:1: bgp bgp bgp IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION INCOME INCOME INCOME TAX REFERENCE NO.73 OF 1991 TAX REFERENCE NO.73 OF 1991 TAX REFERENCE NO.73 OF 1991 M/s.Hemkiran Packaging (P) Ltd. ..Applicant Vs. The Commissioner of Income Tax ..Respondent Ms.Aasifa Khan i/b.K.B.Bhujle for the Applicant. Mr.Vimal Gupta for the Respondent. CORAM CORAM CORAM :- DR.S.RADHAKRISHNAN & :- DR.S.RADHAKRISHNAN & :- DR.S.RADHAKRISHNAN & S.J.KATHAWALLA, S.J.KATHAWALLA, S.J.KATHAWALLA, JJ. JJ. JJ. DATE DATE DATE : 2ND SEPTEMBER, 2008 : 2ND SEPTEMBER, 2008 : 2ND SEPTEMBER, 2008 P.C. P.C. P.C. 1. Heard the learned Counsel for the parties. The Tribunal has referred to this Court the following substantial question of law for our opinion: "Whether on the facts and circumstances of the case, the assessee was entitled to deduction of Rs.1,14,693/- paid as termination dues to the employees, as revenue expenditure?" 2. We have perused the order dated 11th July,1986 passed by the Income Tax Appellate tribunal, wherein, the Tribunal had clearly given a finding that the Applicant Assessee was carrying on the business of manufacturing of corrugated card-board boxes at Bombay, and used to supply the same to its sister concern Milton Ltd. Due to labour problem, the Assessee had stopped the production completely at the Bombay Factory in December,1979. It appears that the Assessee after closure of the said business at Bombay :2: had paid an amount of Rs.1,14,693/- to its 16 employees at Bombay on the ground of termination dues and gratuity. Thereafter, the Assessee appears to have started the very same business of manufacturing corrugated card-board boxes at Kandla and had set up a new Unit. 3. The Assessing Officer had disallowed the payment of Rs.1,14,693/- on the ground that it was the payment made for termination of services of all the labours after closing down the business at Bombay. Therefore, there was no question of expenses being incurred while the business was completely closed down. Even the Commissioner of Income Tax (A) has concurred with the same. The Tribunal also by the aforesaid order found that the Assess had closed down the business at Bombay and the expenses incurred at Bombay for closing down the said business cannot be construed as a business expense for carrying on the business at Kandla. 4. Under the aforesaid facts and circumstances of the case, The Income Tax Appellate Tribunal had declined to interfere. However the Tribunal referred the above issue by way of a Reference to this Court. 5. The learned Counsel appearing for the Appellant sought to contend that there was no complete discontinuance of business at Bombay and it was being :3: carried-on on a small scale. Ms.Aasifa Khan also submitted that in the year 1979 a business was set up at Kandla and trial production was started but actual commercial production had started in the month of March 1980. Under these circumstances, it was sought to be contended that there was no discontinuance of business and the same was continued. In view thereof, she submitted that the expenditure of payment of termination dues ought to be treated as a business expenditure, as the business was never closed down. 6. Mr.Vimal Gupta, the learned Counsel appearing on behalf of the Revenue strongly contended that the very question which is referred to this Court by the Tribunal, itself indicates that the amount was paid by way of termination dues termination dues termination dues, which obviously means that the aforesaid sum was paid when the business at Bombay Unit was completely closed down and the labour services were terminated. Mr.Gupta also pointed out that the learned Counsel for the Applicant could not show that right from December,1979 onwards even at Kandla the very same business was carrying on by the Assessee. Admittedly, even according to the Assessee, the commercial production at Kandla Unit was started only in the month of April, 1980. 7. Under the aforesaid facts and circumstances of the case and in view of the aforesaid clear finding of fact that there was no business after December,1979 at :4: Bombay and the very same business appears to have started in April,1980, the aforesaid payment of Rs.1,14,693/-, which was paid as termination dues to the employees can never be considered as a revenue expenditure. Under the aforesaid facts and circumstances of the case, we answer the aforesaid question in the negative and against the Assessee and in favour of the Revenue. (S.J.KATHAWALLA,J.) (S.J.KATHAWALLA,J.) (S.J.KATHAWALLA,J.) (DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.)