Sudhindra Mohan Guha, J. - (1.) "Whether, on the facts arid in the cir cumstances of the case, the payment of gratuity of Rs. 24,000 by the assessee-company to its ex-manager is deductible in computing its business income ?" is the question referred by the Income-tax Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961, to this court for answer.
(2.) The facts of the case, in a nutshell, may be stated as follows : The assessee is a private limited company and derives income from business in running a printing press. The assessment year involved is 1966-67, the corresponding accounting year being the year ending on 31st March, 1966. During the year of account, the assessee paid Rs. 24,000 as gratuity to its ex-manager, Mr. H. J. Hallen, who retired after putting in a service of 20 years with the assessee-company. The assessee claimed the payment as a deduction in the computation of its taxable income for the assessment year 1966-67. The ITO disallowed the claim on the ground that no appointment letter was produced before him, that the payment was first of its kind, and that it was in the nature of an ex gratia payment and, therefore, not allowable.
(3.) The assessee came up in appeal before the AAC. The AAC upheld the findings of the ITO and dismissed the appeal.;