BANERJEE,J. - (1.) THIS reference under s. 66(1) of the Indian IT Act, 1922, has been made in circumstances hereinafter related.
(2.) THE assessee is obliged, under a resolution of its board of directors to pay a pension of Rs. 12,000 per annum, to one Mr. Hunter, a retired manager of the assessee. The amount used to be claimed by the assessee in previous assessment years and used always to be allowed by the ITO in those years as a permissible business expenditure. In the asst. yr. 1958-59 (corresponding to the accounting year ended with 31st Dec., 1957), the assessee did not make the claims for deduction of the said amount as a business expenditure, in the return filed by it. The said sum was not also debited to the profit and loss account. The amount was, however, debited to an account headed ''staff account", appearing as reserve in the balance sheet. In the aforesaid circumstances, the ITO made the assessment without considering the question of allowability of the expenditure.
(3.) THE assessee preferred an appeal before the AAC and there claimed deduction of the said sum of Rs. 12,000 from the computation of the total income. The AAC allowed the claim with the observation: ''As the amount was allowed by the ITO himself in earlier years and as the pension payment is to the same gentleman, the amount is allowed in computing the appellant's business income. The appellant therefore gets a reduction of Rs. 12,000''. ;