their dues including notice pay and compensation in accordance with Section 25FFF read with Section 25F of the I.D. Act, 1947, They were asked to collect their dues on the 1st July, 1968. Accordingly, on the 1st July, 1968, the employees borne on the printing establishment were paid Rs. 52,121 as retrenchment compensation and Rs. 10,233 as notice pay under clauses (b) and (a) of Section 25F read with Section 25FFF of the I.D. Act, 1947, and Rs. 6,495 as money value of the unavailed leave standing to their credit. In the assessment for the assessment year 1969-70 the assessee claimed deduction of these amounts aggregating to Rs. 68,849 as business expenditure. It may be pointed out here that in the relevant year of account the assessee carried on the other business, viz., the publication business. The ITO disallowed this claim for deduction on the ground that this expenditure was incurred by the assessee, not in the course of business, but after the closure of the business and was, therefore, not allowable to be deducted as an expenditure incurred in the course of business. In support of the view taken by him the ITO relied upon the ruling of the Supreme Court in CIT v. Gemini Cashew Sales Corporation. "
(3.) The ITO held against the assessee.;